The clone issue is real, but it's no more complicated than it would be without git: Keep track of who has a copy of this data and where. Whatever system you have in place to solve that problem can also be used to manage the cloning process.

As for the individual repos, here's the procedure:

  cd <repo>
  rm -rf .git/  # DON'T TRY THIS AT HOME unless you know what you're doing.
  git add .
  git commit -m "Brand new repo"

Do not do the above unless you completely understand the ramifications. But those ramifications might be precisely the ones you want for legal compliance.