What are the penalties for non-compliance with these new rules?
A breakdown of the tiered penalty structure under the EU AI Act - from up to €35M or 7% of global turnover for prohibited practices, down to €7.5M for supplying incorrect information.
Under the EU AI Act, penalties for non-compliance are structured in tiers based on the severity of the infringement and the type of rule violated. The fines can be substantial and are calculated as either a fixed monetary amount or a percentage of the offending undertaking's total worldwide annual turnover for the preceding financial year, whichever is higher.
Tiers of administrative fines
Prohibited AI practices - Non-compliance with the prohibition of unacceptable risk AI practices (outlined in Article 5) carries the most severe penalties. Offenders can be fined up to €35 million or up to 7% of their total worldwide annual turnover, whichever is higher.
Obligations for high-risk and other systems ��� Failing to comply with obligations related to high-risk AI systems (such as risk management, data governance, and transparency), transparency obligations for certain AI systems, or the requirements for notified bodies will result in fines of up to €15 million or up to 3% of total worldwide annual turnover, whichever is higher.
Providers of general-purpose AI models - If providers of general-purpose AI models intentionally or negligently infringe on their specific obligations, fail to cooperate with requests for documents/information, or refuse to provide access for evaluation, they can be fined up to €15 million or 3% of their total worldwide annual turnover, whichever is higher.
Supplying incorrect information - Supplying incorrect, incomplete, or misleading information to notified bodies or national competent authorities in reply to a request is subject to fines of up to €7.5 million or up to 1% of total worldwide annual turnover, whichever is higher.
Exceptions and nuances
- SMEs and start-ups: To protect smaller businesses, if the offender is a small or medium-sized enterprise (SME) or a start-up, they will be subject to the lower of the two amounts (the fixed amount or the percentage of turnover) for each respective tier of fines.
- Union institutions: For Union institutions, bodies, offices, and agencies, the fines are capped at specific amounts: up to €1.5 million for violating prohibited AI practices, and up to €750,000 for non-compliance with other requirements.
When authorities decide whether to impose a fine and what the exact amount should be, they must take into account all relevant circumstances of the specific case. This includes the nature, gravity, and duration of the infringement, the number of affected persons, the size and market share of the operator, the degree of cooperation with authorities, any previous fines applied for the same activity, and whether the infringement was intentional or negligent.