The EU AI Act, passed in 2024, is the first comprehensive law regulating artificial intelligence. Much like GDPR reshaped privacy, the AI Act will set a global benchmark for responsible AI. Any business offering or using AI that impacts EU citizens falls within its scope. (European Commission, 2024)
Risk-Based Framework
The Act categorizes AI by risk:
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Unacceptable risk – Social scoring, manipulative AI. These are banned.
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High risk – Healthcare, hiring, finance, biometric ID. These face strict obligations.
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Limited risk – Transparency required (users must know they’re dealing with AI).
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Minimal risk – Spam filters or recommender systems face minimal rules.
Obligations for High-Risk AI
Businesses deploying high-risk AI must:
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Use high-quality, non-biased data.
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Maintain extensive documentation of training and testing.
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Provide clear transparency notices.
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Ensure human oversight for critical decisions (KPMG, 2024).
Enforcement and Penalties
Non-compliance could mean fines up to €35 million or 7% of global annual revenue, whichever is higher (Skadden, 2024).
Business Checklist
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Audit current AI uses and risk levels.
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Document training data and processes.
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Update contracts and governance.
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Train teams on compliance.
Why It Matters Globally
Like GDPR, the AI Act will influence non-EU businesses. U.S. and Asian companies serving EU markets must comply, making it a de facto global standard.
Takeaway: Companies that prepare now will reduce compliance risk, avoid penalties, and build trust.