How the EU AI Act Will Impact Your Business

The AI Act, recently passed by the European Commission, has raised many questions and concerns among businesses using AI. Companies are just beginning to benefit from artificial intelligence, and the last thing they want is legal complications. This is especially true for healthcare, financial, and law enforcement institutions, which were already cautious about adopting AI systems. So, what now? Will they need to stop using AI?

Thankfully, not at all. AI regulation may sound intimidating, but in practice, it’s more helpful than threatening. And if you’re seeking answers to the why, what, and how of the AI Act, you’ve come to the right place. At Dynamiq, we want to help our existing and future clients understand and comply with the legalities of AI use.

So keep reading to discover why the AI Act was introduced, what the requirements for your company are, and how Dynamiq can support your compliance with it.

Why the EU Passed the AI Act

Even though artificial intelligence hasn’t caused any major problems in the world yet, the growing use of AI systems poses risks to people's privacy and rights. AI can act autonomously and, without human oversight, can provide false or biased information. 

It can also potentially be misused for harmful purposes and is generally quite vulnerable to data breaches. These concerns conflict with European Union values and inspired the creation of the Artificial Intelligence Act.

“We are taking up our responsibility as lawmakers to protect our society from potential harm and give our economies a clear direction as to how AI can be used for good,” — stated Margrethe Vestager, European Commission Executive VP for A Europe Fit for the Digital Age and Competition in her closing statements during the debates.

Key Goals of the AI Act

It’s important to understand that the European Union isn’t trying to limit the responsible use of AI in any way. The act they created serves as guidelines for the responsible use of artificial intelligence. 

The EU has outlined several key goals in the Artificial Intelligence Act, which can help you better understand the core purpose of this regulation. The act aims to:

• Protect privacy and personal data
• Prevent discrimination
• Ensure that AI systems are safe, transparent, and understandable
• Create a unified market for AI in the European Union
• Support innovation while ensuring safety

Thus, even though many companies are concerned that the AI Act might hinder them from integrating AI into their business, the regulations don't aim to prevent the adoption of artificial intelligence; but rather promote its informed and responsible use.

Despite its good intentions, the AI Act has also sparked concerns that the regulatory bar might be set too high. Particularly, Gabriele Mazzini, the architect and lead author of the proposal, fears that the act could reinforce the dominance of big US tech companies, while smaller European firms may struggle to comply due to the lack of clarity.

To provide this clarity, we’ll now break down the act’s risk categories, so you can better understand which regulations apply to your AI systems and how to ensure compliance.

Risk Categories Under the AI Act

Due to the variety of ways and aims to use AI, the European Union didn't want to apply a one-size-fits-all rule and proposed a more rational solution: risk categories. By categorizing different AI systems based on the potential harm they may cause, the Act ensures a more nuanced approach to addressing the risks.

Unacceptable Risk: What AI Systems Are Banned?

The name says it all: AI systems in this category cannot be developed or used in the EU. For example, unacceptable risks include systems that manipulate human behavior in a harmful way, such as gambling platforms that exploit vulnerabilities or AI-powered social scoring systems that classify individuals based on their social behavior.

High-Risk AI Systems: What Are the Requirements?

The high-risk category includes AI models used in healthcare diagnostics, some biometric identification systems, autonomous vehicles, and managing utilities like electricity and water. These AI systems have strict regulations to ensure they’re safe and transparent. To comply, you must:

• Have a system to identify and minimize the risks, for example, setting up regular system check-ups and a process for addressing errors.
• Make sure the data used to train AI is fair, accurate, and unbiased and that data is systematically updated so the information remains current and relevant.
• Have a responsible human oversee AI performance and step in to fix any mistakes AI makes.
• Have AI system development documentation, including the design and deployment processes.
• Have a description of your AI system’s capabilities and limitations.
• Ensure your system meets performance, reliability, and security standards.
• Have your AI system tested by a notified body—an organization accredited by EU member states to evaluate whether high-risk AI systems comply with the legal requirements set out in the AI Act.
• Constantly monitor your AI system’s performance and report to your notified body any incidents or serious malfunctions.

Limited Risk AI Systems: What AI Uses Are Impacted?

