Firms need to have an understanding of the severe penalties and time frame of enforceability.
By Johan Steyn, 14 August 2024
Published by BusinessDay: https://www.businesslive.co.za/bd/opinion/columnists/2024-08-14-johan-steyn-eus-ai-law-could-have-dire-consequences-for-sa-companies/
The EU’s Artificial Intelligence Act, which is a crucial piece of law that ensures the deployment of artificial intelligence (AI) in a manner that is both safe and ethical, officially went into effect on August 1.
Not only does this historic rule affect businesses based in the EU, but it also affects firms that are not based in the EU, such as those in SA, that are participating in the EU market. For businesses to successfully incorporate these requirements into their operations, they need to have a comprehensive understanding of the staggered time frame of enforceability and the severe penalties that will be imposed for noncompliance as this legislation becomes effective.
The provisions of the Artificial Intelligence Act will become enforceable in stages, which will require careful preparation and adaptation to avoid complications. By February 2025, general requirements and restrictions about AI systems that are prohibited will be in effect.
At the beginning of August 2025, more complicated provisions that deal with notifying authorities, general-purpose AI models, governance, confidentiality and sanctions will start to take effect. By August 2026, the majority of the provisions of the act will be legally enforceable.
The penalties for failing to comply are considerable, and they may have repercussions for organisational finances. A punishment of up to €35m, which is equivalent to 7% of the total annual sales of the company, may be imposed if the laws regarding forbidden AI systems are not followed. If notified bodies or national competent authorities receive information that is inaccurate, incomplete, or misleading, these individuals may be subject to fines of up to €7.5m or 1% of their worldwide revenue.
Penalties will be capped at lower levels for small and medium-sized enterprises and start-ups, as defined in Article 99. On the other hand, fines for providers of general-purpose AI models can reach up to 3% of their annual worldwide turnover or €15m, whichever is higher.
Due to the changing nature of AI rules, it is essential to maintain a level of awareness. To maintain compliance, it is necessary to have routine updates, official papers, legislative developments, and other publications on AI governance.
In accordance with the act, employees and other individuals who work with AI systems are required to have a suitable degree of AI literacy. Per article 4, businesses are obligated to take the necessary steps to guarantee that the individuals who will be running and using AI systems on their behalf have received proper training. This training must take into account the individuals’ level of technical expertise, experience, education, and the environment in which the AI systems will be used.
SA businesses that are active in the EU market are required to immediately examine and modify their AI systems to comply with the new requirements. However, due to the intricacy and breadth of the changes, quick action is required. The staggered implementation allows for some time for adjustment, but it is necessary to take action immediately.
Companies have the ability to not only avoid penalties but also position themselves as ethical and compliance leaders in the global landscape of artificial intelligence if they ensure that they comprehend and incorporate these standards.
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