AI adoption within a business does not always begin with a formal technology project. In many organisations, it starts with an employee using a generative AI tool to summarise a document, draft correspondence, analyse information or assist with research.
That creates a practical governance challenge. AI may already be processing business information before the organisation has decided which tools employees can use, what information can be entered into them or how their outputs should be reviewed.
Across Bahrain, organisations are increasingly using AI to improve efficiency, automate routine processes and support decision-making. More sophisticated applications are also supporting functions ranging from customer service and human resources to compliance and finance. In regulated sectors such as financial services, AI is increasingly being used in areas including fraud detection, anti-money laundering monitoring, risk management and customer onboarding.
For businesses, the immediate question is therefore not simply whether to use AI, but whether governance and internal controls are keeping pace with its adoption.
AI adoption may already be happening
The first step for businesses is to understand how AI is currently being used across the organisation.
This means looking beyond formally approved technologies. Employees may already be using publicly available AI tools independently, without necessarily considering how the information they enter will be processed, stored or retained.
Understanding where and how AI is being used can help identify where confidential information or personal data may be entering AI systems, where AI-generated outputs are influencing business decisions and where appropriate controls may be required.
Businesses also need to recognise the limitations of the technology. Generative AI systems can produce inaccurate, incomplete or misleading information while presenting it with apparent confidence. Where AI-generated material may influence legal, regulatory or commercial decisions, appropriate human review and verification remain important.
Existing Bahrain law continues to apply
Bahrain has not enacted comprehensive legislation specifically regulating AI. That does not, however, mean its use is unregulated.
Depending on how AI is deployed, existing legal and regulatory requirements relating to data protection, confidentiality, intellectual property, consumer protection, cybersecurity and sector-specific regulation may continue to apply.
Data protection is one area requiring particular attention.
Where an AI system processes personal data, organisations remain responsible for complying with Bahrain’s Personal Data Protection Law (Law No. 30 of 2018) (PDPL). Among other considerations, businesses must ensure that personal data is processed lawfully, appropriate security measures are implemented and applicable requirements governing cross-border transfers of personal data are observed.
AI should therefore be considered within an organisation’s existing legal and compliance framework rather than treated solely as a technology issue.
Confidentiality and data use require particular attention
The accessibility of generative AI tools creates a practical confidentiality risk.
Employees can easily input confidential business information, client data, trade secrets, commercially sensitive information or personal data into publicly available AI platforms without fully understanding what happens to that information.
Many AI platforms operate through cloud-based services provided by third parties. Depending on the provider and contractual terms, organisations may have limited visibility over where information is stored, how long it is retained or whether it is processed across multiple jurisdictions.
Organisations and businesses should consider what information employees are permitted to enter into AI systems and assess whether appropriate legal and technical safeguards are in place before confidential information or personal data is processed through them.
They should also consider whether their existing privacy notices adequately address relevant uses of AI, whether data minimisation principles are being observed and whether appropriate contractual protections are in place when engaging third-party AI providers.
AI governance is becoming a business necessity
Where employees have already incorporated AI tools into their work without internal guidance, organisations may unknowingly expose confidential information, process personal data inappropriately or rely on inaccurate AI-generated content.
An effective AI governance framework can reduce these risks by establishing clear parameters around how AI may be used. Depending on the organisation’s size, sector, and risk profile, this may include:
- identifying approved and prohibited AI tools;
- establishing rules governing confidential information and personal data;
- defining processes for approving new AI applications;
- requiring appropriate review of AI-generated outputs;
- allocating responsibility for oversight and risk management;
- providing employee training; and
- establishing procedures for assessing third-party AI providers.
Vendor arrangements should form part of this framework. Businesses procuring AI solutions should consider contractual provisions addressing matters such as confidentiality, data ownership, intellectual property, cybersecurity, liability, data retention and the processing of data across jurisdictions.
Bahrain’s developing policy landscape also points towards greater emphasis on responsible AI adoption. The Information & eGovernment Authority’s National Policy for the Use of Artificial Intelligence reflects a broader focus on the responsible, ethical and secure use of AI.
Putting appropriate governance arrangements in place now will help businesses manage existing risks while remaining able to adapt as the regulatory landscape develops.
Five steps businesses can take now
Businesses do not need to wait for further regulatory developments before reviewing their approach to AI.
- Identify how AI is already being used
Map both formally approved AI systems and informal employee use across the organisation.
- Assess the associated risks
Consider the legal, regulatory, confidentiality, data protection, cybersecurity and operational implications of current and proposed AI applications.
- Establish an AI governance framework
Develop policies and procedures appropriate to the organisation’s size, sector and risk profile, including rules governing approved tools and the handling of confidential information and personal data.
- Train employees and maintain appropriate human oversight
Employees should understand both the capabilities and limitations of AI. AI-generated outputs should be appropriately reviewed and verified, particularly where they may affect significant legal, regulatory or commercial decisions.
- Review contracts and third-party providers
Assess arrangements with AI providers, paying particular attention to confidentiality, intellectual property, cybersecurity, data retention, liability and cross-border processing of personal data.
Looking ahead
AI adoption is likely to continue developing rapidly across Bahrain and the wider GCC. The challenge for businesses is to benefit from the technology without allowing its use to move ahead of the controls needed to manage it.
This is not solely an IT issue. Legal, compliance, information security, IT and business teams all have a role to play in determining how AI can be used safely and responsibly.
For organisations operating in Bahrain, the priority is not to anticipate every future regulatory development. It is to understand how AI is being used today, determine how existing legal obligations apply and put in place proportionate governance arrangements that can adapt as the technology develops.
Is your AI governance keeping pace?
If your organisation is reviewing its use of AI, ASAR’s Bahrain team can assist with AI governance frameworks, internal policies, data protection and regulatory considerations and contractual arrangements with AI providers.
To discuss the legal and regulatory considerations for your business, contact our Bahrain team at asarbh@asarlegal.com.
