Artificial Intelligence Ordinance (AI Ordinance) comes into force on 1 August 2024
On 12 July 2024, the European Union published the AI Regulation ((EU) 2024/1689 – ‘AI Act’) in the Official Journal, creating the world’s first comprehensive legal framework for artificial intelligence. This regulation will enter into force on 1 August 2024, i.e. 20 days after publication. However, various transitional periods must be taken into account.
The European Union’s Artificial Intelligence Regulation (AI Regulation) represents a significant regulatory milestone. The aim is to create a legal framework that both promotes innovation and minimises the risks of AI. This regulation has far-reaching implications for the financial services industry.
Transition periods and requirements of the AI Regulation
The general provisions and definitions (Chapter I) and the rules on prohibited practices (Chapter II) will enter into force in February 2025 after a short transitional period of six months. A period of 36 months is available for high-risk AI systems, while the other requirements must be implemented within 24 months.
After these deadlines, non-compliant AI systems may neither be sold nor used.
The regulation affects both companies that sell AI systems or products with AI and those that use AI in their work processes. It is important to review the use of AI in the company and to create an individual catalogue of obligations that takes into account the specific requirements of the regulation. The staggered transition periods offer companies the opportunity to prepare for the new regulations and ensure compliance. These periods should be used intensively in order to be well prepared.
Definition
The AI Regulation is a planned EU regulation that defines rules and standards for the development and use of artificial intelligence. It aims to ensure the safety, transparency and accountability of AI systems while at the same time not hindering innovation.
Realisation
The implementation of the AI Regulation requires financial institutions to thoroughly review their AI-based systems. This includes:
- Risk assessment: identifying and assessing the risks associated with the use of AI.
- Compliance programmes: Developing and implementing programmes to comply with the new regulations.
- Training programmes: Training employees in the new legal requirements and their impact on business processes.
Application
The AI Regulation affects all AI applications used in the financial sector, including:
- Fraud detection: Systems for recognising and preventing fraud must be secure and transparent.
- Credit scoring: Credit scoring algorithms must be fair and non-discriminatory.
- Trading algorithms: Automated trading systems must be robust and reliable.
The challenges
- Complexity of implementation: The implementation of the AI Regulation requires extensive adjustments to existing systems and processes.
- Costs: Implementing new compliance measures can be costly.
- Technical hurdles: The requirements for transparency and explainability of AI systems pose technical challenges.
Recommendations
To prepare for the AI Regulation, financial institutions should take the following steps:
- Evaluation of current AI systems: Conduct a comprehensive assessment of the AI technologies in use.
- Development of a compliance plan: Creating a detailed plan to comply with the new regulations.
- Collaboration with experts: Involving legal and technical experts to fulfil the requirements of the AI Regulation.
How can Be help?
At Be, we utilise our extensive knowledge of the financial sector and combine it with our AI and compliance expertise to provide our clients with the most effective strategies for their individual needs. Contact us for a customised roadmap to AI compliance for your business.
