AI fines… going to be large if you get it wrong

The new EU AI act brings potential fines of up to 35m Euros or up to 7% of annual turnover.

The new fines as defined by the EU act seem pretty well defined, although enforcing them will be a different matter!

Chapter 12 of the act specifies the levels of fines for non-compliance, covering the enforcement mechanisms in Article 99 and Article 101. Fine Levels are as follows:

1) Non-compliance with Prohibitions - fines of up to EUR 35m or up to 7% worldwide annual turnover for the preceding financial year, whichever is higher.

2) Serious Infringements - non-compliance with certain obligations related to operators or notified bodies can result in fines of up to EUR 15m or up to 3% of annual turnover for the preceding financial year, whichever is higher.

3) Less Severe Infringements
- Supplying incorrect, incomplete, or misleading information to notified bodies or national competent authorities can result in fines of up to EUR 7.5m or up to 1% of total worldwide annual turnover for the preceding financial year, whichever is higher.

4) General-Purpose AI Models - Providers of general-purpose AI models can be fined up to 3% of their annual total worldwide turnover in the preceding financial year or EUR 15m whichever is higher, for various infringements. This is mentioned in Article 101, paragraph 1 on page 117.

Enforcement Mechanisms are as follows:

1) Market Surveillance Authorities - Each Member State must designate market surveillance authorities responsible for enforcing the AI Act. These authorities can audit, inspect, and require corrective actions to ensure compliance.

2) Technical Documentation - Providers must maintain detailed technical documentation and make it available to authorities upon request, ensuring transparency and traceability.

3) Post-Market Monitoring - Providers must implement systems to monitor the performance of AI systems after they are placed on the market, logging and analysimg any incidents or malfunctions.

4) Quality Management Systems - Providers are required to establish and maintain quality management systems to ensure ongoing compliance with regulatory standards.

Going to be interesting to see how providers respond and whether they care enough to do anything.

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