EU AI Act Will Be World’s First Comprehensive AI Law
March 31, 2024
The Case
On March 13, 2024, the European Union’s parliament formally approved the EU AI Act, making it the world’s first major set of regulatory ground rules to govern generative artificial intelligence (AI) technology.
After passing final checks and receiving an endorsement from the European Council, the EU AI Act is expected to become law in spring 2024, likely in May or June.
The first-of-its-kind law is poised to reshape how businesses and organizations in Europe use AI for everything from healthcare decisions to policing. It imposes blanket bans on some “unacceptable” uses of the technology while enacting stiff guardrails for other applications deemed “high-risk.”
Some of its most notable requirements include the following:
Outlaws AI-powered social scoring systems and any biometric-based tools used to guess a person’s race, political leanings, or sexual orientation.
Bans the use of AI to interpret the emotions of people in schools and workplaces, as well as some types of automated profiling.
Outlines a separate category of “high-risk” uses of AI (including education and hiring), requiring transparency and a separate set of other obligations.
Mandates broad new disclosure requirements around the usage of AI models.
Requires all AI-generated deepfakes to be clearly labeled, targeting concerns about manipulated media that could lead to disinformation and election meddling.
Why Does This Matter?
The sweeping legislation, set to take effect in roughly two years, highlights the speed with which EU policymakers have responded to the exploding popularity of tools such as OpenAI’s ChatGPT.
It also underscores how fintechs must navigate the complexities of AI compliance to aim towards adherence to internal compliance policies and regulatory change management. Such regulations vary widely across jurisdictions, encompassing areas such as data privacy, discrimination, and liability. Compliance with these regulations is crucial for promoting trust and safeguarding against legal risks.
The legislation also draws a sharp contrast to the United States, which has yet to make any meaningful progress on federal legislation for AI.
InnReg's Experience
As part of its compliance outsourcing services, InnReg has assisted the world's most innovative fintech companies when they receive specific inquiries and face regulatory scrutiny of their AI algorithms.
Learn More About This Topic
For additional details, read how InnReg’s primer on AI compliance can help your fintech build best practices to meet evolving regulatory requirements. The guide covers all the key AI compliance topics, including:
Understanding regulatory compliance for AI-based fintech products;
Implications of machine learning in compliance;
Time and cost-saving lessons learned from responding to regulatory inquiries;
Legal regulations around AI, and
Practical application examples of AI compliance by InnReg client services.
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The FTC recently took action against bill payment company Doxo and its co-founders, accusing them of deceptive “junk fee” practices that harmed consumers.
FINRA has fined Stifel Independent Advisors, alleging violations of rules regarding nontraditional exchange-traded products (NT-ETPs).
