For years, tech companies have developed AI systems with minimal oversight. While artificial intelligence itself isn’t inherently harmful, the lack of clarity around how these systems make decisions has left many stakeholders uncertain, making it difficult to fully trust the outcomes generated by AI.
In response to this issue, the European Union has enacted the first global legislation aimed at regulating AI—the EU AI Act, which was officially approved on February 2, 2024. Companies operating within the EU or providing services to EU residents are required to comply by April 2024. The primary goal of the Act is to ensure that AI technologies remain transparent, accountable, and secure.
One essential approach for meeting these regulatory standards is through AI-powered data classification. By systematically organizing data, businesses can maintain better oversight of their AI systems, enhancing both security measures and compliance with the law.
This groundbreaking legislation positions Europe as a leader in AI governance, offering a comprehensive framework to address risks associated with human rights, safety, and health. Other nations are already observing and planning to implement similar strategies.
Why is there a need for rules on AI?
There have been instances when an AI system has made a decision or a prediction, and we do not know why or how it made that specific decision. For example, it will be difficult to assess if someone has been fairly disadvantaged during a job interview or if someone’s application has been rejected for a public benefit scheme.
Currently, there are insufficient rules regarding the fair and secure use of AI and the specific challenges they may bring. And so, the proposed rules in the AI Act will
- Address the risks created by AI applications.
- Ban AI practices that pose unacceptable risks.
- Establish a list of high-risk applications.
- Define clear requirements for AI systems for high-risk applications.
- Set specific obligations for deployers and providers of high-risk AI applications.
- A conformity assessment is required before a given AI system is put into service or placed on the market.
- Ensure enforcement is in place after a given AI system is placed on the market.
- Develop a governance structure at the European and national levels.
The EU AI Act and its Key Requirements
The EU AI Act takes a risk-based approach to regulating the development and deployment of AI. The AI Act has classified different risk categories based on the field of application and defined measures to be implemented by organizations that develop or sell AI systems. There are four levels of risk for AI systems: minimal risk, limited risk, high risk, and unacceptable risk.
The EU AI Act places specific demands on organizations that develop or deploy AI systems. These include:
- Transparency: AI systems need to be transparent, meaning organizations must be able to explain how they use and process data within their AI models.
- Risk Management: The Act classifies AI systems based on risk levels—ranging from minimal to high risk—requiring organizations to perform risk assessments for their AI.
- Data Governance: Effective data governance policies are required, ensuring the proper storage, processing, and monitoring of sensitive information within AI systems.
Data classification is a critical tool that can help organizations manage these requirements efficiently.
Role of Data Classification in Compliance with the EU AI Act
Data classification plays a pivotal role in aligning with the EU AI Act. Here’s how:
- Identifying and Tagging High-Risk Data: One of the key challenges of the EU AI Act is identifying which data falls under high-risk categories. Data classification helps by categorizing data according to its sensitivity, compliance requirements, or the risks associated with its use in AI systems.
- Facilitating Risk Assessments: Data classification ensures that organizations know exactly what types of data their AI models are handling. This clarity allows for more accurate risk assessments, helping businesses comply with risk mitigation strategies under the Act.
- Enabling Transparency: Transparency is at the heart of the EU AI Act, requiring organizations to provide detailed information about how their AI models process data. Properly classified data makes it easier to track data lineage, which in turn enables organizations to demonstrate transparency regarding data sources and usage.
Best Practices for Data Classification for EU AI Act Compliance
To fully leverage data classification for EU AI Act compliance, here are some best practices:
- Automate Data Classification: Manually classifying data is time-consuming and prone to errors. By automating the process with AI-powered tools, organizations can scale their data classification efforts efficiently and accurately.
- Establish Clear Policies: It’s important to define policies on how to categorize and manage different types of data—such as personal, sensitive, or operational data—across your organization. This ensures that everyone is on the same page when it comes to data handling.
- Monitor and Audit Regularly: Continuous monitoring and periodic audits are essential to maintaining compliance. Data classification should not be a one-time process but an ongoing practice to adjust as new data enters the system.
Ensuring Compliance with the EU AI Act: How Secuvy Streamlines Data Classification and Risk Management
Secuvy plays a pivotal role in helping businesses align with the stringent requirements of the EU AI Act, particularly when it comes to data classification, by leveraging its sophisticated AI-powered data intelligence. Here’s an overview of how it facilitates compliance:
Automated Detection of Sensitive Data: With Secuvy’s cutting-edge AI platform, companies can effortlessly categorize data based on its sensitivity, legal stipulations, and associated risks. This enables organizations to quickly identify high-risk information—whether it pertains to personal details or critical infrastructure—ensuring that key compliance standards under the EU AI Act are met.
Improved Risk Management: Through precise data categorization, Secuvy gives businesses deeper insights into the types of data their AI systems are engaging with. This improved clarity fosters more effective risk management practices, allowing organizations to tailor their risk mitigation efforts in accordance with the EU AI Act’s directives.
Data Lineage for Enhanced Transparency: Secuvy ensures organizations can trace the flow of their data from origin to endpoint. This feature, essential for maintaining transparency—a core principle of the EU AI Act—makes it easy to document data’s journey, from where it is sourced to how it’s handled and accessed. Companies can thus readily fulfill transparency mandates and demonstrate regulatory adherence.
Streamlined Reporting for Audits: Secuvy’s data orchestration engine simplifies the generation of compliance reports, automating insights related to data classification, risk evaluations, and data processing. By offering comprehensive reports, the platform not only eases the compliance burden but also helps organizations stay prepared for regulatory audits, providing a detailed view of data management under the EU AI Act.
Penalties under the EU AI Act
Organizations are required to adhere to the act, and notably, the act has different rules for fining startups and other small businesses. Organizations may face fines of up to EUR 35,000,000 or 7% of their global turnover, whichever amount is greater, for using prohibited AI practices.
For other infractions, such as breaching GPAI regulations, organizations may incur fines reaching EUR 15,000,000 or 3% of their global revenue, whichever is the greater amount. Providing false or deceptive information to authorities can result in organizations being fined up to EUR 7,500,000 or 1% of their turnover, whichever is higher.
As AI regulations evolve, organizations that implement effective data classification strategies now will be better equipped to navigate future changes.
To learn more about how Secuvy technology can help you in this area please visit www.secuvy.ai