Systems that use AI for customer interactions and marketing content generation are designated as limited risk. If you fall into this category, you must:

• Ensure your users know they’re interacting with AI
• Provide users with the option to interact with a human instead
• Clearly label content generated by AI

Minimal Risk AI Systems: No Regulatory Burden

Lastly, the least risky category includes using AI for game development and spam filtering. Since artificial intelligence doesn’t pose any danger here, there are no special requirements for businesses in this sector.

Risk Categories Under the AI Act

So now, when EU-based businesses plan to use AI, they first need to determine which risk category their AI system falls into and what requirements they must meet. But what happens if they don’t?

What Are The Penalties For Non-Compliance?

The law is the law, and businesses that fail to comply with the AI Act can face serious financial and legal consequences. The size of the punishment depends on the severity of the violation, with the biggest penalties for banned systems.

Financial penalties can reach up to €30 million or 7% of a company’s global annual income (whichever is higher). Legal consequences for non-compliant businesses include restrictions on AI use until the company achieves compliance or compensation claims in cases of harm to individuals or society. Potentially, non-compliance may also lead to reputational damage.

These penalties apply to all European Union companies developing or using AI systems. If you represent a non-EU organization, you might wonder whether the AI Act affects your business, and Dynamiq has prepared an answer for you.

Global Implications: How the EU AI Act Impacts Non-EU Companies

Non-EU companies that do business in the EU or interact with EU citizens must comply with the AI Act. They must comply with all regulations for whichever risk category they fall under, undergo conformity assessments, ensure transparency, and implement data protection measures, just as EU companies do. If non-EU businesses fail to comply with the act, they could face hefty fines similar to those imposed under GDPR.

How Dynamiq Can Help Your Business Comply with the AI Act

Dynamiq is an all-in-one, no-code platform for developing AI systems. Here, businesses can easily prototype, develop, test, and train their AI applications, as well as analyze performance after deployment. Using such a platform provides several general benefits to businesses, such as faster deployment, easier scaling, and cost efficiency due to the reduced need for in-house AI specialists.

However, today, we will explore Dynamiq’s functionality through the lens of the AI Act and show how it supports your company’s compliance. We’ll provide a table with high and limited-risk categories and specific Dynamiq features that align your AI system with the category’s requirements, but first, let us introduce the important functionality.

Guardrails

Guardrails are specific predefined rules or boundaries within AI systems that control its behavior and output. They automatically detect and prevent the display of inappropriate or harmful content, block potential leaks of sensitive information with predefined criteria, such as ethical guidelines, accuracy standards, legal requirements, or company policies.

Comprehensive Observability Suite

Dynamiq provides real-time monitoring of every user interaction with your AI system, along with quality evaluation and the ability to optimize your pipeline. The platform also allows you to configure alerts for critical issues, enabling you to promptly resolve them.

Secure On-Premises Deployments

Developing with Dynamiq means having your AI system and all your data on your local server or a virtual private cloud (VPC). This means the data is stored and controlled directly by your company, helping you comply with data privacy laws like GDPR and HIPAA.

Human Oversight and Alerts

Dynamiq lets human operators oversee AI decisions and intervene when necessary. As mentioned earlier, the platform also has an alert system, which helps businesses quickly react to AI mistakes.

Fine-Tuning and Customization

Dynamiq offers integrated fine-tuning techniques that allow you to adjust the behavior and learning methods of your AI system. With just two clicks, businesses can fine-tune any open-source AI models to meet their industry-specific needs and requirements.

Dynamiq’s Functionality for High and Limited Risk Categories

As promised, we will provide a table of Dynamiq’s functionality that helps high- and limited-category businesses comply with the AI Act.

Dynamiq is an excellent option for businesses looking to easily and securely develop AI systems while ensuring compliance with the AI Act.

Preparing For The Future Of AI Regulation with Dynamiq

Compliance is a must for all businesses looking to implement AI. Choosing the right development solution is an important first step. Dynamiq offers easy deployment and all the features needed to ensure your AI system is used safely and legally. So, whether you’re ready to start your project or need assistance understanding the AI Act and how our platform can help, book a demo today to begin your compliant AI journey.