- The role of General Counsels is increasingly complex, navigating broad regulations like GDPR, DMA, and DSA, alongside commercial contracts and activities.
- General Counsels must take AI regulations seriously, addressing them immediately with engineering teams to ensure AI compliance from the start, as redoing work can be expensive and resource-heavy.
- General Counsels need to act now to establish clear AI governance structures, conduct thorough risk assessments, and ensure AI systems comply with the law.
In today's rapidly evolving world, artificial intelligence is revolutionizing industries, transforming business operations, and shaping decision-making processes. This transformative power has placed General Counsels at the forefront of navigating this complex and evolving regulatory landscape.
As AI becomes increasingly integral to business operations, in-house legal teams face the challenge of ensuring data privacy and compliance with evolving AI regulations. The role of General Counsels is becoming more complex, navigating broader regulations like GDPR, DMA, and DSA, alongside commercial contracts and activities. This expansion of responsibilities requires GCs to adopt a strategic approach to legal oversight, balancing data protection with adherence to diverse and ever-changing legal frameworks in the digital era.
However, staying on top of evolving AI regulations poses a serious challenge, often requiring additional expenses like hiring new staff or advisors, all while managing within tightening budgets. In this article, our goal is to assist legal teams in effectively navigating the complex realm of AI compliance.
Understanding the Legal Landscape of AI
One of the most crucial aspects that General Counsels must be aware of is that AI regulations have become a reality. Due to numerous concerns, such as data protection, intellectual property, and algorithmic bias, governments worldwide are actively working on legal frameworks that will regulate the development, deployment, and use of AI systems.
It is expected that by 2025, major markets will have implemented AI regulations, putting AI companies on a tight timeline with limited time to comply with these regulations.
One example is the European Union, which has already reached an agreement on AI regulations and established harmonized rules for AI systems across the European Union. By categorizing AI systems based on their level of risk, the EU AI Act provides a clear framework for organizations to assess their AI systems and implement appropriate compliance measures.
The EU AI Act emphasizes the importance of transparency, explainability, data governance, privacy, and customer protection in AI deployment, and AI businesses must ensure that their AI systems adhere to these principles. However, it's worth noting that achieving comprehensive AI regulation isn't an easy task, and the EU AI Act represents just the initial step in this direction. In the next 12 months, companies that develop foundational AI models, such as ChatGPT, Mistral, and others, will be required to comply with the EU AI Act's requirements.
Failure to comply with AI regulations will expose organizations to significant risks, including legal liability, reputational damage, and financial penalties up to 35 million Euros. The good thing is that the EU AI Act provides General Counsels with a crucial framework for AI compliance, significantly reducing uncertainties in the legal landscape. This clear guidance allows General Counsels to confidently ensure their AI systems meet EU standards, mitigating the risk of penalties and legal issues.
AI companies should act swiftly, and turn AI compliance into their market advantage. Since you are reading this article, you are already in a great position compared to your competitors to take the first step toward AI compliance, our free EU AI impact assessment. In the next chapter, we have identified 5 common AI landmines you should avoid on your journey to AI compliance.
5 Common AI Compliance Landmines
We understand that navigating the complexities of AI compliance is challenging, regardless of the company's size or size of the legal team. However, by taking AI regulations seriously, businesses can leverage their AI compliance as a selling point that sets them apart from competitors.
To make your compliance process as smooth as possible, we have identified 5 common landmines you should avoid on your journey to AI compliance.
1. Misunderstanding AI Regulations and Their Scope
Many companies, especially those in their early stages seeking product-market fit, may not prioritize regulatory compliance, focusing instead on development and growth. While such an approach may have been feasible with other regulations in the past, AI regulations demand early and proper adherence, particularly in areas like training data management.
Failure to implement these requirements from the outset can lead to significant challenges in achieving compliance later, potentially preventing companies from placing their AI products on the market. Neglecting to keep up with regulatory updates can also lead to legal repercussions and reputational damage, a risk no company wants to take.
