The European Union has introduced the AI Act, the first law designed to regulate artificial intelligence in a comprehensive way. This law will significantly change how businesses develop, purchase, and deploy AI systems. It also reshapes how compliance teams operate, requiring them to be proactive, thorough, and well-documented.
In simple terms, the law demands that companies prioritize safety, fairness, and accountability in AI systems. Businesses will need to demonstrate that their AI solutions comply with legal requirements and that they have systems in place to prevent harm. This article provides a complete guide to the AI Act, explaining what it requires, why it matters, the steps businesses should take, and what to expect in the coming years.
Understanding the AI Act
The AI Act classifies AI systems based on risk and assigns rules according to that risk. It applies not only to companies based in the EU but also to any organization offering AI services to EU users. This means that global companies must pay attention, even if they do not have an EU office. Penalties for non-compliance can be severe, reaching up to €35 million or 7% of global revenue for serious violations. Lesser breaches also carry significant fines, emphasizing the importance of robust compliance programs.
Timeline of the AI Act:
>Introduced in 2024, some provisions are already in effect.
>Most major obligations will apply from August 2026.
>Standards, technical guidelines, and conformity frameworks continue to be rolled out through 2025 and beyond.
Key Requirements of the Law
The AI Act uses a risk-based approach, dividing AI systems into four categories:
>Prohibited AI systems – AI that manipulates behavior to cause harm or enables social scoring by authorities is banned.
>High risk systems – Systems that affect critical areas like hiring, lending, biometric identification, healthcare, and transport fall here. They require:
Risk management programs
Detailed technical documentation
Human oversight
Data governance
Pre-market conformity checks
Post-market monitoring
>Limited risk systems – These systems need to disclose to users that AI is being used, such as chatbots or deepfakes.
>Minimal risk systems – Most AI tools, including simple automation, face only minimal new obligations.
Compliance Building Blocks for Businesses
To meet the AI Act requirements, companies must implement:
>Full AI lifecycle risk management
>Detailed technical files documenting AI development and usage
>Data governance policies to ensure training data is accurate and representative
>Clear human oversight protocols
>Pre-market conformity assessments for high risk systems
>Post-market monitoring and reporting processes
>Record keeping for audits
Why Compliance Matters Now
Global AI adoption is growing rapidly. In 2025, over 78% of organizations reported using AI in at least one function, a significant increase from 2023 and early 2024. With AI investments expected to grow further, regulators will closely monitor companies’ risk management practices.
Estimated Compliance Costs:
For a single high risk AI system, governance and certification costs can reach €52,000 per year.
Companies managing multiple high risk systems should expect higher costs, including internal resources, third-party audits, and ongoing monitoring.
Practical Implications for Product Teams
Product teams must integrate compliance into the design phase rather than treating it as a final check. This includes:
Shifting risk management left in the development process
Continuously testing models for bias and errors
Maintaining logs and documentation for regulatory audits
Designing AI systems for transparency and explainability
Procurement and Vendor Management
When buying AI tools from suppliers, businesses should request:
>Evidence of compliance and conformity checks
>Documentation of testing and risk management
>Contracts defining responsibilities for compliance and audit cooperation
Day-to-Day Compliance Actions
Compliance teams should:
>Map all AI systems and classify them by risk level
>Set up AI governance committees including legal, privacy, security, and product teams
>Use standard templates for technical files, risk registers, and monitoring reports
>Conduct regular audits and practice inspections
>Train staff to understand AI risks and reporting requirements
Using Technology to Simplify Compliance
RegTech tools can assist by:
Discovering AI models in use across the organization
Generating technical documentation
Monitoring models for drift or risk
Creating audit trails and reports
Automation does not replace human oversight but helps reduce time and effort, especially in large organizations.
Example: AI Hiring Tool
Consider an AI tool screening resumes in multiple EU countries. Because it impacts fundamental rights, it is high risk. Compliance steps include:
Documenting training data sources
Testing for bias and fairness
Implementing human oversight
Maintaining logs of decisions
Informing candidates about automated decision making
Monitoring performance and fairness over time
If the tool is purchased from a vendor, the company must obtain supplier documentation and proof of conformity.
Interaction with Other Laws
The AI Act works alongside GDPR and sector-specific rules. Data governance and privacy by design remain critical. Compliance teams must ensure both GDPR and AI Act requirements are met while adapting to national or sectoral regulations.
Board-Level Concerns and Insurance
Boards need clear metrics on AI risk, potential incidents, and response plans. Insurers may adjust AI-related coverage based on compliance programs. Companies should review policies and ensure they cover AI system risks adequately.
Audits and Regulatory Inspections
Regulators will focus on:
Risk management and evidence of AI oversight
Technical documentation for high risk systems
Human oversight and transparency measures
Post-market monitoring and incident reporting
Third-party vendor agreements with compliance clauses
Planning a Multi-Year Compliance Roadmap
Short term (3–6 months): Map AI systems, classify by risk, close high impact gaps
Medium term (6–18 months): Implement governance programs, update vendor contracts, finalize documentation
Long term (2026+): Continuous monitoring, conformity assessments, AI lifecycle updates
Technology Solutions like Atlas Compliance
Regulatory intelligence tools can support compliance by:
Providing access to past inspection records
Tracking enforcement trends and regulatory changes
Offering AI-driven alerts for potential compliance issues
Tools like Atlas Compliance help teams organize evidence, monitor supplier risks, and prepare technical files efficiently. While tools cannot guarantee compliance alone, they reduce manual work and improve audit readiness.
Final Thoughts
The EU AI Act is a major shift in how AI and law interact. Companies must embed safety, fairness, and transparency in AI from the start. While the law adds cost and complexity, it also creates opportunities to build trustworthy AI, strengthen compliance culture, and gain competitive advantage.
Frequently Asked Questions
Who must comply with the EU AI Act
Any AI system used in the EU or offered to EU users is subject to the Act, even if the company is outside Europe.
Which AI systems are high risk
High risk AI includes biometric identification, recruitment, credit scoring, healthcare, transport, and critical infrastructure systems.
How much does compliance cost
A single high risk AI system may cost around €52,000 per year for governance and certification. Costs rise with scale and complexity.
When do the rules fully apply
The Act took effect in 2024, but most major requirements are applicable from August 2026. Companies should begin mapping and risk-classifying AI systems immediately.
Can Atlas Compliance help meet the rules
Yes, Atlas Compliance provides regulatory intelligence, monitoring, and workflow tools. It helps teams collect evidence, track rules, and prepare documentation. Using such tools alongside legal advice and internal controls improves efficiency and readiness for inspections.