[AI]EU AI Act: What businesses need to know as regulations go live

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Next week marks the beginning of a new era for

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as the first obligations of the EU AI Act take effect.

While the full compliance requirements won’t come into force until mid-2025, the initial phase of the EU AI Act begins February 2nd and includes significant prohibitions on specific AI applications. Businesses across the globe that operate in the EU must now navigate a regulatory landscape with strict rules and high stakes.

The new regulations prohibit the deployment or use of several high-risk AI systems. These include applications such as social scoring, emotion recognition, real-time remote biometric identification in public spaces, and other scenarios deemed unacceptable under the Act.

Companies found in violation of the rules could face penalties of up to 7% of their global annual turnover, making it imperative for organisations to understand and comply with the restrictions.  

Early compliance challenges  

“It’s finally here,” says Levent Ergin, Chief Strategist for Climate, Sustainability, and AI at

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. “While we’re still in a phased approach, businesses’ hard-earned preparations for the EU AI Act will now face the ultimate test.”

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Ergin highlights that even though most compliance requirements will not take effect until mid-2025, the early prohibitions set a decisive tone.

“For businesses, the pressure in 2025 is twofold. They must demonstrate tangible ROI from AI investments while navigating challenges around data quality and regulatory uncertainty. It’s already the perfect storm, with 89% of large businesses in the EU reporting conflicting expectations for their generative AI initiatives. At the same time, 48% say technology limitations are a major barrier to moving AI pilots into production,” he remarks.

Ergin believes the key to compliance and success lies in data governance.

“Without robust data foundations, organisations risk stagnation, limiting their ability to unlock AI’s full potential. After all, isn’t ensuring strong data governance a core principle that the EU AI Act is built upon?”

To adapt, companies must prioritise strengthening their approach to data quality.

“Strengthening data quality and governance is no longer optional, it’s critical. To ensure both compliance and prove the value of AI, businesses must invest in making sure data is accurate, holistic, integrated, up-to-date and well-governed,” says Ergin.

“This isn’t just about meeting regulatory demands; it’s about enabling AI to deliver real business outcomes. As 82% of EU companies plan to increase their GenAI investments in 2025, ensuring their data is AI-ready will be the difference between those who succeed and those who remain in the starting blocks.”

EU AI Act has no borders

The extraterritorial scope of the EU AI Act means non-EU organisations are assuredly not off the hook. As Marcus Evans, a partner at

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, explains, the Act applies far beyond the EU’s borders.

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“The AI Act will have a truly global application,” says Evans. “That’s because it applies not only to organisations in the EU using AI or those providing, importing, or distributing AI to the EU market, but also AI provision and use where the output is used in the EU. So, for instance, a company using AI for recruitment in the EU – even if it is based elsewhere – would still be captured by these new rules.”  

Evans advises businesses to start by auditing their AI use. “At this stage, businesses must first understand where AI is being used in their organisation so that they can then assess whether any use cases may trigger the prohibitions. Building on that initial inventory, a wider governance process can then be introduced to ensure AI use is assessed, remains outside the prohibitions, and complies with the AI Act.”  

While organisations work to align their AI practices with the new regulations, additional challenges remain. Compliance requires addressing other legal complexities such as data protection, intellectual property (IP), and discrimination risks.  

Evans emphasises that raising AI literacy within organisations is also a critical step.

“Any organisations in scope must also take measures to ensure their staff – and anyone else dealing with the operation and use of their AI systems on their behalf – have a sufficient level of AI literacy,” he states.

“AI literacy will play a vital role in AI Act compliance, as those involved in governing and using AI must understand the risks they are managing.”

Encouraging responsible innovation  

The EU AI Act is being hailed as a milestone for responsible AI development. By prohibiting harmful practices and requiring transparency and accountability, the regulation seeks to balance innovation with ethical considerations.

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“This framework is a pivotal step towards building a more responsible and sustainable future for artificial intelligence,” says Beatriz Sanz Sáiz, AI Sector Leader at

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Sanz Sáiz believes the legislation fosters trust while providing a foundation for transformative technological progress.

“It has the potential to foster further trust, accountability, and innovation in AI development, as well as strengthen the foundations upon which the technology continues to be built,” Sanz Sáiz asserts.

“It is critical that we focus on eliminating bias and prioritising fundamental rights like fairness, equity, and privacy. Responsible AI development is a crucial step in the quest to further accelerate innovation.”

What’s prohibited under the EU AI Act?  

To ensure compliance, businesses need to be crystal-clear on which activities fall under the EU AI Act’s strict prohibitions. The current list of prohibited activities includes:  

• Harmful subliminal, manipulative, and deceptive techniques  
• Harmful exploitation of vulnerabilities  
• Unacceptable social scoring  
• Individual crime risk assessment and prediction (with some exceptions)  
• Untargeted scraping of internet or CCTV material to develop or expand facial recognition databases  
• Emotion recognition in areas such as the workplace and education (with some exceptions)  
• Biometric categorisation to infer sensitive categories (with some exceptions)  
• Real-time remote biometric identification (RBI) in publicly accessible spaces for law enforcement purposes (with some exceptions)  

The Commission’s forthcoming guidance on which “AI systems” fall under these categories will be critical for businesses seeking to ensure compliance and reduce legal risks. Additionally, companies should anticipate further clarification and resources at the national and EU levels, such as the upcoming webinar hosted by the AI Office.

A new landscape for AI regulations

The early implementation of the EU AI Act represents just the beginning of what is a remarkably complex and ambitious regulatory endeavour. As AI continues to play an increasingly pivotal role in business strategy, organisations must learn to navigate new rules and continuously adapt to future changes.  

For now, businesses should focus on understanding the scope of their AI use, enhancing data governance, educating staff to build AI literacy, and adopting a proactive approach to compliance. By doing so, they can position themselves as leaders in a fast-evolving AI landscape and unlock the technology’s full potential while upholding ethical and legal standards.

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