The EU AI Act, which entered into force on August 1, 2024, establishes a comprehensive framework for the development and use of artificial intelligence within the European Union. It differentiates between AI Systems and General-Purpose AI Models, imposing varying compliance obligations based on the perceived risk level associated with their use.
The EU AI Act is the world’s first comprehensive framework for AI governance, aiming to ensure that artificial intelligence systems are safe, ethical, and aligned with human rights. By categorizing AI systems based on risk levels, the Act sets global standards that will impact businesses and individuals, regardless of their location.
The EU AI Act presents both challenges and opportunities for organizations, emphasizing the importance of robust data governance to ensure responsible AI development. By aligning data practices with the Act’s requirements, companies can enhance operational efficiency, build trust, and gain a competitive advantage in the market.
The enforcement deadline for the EU AI Act is approaching, with key regulations set to come into effect on February 2, 2025. High-risk AI systems will be prioritized, and organizations could face substantial fines for non-compliance.
The EU AI Act requires non-EU providers of high-risk AI systems and general-purpose AI models to appoint an authorised representative within the EU to ensure compliance with regulations. This representative must perform several duties, including verifying technical documentation and cooperating with competent authorities on regulatory matters.
The EU AI Act introduces a risk-based regulatory framework for artificial intelligence, categorizing systems based on their potential risks. Limited-risk AI systems, which include chatbots and content generators, are subject to specific transparency obligations to ensure users are aware they are interacting with AI technology.
A recent survey revealed that 72% of Germans have never heard of the EU AI Act, a crucial piece of legislation aimed at regulating artificial intelligence in Europe. The findings highlight a significant disconnect between public awareness and confidence in government policies regarding AI technology.
As global AI regulation evolves, EY teams are navigating compliance requirements while fostering innovation through ethical AI practices. The EU AI Act, one of the most comprehensive regulations, requires a strategic approach to governance that balances regulatory obligations with business objectives.
American AI policy in 2025 will likely be dominated by state legislative proposals, as federal AI policy is expected to be a lower priority amid other pressing issues. With more major regulatory proposals anticipated, states like New York and Texas are already working on initiatives that resemble previous civil rights-based bills.
The EU AI Act represents a significant regulatory framework that impacts financial services institutions, requiring them to assess and ensure compliance of their AI systems based on risk categories. With stringent requirements for transparency, accountability, and oversight, financial institutions must prepare to adapt their existing AI applications to meet the new standards or face substantial penalties for non-compliance.