The European Union's AI Act, which took effect on February 1, 2025, sets forth compliance requirements for entities using AI systems. Articles 1-5 of the Act focus on principles and obligations for high-risk or unacceptable risk AI systems.

Entities must categorize their AI systems based on risk levels: unacceptable, high, limited, or minimal. Systems deemed unacceptable are prohibited entirely. High-risk systems require comprehensive technical documentation in line with Articles 8 and subsequent sections. This includes a quality management system and an EU declaration of conformity.

Risk management is crucial for compliance. Entities should conduct a Fundamental Rights Impact Assessment (FRIA) for high-risk systems used by public authorities. Data governance practices must ensure the use of unbiased datasets and maintain traceability throughout the AI lifecycle.

Human oversight and transparency are essential in deploying AI systems. Clear user instructions and operator understanding of outputs are necessary to build trust. High-risk systems must be registered in the EU database per Article 49, with CE marking indicating legal compliance.

Continuous monitoring mechanisms are required to assess AI system performance. Issues or non-compliance should be reported to national authorities promptly.

In February 2025, the EU Commission issued guidelines on prohibited AI practices under the Act. These include bans on manipulating individuals, social scoring, emotion inference in workplaces or educational settings, among others.

AI providers must prevent their systems from being used for prohibited purposes through safeguards like user controls and restrictions. Continuous monitoring is needed to detect misuse.

Enforcement of provisions banning certain practices began on February 2, 2025; penalties start August 2, 2025. Fines may reach €35 million or up to 7% of global turnover.

The AI Act seeks uniform regulations across the EU for developing and using AI technology categorized into four risk levels: unacceptable, high risk, limited risk, and minimal risk.

The scope extends beyond EU borders if activities impact the region; non-EU providers need authorized representatives within the Union. Obligations apply to General Purpose AI models starting August 12, 2025.

Financial institutions utilizing AI for credit scoring or insurance assessments face stringent requirements regarding data quality and cybersecurity while aligning with other regulatory frameworks like anti-money laundering directives.

Overall, the Act aims to promote responsible use of AI by fostering trustworthy principles that businesses can adopt to enhance efficiencies in areas such as fraud prevention and money laundering detection while adapting ethically to technological advancements.