What will the new European Union AI Act bring? Part One

By:
on Jun 5, 2024
Listen
  • The world awaits the new EU Artificial Intelligence Act.
  • The act will be the first of its kind and a benchmark new standard in cyber law, coming into effect this month
  • But what will the law mean for AI users and businesses?

Follow Invezz on Telegram, Twitter, and Google News for instant updates >

This month, a historic and groundbreaking new law governing AI comes into effect.

Are you looking for signals & alerts from pro-traders? Sign-up to Invezz Signals™ for FREE. Takes 2 mins.

The EU Artificial Intelligence Act will, by its own admission, be the first comprehensive regulation on AI by a major regulator anywhere.”

But what does that actually mean for the average person? And what, for that matter, will it imply for financial markets?

Who needs to be aware of the EU AI ACT?

Copy link to section

Don’t think that you won’t be affected if you’re not in the EU. Anyone using AI services or providing them within the European Union will be affected – but the AI Act doesn’t stop there.

Robert Jain, associate at legal firm Holland & Knight says that “the proposed AI Act applies to providers and developers of AI systems that are marketed or used within the EU (including free-to-use AI technology), regardless of whether those providers or developers are established in the EU or another country.”1

This means that American-based companies that market or provide AI-based technology within the EU may be subject to the Act’s potential penalties for noncompliance.”

A high price to pay

Copy link to section

And those penalties can be hefty. As laid out in the Act, they can range from €7.5 million to €35 million – but things can be even more punitive for mega-corporations.

The AI ACT also allows for a sliding scale punishment of anything from 1.5% to 7% of a company’s total global revenue.

If this revenue-based fining were to be acted upon, it would make the EU AI Act among the strictest legal fining amounts in the world. The Microsofts of this world may not balk too much at a €35 million fine – but close to a tenth of all revenue accrued even before profits?   

What does the European AI Act aim to do?

Copy link to section

Put simply, the law aims to enforce compliance to a certain prescribed standard of AI use and best practise by both companies and developers.

This is a pretty different approach from, for example, the United States, where regulation of AI has been far less prescriptive and punitive, almost being a voluntary compliance exercise for many.

More specifically, the AI Act categorises various possible uses for AI technology into different levels of ‘risk’ and forbids ‘high risk’ usage of AI.

Some high-risk activities that are forbidden are:

  • Scraping of facial images, either from online or from footage, for use in things like ‘deepfakes’
  • AI segmenting people, using their personal data such as biometrics, into groups which either limit or discriminate someone’s sex, race, religion, political affiliations and other personal information
  • ‘Social scoring’, i.e. categorizing someone and discriminating against them based on any personal traits  
  • ‘Manipulative AI’ – a vaguely worded, potentially problematic definition of “deploying subliminal, manipulative, or deceptive techniques to distort behaviour and impair informed decision-making, causing significant harm”

When does the act come into law?

Copy link to section

The window period for the EU AI Act coming into law is May to July 2024.

However, the World Economic Forum believes the act will come in during June, this month, specifically.

Next, in Part Two, we will specifically be discussing what the European Union’s AI Act will likely mean for financial markets.

Sources:

Copy link to section

1 Holland & Knight, 2024; the official EU Artificial Intelligence Act website

EUR AI Europe