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Artificial Intelligence is rapidly becoming a central part of everyday business operations, from recruitment systems and contract review to predictive analytics and compliance monitoring. While AI offers efficiency, it also brings important legal responsibilities that businesses cannot ignore. The legal requirements are already here and the timeline for full compliance is approaching fast.
The European Union Artificial Intelligence Act (Regulation (EU) 2024/1689) (the AI Act) is now applicable across the EU, including Cyprus. While certain provisions are already in effect, the most crucial obligations for high-risk AI systems (those which may affect health, safety, fundamental rights or legal outcomes) must be fully complied with by 2 August 2026. Some examples are AI systems used in healthcare and critical infrastructure, as well as credit scoring, insurance, education and employment use (i.e. hiring, performance evaluation).
Key changes already in effect
Since 1 August 2024, the AI Act entered into force in the EU, meaning that all relevant AI systems need to comply with its provisions. Some practices which are already prohibited as of 2 February 2025 are the use of AI for scoring individuals for social purposes and AI practices relating to processing of biometric data without an individual's consent. Non-compliance with these provisions can lead to fines of up to €35,000,000 or 7% of global turnover.
From 2 August 2025, General-Purpose AI Systems (GPAI), including large language models which are made to generate human-like language (such as ChatGPT) are required to meet basic transparency and risk management obligations. AI tools that affect people can also trigger liability under the General Data Protection Regulation (GDPR) (Regulation (EU) 2016/679) and anti-discrimination legislation.
If an AI tool is used to make decisions that impact employees, customers or clients, this system generally falls under the scope of these rules.
Obligations in force from 2 August 2026
For high-risk AI systems, 2 August 2026 is the final date for full compliance. By this date, organisations are expected to have:
- Documented procedures ensuring accuracy, fairness, and reliability;
- Human oversight integrated into the relevant critical decisions;
- Transparency measures to inform users when AI is applied;
- Complete records available for regulatory review.
Failing to meet these requirements can result in fines of up to €15,000,000 or 3% of global turnover. Companies which are using AI software for these practices must thoroughly review their systems to ensure timely compliance.
Implications for Cypriot Businesses
Compliance is no longer optional - prohibited practices and GDPR obligations already apply and preparing for the upcoming high-risk adjustments means timely identification of high-risk systems, proper record-keeping and effective human oversight.
Professional seminars and training sessions on GDPR and AI compliance are already on the rise, supporting awareness - however, adoption of these systems is still limited. Companies that act early not only reduce legal risks but also position themselves to use AI effectively, turning compliance into a competitive advantage.
Conclusion
AI is no longer just a tool - it is a legal responsibility with real consequences. For Cypriot businesses, 2 August 2026 is the deadline for full compliance for high-risk AI systems under the AI Act. Companies that start preparing will be ready to navigate the evolving legal landscape and avoid risking fines and reputational impact.
If you are using AI systems as part of your hiring procedures, credit scoring, insurance or other automated processes affecting individuals, make sure that you review your internal procedures and ensure that they meet the AI Act and GDPR obligations, proper record-keeping and implementation of human oversight. Understanding these rules is the first step toward using AI tools safely and responsibly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
