A Guide for Ethical AI Compliance

Artificial Intelligence (AI) is revolutionizing industries across the globe. It’s making our lives easier, from personal assistants like Siri and Alexa to complex data analysis in healthcare. However, with the growing use of AI, there’s a pressing need to regulate how it’s used, particularly when it comes to data privacy and security. Enter the EU AI Act, a groundbreaking regulation aimed at making sure AI is used responsibly and ethically within the European Union.

In this blog, we'll explore what the EU AI Act is, why it matters, and what it means for businesses, particularly those operating in the EU.

What is the EU AI Act?

The EU AI Act is a proposed regulatory framework by the European Commission that aims to set clear rules and standards for the use of AI within the EU. It was first introduced in April 2021 and is expected to be finalized and enforced in the coming years. The Act categorizes AI systems based on their risk levels and establishes strict requirements for each category.

The goal of the EU AI Act is to make sure that AI technologies are developed and used in a way that is safe, transparent, and aligned with European values, such as respect for fundamental rights. It’s the first of its kind and sets a precedent for how AI might be regulated in other parts of the world.

Key Features of the EU AI Act

1. Risk-Based Classification of AI Systems

The EU AI Act classifies AI systems into four categories based on the level of risk they pose:

• Unacceptable Risk: AI systems that pose a clear threat to the safety, livelihoods, and rights of people. These include systems that use subliminal techniques to manipulate behavior or systems used for social scoring by governments. These types of AI are banned under the Act.
• High Risk: These AI systems are subject to strict requirements because they can significantly affect individuals' rights or safety. Examples include AI used in critical infrastructure (like transport), biometric identification, and recruitment processes. High-risk AI systems must undergo rigorous testing and documentation to meet the standards.
• Limited Risk: These systems are subject to transparency obligations. Users must be informed that they are interacting with an AI system. For instance, chatbots would fall under this category.
• Minimal or No Risk: These AI systems pose little to no risk and are subject to minimal regulatory requirements. Most AI applications in this category involve everyday activities like spam filters or video games.

2. Requirements for High-Risk AI Systems

High-risk AI systems face the most stringent requirements under the EU AI Act. Businesses that develop or use these systems must:

• Make the AI system transparent, allowing users to understand how decisions are made.
• Guarantee the system is accurate, reducing the chances of errors or biases.
• Implement risk management measures to address potential issues.
• Maintain comprehensive documentation to demonstrate compliance with the Act.

Failure to meet these requirements can lead to significant fines, much like the penalties under the GDPR.

3. Transparency and Human Oversight

For AI systems that are not classified as high-risk but still pose some risk, the Act requires transparency. Users need to be informed when they are interacting with AI, and there must be clear guidelines on how AI-driven decisions can be reviewed by a human.

Human oversight is also emphasized, especially for high-risk AI systems. This verifies that AI does not operate unchecked and that humans can intervene if necessary.

4. Data Governance and Management

The EU AI Act places a strong emphasis on data governance. Since AI systems often rely on large datasets to function effectively, the Act requires that data used for training and operating AI systems is of high quality and free from biases. This aligns closely with existing data protection laws like the GDPR, which also stress the importance of accurate and fair data processing.

Why the EU AI Act Matters

The EU AI Act is significant because it sets a clear regulatory framework for the development and use of AI. This is especially important as AI continues to evolve and become more integrated into various aspects of life and business.

For businesses, particularly those operating in the EU, the Act represents a new layer of compliance that must be addressed. However, it also offers an opportunity to build trust with consumers by showing a commitment to ethical AI practices.

Moreover, the EU AI Act could influence AI regulations globally. As seen with the GDPR, regulations that originate in the EU often set the standard for other regions. Businesses that adapt to the EU AI Act early may find it easier to comply with future AI regulations in other markets.

What was updated in the EU AI Act in October 2024?

There have been some important updates and adjustments lately, making the Act an evolving regulation and one that needs close monitoring. Luckily, we have summarized everything you need to know as a business owner who has implemented AI in the workplace.

1. More AI Applications have been marked "High-risk"

AI tools used in recruitment and AI used in the justice system (example: predictive policing or sentencing algorithms) are now also seen as high risk. The reason - they can unfairly carry out judgements, spike racism fears, and need to be used very carefully or not at all. This is a heated topic and we are yet to see how and if AI will remain in import decision making processes.

2. Stricter regulation in Healthcare and Education

The healthcare sector is even more closely regulated under the AI Act. There are new requirements for AI tools used in diagnostics and patient care. All AI tools need to meet clinical safety standards in order to be used and also have to be under non-stop monitoring for potential problems.

AI tools used in education (like automatic grading systems) are now placed under the high-risk category due to concerns over fairness, transparency, and bias. The idea is to make sure that AI doesn't accidentally disadvantage students.

3. Need for AI Transparency for in the Creative Sector

If it's AI generated - it needs to be made known. The Act requires transparency around AI-generated content, including AI-created art and deepfakes. Developers of generative AI systems have to clearly label AI-generated content. AI art is now seen as a potential harm to users as it can lead to misinformation and copyright problems.

4. National Authorities are now also enforcing the AI Act

National bodies in EU countries (like those fighting organized crime) now have greater power to enforce the AI Act. This can be anything from just requesting certain company documents to carrying out unannounced inspections. These authorities are now more actively involved in overall compliance monitoring.

5. And also - more penalties for non-compliance

Another recent update is regarding penalties - they can be even more severe. The Act now includes penalties for those who fail to audit AI systems properly or who attempt to cheat the regulatory system. Remember, the Act includes pretty high penalties for non-compliance - up to €30 million or 6% of global turnover, depending on the violation. The upside is at least now there is more clarity around how they will be applied and when a company is in the wrong.

How to Prepare Your Business for the EU AI Act

If your business uses AI, it's important to start preparing for the EU AI Act now. Here are some steps you can take:

1. Assess Your AI Systems

Begin by categorizing your AI systems based on the risk levels outlined in the Act. Identify which systems are high-risk and which are of limited or minimal risk. This will help you understand the specific requirements you need to meet.

2. Implement Transparency Measures

For AI systems that interact with users, make sure transparency measures are in place. This includes informing users when they are interacting with AI and providing explanations for AI-driven decisions.

3. Strengthen Data Governance

Review the data used to train and operate your AI systems. Make sure it is accurate, unbiased, and compliant with GDPR. Implement strong data management practices to maintain high-quality datasets.

4. Document Your Processes

For high-risk AI systems, thorough documentation is crucial. Document how your AI systems work, the risks involved, and the steps you’ve taken to manage those risks. This documentation will be essential for demonstrating compliance with the EU AI Act.

5. Use Compliance Tools

If you run a Shopify store, tools like Consentmo can be invaluable in helping you navigate some of the complexities of the EU AI Act. Consentmo offers features that help manage data governance, transparency, and compliance with GDPR and other regulations. By integrating these tools into your business, you can better manage your compliance efforts and focus on innovation.

Conclusion

The EU AI Act is a landmark regulation that will shape the future of AI development and use in the EU. For businesses, understanding and preparing for this regulation is important. While the Act introduces new compliance challenges, it also provides an opportunity to build trust with customers and lead in the ethical use of AI.

By assessing your AI systems, implementing transparency measures and strengthening data governance, you can make sure your business is ready for the EU AI Act. As AI continues to advance, staying ahead of regulations will be key to maintaining a competitive edge while upholding the highest standards of ethics and compliance.