The EU AI Act is the world's first comprehensive legal framework designed to regulate the development, deployment, and use of artificial intelligence systems within the European Union.

Enacted to ensure that AI systems are safe, transparent, and respectful of fundamental rights, the Act adopts a risk-based approach, meaning the stringency of the regulation is directly proportional to the potential harm an AI system could cause. Crucially, the law has extraterritorial scope: it applies not only to EU-based companies but to any organization—regardless of location—whose AI systems affect users within the EU. Unless organizations classify their AI inventory and implement the necessary governance, they face significant legal and financial repercussions.

To comply with the EU AI Act, organizations must categorize their systems into one of four risk levels, each with distinct obligations:

• Unacceptable Risk (Prohibited): AI practices deemed a clear threat to fundamental rights are banned outright. Examples include social scoring by governments, manipulative techniques that exploit vulnerabilities (e.g., in children), and real-time remote biometric identification in public spaces by law enforcement (with narrow exceptions).
• High Risk (Strictly Regulated): Systems that could negatively impact safety or fundamental rights, such as AI used in critical infrastructure, recruitment, credit scoring, or migration control. These require a certified risk management system, high-quality data governance, detailed technical documentation, and human oversight.
• Limited Risk (Transparency Obligations): AI systems with specific transparency risks, such as chatbots or emotion recognition systems. Users must be informed they are interacting with a machine, and AI-generated content (like deepfakes) must be clearly labeled.
• Minimal Risk: The vast majority of AI systems (e.g., spam filters, video games) face no new obligations, though voluntary codes of conduct are encouraged.

The EU AI Act also introduces specific rules for General Purpose AI (GPAI) models, including requirements for copyright compliance and detailed training data summaries. Non-compliance carries some of the heaviest penalties in the digital world, with fines reaching up to €35 million or 7% of total worldwide annual turnover for prohibited practices.