2. Failure to Properly Assess the Risk
AI systems can pose a range of risks, from algorithmic bias and discrimination to data privacy breaches and security vulnerabilities. General counsels must undertake comprehensive risk assessments to understand the risks they might be facing and to address potential harms to individuals, businesses, and society. Neglecting this crucial step or treating it too lightly can expose AI companies to significant liabilities. The easiest way to assess your AI system is to complete TrustPath’s free AI risk assessment.
3. Failing to Communicate AI Compliance as a Differentiator
Failing to communicate AI compliance not only leaves customers unaware of an AI company's commitment to development and deployment of systems with highest standards but also fails to leverage compliance as a competitive differentiator. AI companies should actively promote their compliance efforts to attract customers who value responsible AI practices and gain a stronger market position. While smaller buyers will not necessarily need such assurances, when AI companies start selling to bigger companies, those assurances may be crucial.
4. Inadequate Collaboration with Sales and Engineering
While AI integration is common in various aspects of business operations, the collaboration between legal and engineering teams is often not as robust as it should be. General Counsels and their legal teams must forge stronger partnerships with engineering departments, as the nature of AI software development significantly differs from that of traditional software.
Legal teams can provide valuable insights into the unique regulatory requirements and compliance challenges that AI development entails. By working closely with engineers, legal teams can help them understand the implications of AI regulations on software development processes, ensuring that AI products are designed and built in compliance with these stringent standards from the very beginning. This collaborative approach is crucial to avoid potential legal issues and to foster an environment where innovation and compliance coexist effectively.
5. Staying frozen in time
As already mentioned the AI landscape is constantly evolving, and regulatory updates are constantly popping up. Legal teams within AI businesses must foster a culture of continuous learning and monitoring to stay ahead of all regulatory changes. Neglecting this ongoing effort, especially in light of countries like the UK, US, Canada, and others continuously updating and rolling out new requirements in response to the increasing adoption of AI, is perhaps the riskiest action they can take. This negligence can potentially push AI businesses to the edge of the cliff of compliance issues. Failing to adapt to these dynamic regulatory environments not only jeopardizes compliance but also risks stifling innovation and growth, ultimately impacting the company's competitiveness and legal standing.
The Road Ahead
Imagine a rush-hour scene on a bustling city street - this is how we envision AI compliance in late 2024. Instead of reacting to the impending rush, it is crucial to proactively take the lead. In this concluding section, let's embark on the journey of navigating the next steps for the legal team together.
Take the Initiative and Position Yourself as a Leader
General Counsels must step forward and assert themselves as champions of responsible AI development, deployment, and use within their companies. This involves establishing themselves as trusted advisors to the founders and leadership teams, providing insights into the regulatory implications of AI projects, and advocating for proactive measures to develop, deploy, or use AI in line with AI regulations. By taking the initiative, General Counsels can help AI companies to differentiate themselves from their competitors, win more deals faster and save resources.
Put AI Compliance as a Strategic Imperative for Long-Term Success
AI compliance is no longer just a story. Moreover, it’s one of the most urgent tasks of all governments around the world. General Counsels must integrate AI compliance as a vital part of the AI business strategy. This proactive approach will not only safeguard the business from legal and reputational harm but also foster trust and confidence among customers and other stakeholders.
Start Taking Action Immediately
The pace of AI development is relentless, and so it’s the regulatory development landscape. As already mentioned in this article, countries are prioritizing AI regulations and will put AI companies on a tight timeline with limited time to comply. General Counsels cannot afford to wait for the perfect moment to act. They must start taking steps today to establish clear AI governance structures, conduct thorough risk assessments, and ensure that AI systems are developed, deployed, and used in accordance with the law.
In conclusion, General Counsels play one of the crucial roles in shaping the future of AI within their businesses. By embracing AI compliance as a strategic imperative, taking the initiative as a leader, and acting with urgency, General Counsels can foster a culture of responsible AI adoption, safeguard their companies from potential risks, and position them as leaders in this transformative field.
