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EU AI Act vs. U.S. AI Laws: Due Diligence Impact

Jan 21, 2025

The EU AI Act and U.S. AI laws take very different approaches to regulating artificial intelligence. Here's what you need to know:

EU AI Act: Centralized framework with strict rules based on risk levels (e.g., high-risk systems require detailed compliance like risk assessments and documentation). Applies globally if EU citizens or markets are impacted.
U.S. AI Laws: Decentralized, sector-specific regulations (e.g., healthcare, finance). Focuses on national security and specific risks, with no unified federal standard.

Quick Comparison

| Aspect | EU AI Act | U.S. AI Laws |
| --- | --- | --- |
| <strong>Regulatory Approach</strong> | Centralized, risk-based framework | Decentralized, sector-specific rules |
| <strong>Risk Classification</strong> | Four levels: unacceptable to minimal | No unified system |
| <strong>Geographic Scope</strong> | Global (if impacting EU citizens/markets) | Primarily domestic focus |
| <strong>Compliance</strong> | Mandatory assessments & documentation | Varies by state/sector |
| <strong>Focus</strong> | Fundamental rights, transparency | National security, specific risks

For businesses, this means navigating dual compliance strategies: the EU's structured system vs. the U.S.'s fragmented approach. Tools like TRACT simplify compliance by analyzing risks and ensuring adherence to both frameworks.

Main Differences Between the EU AI Act and U.S. AI Laws

How Each Framework Manages Risk

The EU AI Act takes a proactive approach by classifying AI systems based on risk levels. It outright bans certain high-risk applications, like social scoring, and requires compliance checks for others. In contrast, the U.S. follows a more reactive, sector-focused strategy, applying restrictions only within specific industries [1][2]. Both methods aim to address risks, but they differ in timing and scope.

Who Do These Laws Apply To?

The EU AI Act has a broad reach, applying to any AI system that impacts EU citizens or markets, no matter where the company is based [1][3]. U.S. regulations are more limited in scope and primarily target:

Federal agencies using AI
Industries like healthcare and finance with strict oversight
Companies operating within the U.S.

This difference in application scope highlights how each region prioritizes its regulatory focus.

Which Framework Has Greater Global Influence?

The EU AI Act, with its wide-ranging approach, is shaping the global conversation on AI regulation [1][2]. Meanwhile, U.S. regulations remain focused on specific sectors. However, American tech companies play a key role in influencing global AI development through their practices and policies, creating an informal complement to formal regulations.

For global businesses, these contrasting systems can be tricky to navigate. Tools like TRACT simplify compliance by pulling data from thousands of sources, helping organizations manage the regulatory demands of both regions [1][2].

Effects on Due Diligence Processes

What Are the Compliance Requirements?

The EU AI Act sets out strict compliance rules that reshape how companies approach due diligence. Businesses must establish risk management systems and data governance programs when implementing AI technologies. For high-risk AI systems, additional steps are required, such as creating technical documentation, maintaining quality management systems, logging activities, and registering in the EU database.

The first phase of these rules, focusing on systems deemed to pose unacceptable risks, started in December 2024 [4]. This structured approach reflects the EU's detailed regulatory framework, which stands in stark contrast to the more flexible, sector-specific model used in the U.S.

How Risk Assessment Differs Between the EU and U.S.

The EU and U.S. take very different paths when it comes to assessing risks. The EU AI Act uses a classification system based on risk levels, which determines the due diligence requirements:

| Risk Level | Assessment Requirements | Examples |
| --- | --- | --- |
| Unacceptable | Completely banned | Social scoring systems |
| High-risk | Full conformity assessment | HR recruitment AI |
| Limited risk | Basic transparency rules | Chatbots |
| Minimal risk | Voluntary compliance | Basic spam filters

On the other hand, the U.S. relies on sector-specific guidelines without a unified framework [1][2]. For companies operating in both regions, this creates the need for dual compliance strategies, adding layers of complexity to their due diligence processes.

How TRACT Supports AI Due Diligence

TRACT offers a streamlined way to handle AI compliance by analyzing extensive datasets to pinpoint risks and ensure adherence to regulations. The platform pulls data from over 9,500 sources, helping organizations:

Confirm that their AI systems meet EU regulatory standards
Identify risks through real-time data analysis
Prepare detailed documentation to meet regulatory needs

For those deploying high-risk AI systems, TRACT simplifies compliance with the EU AI Act, including tasks like conducting Fundamental Rights Impact Assessments (FRIAs) [5]. As AI regulations continue to evolve, tools like TRACT will become essential in managing compliance and mitigating potential risks.

Comparison Table: EU AI Act and U.S. AI Laws

Key Differences in a Table Format

The EU AI Act and U.S. AI regulations take very different approaches to managing AI, which creates unique challenges for compliance. Here's a side-by-side comparison of their key features:

| Aspect | EU AI Act | U.S. AI Regulations |
| --- | --- | --- |
| Regulatory Approach | Centralized framework with defined risk categories | Decentralized, sector-specific rules with reactive focus |
| Geographic Scope | Applies to any AI system used in the EU, regardless of origin | Limited to state-level rules; no unified federal standard |
| Risk Classification | Four levels: unacceptable, high, limited, minimal risk | No consistent risk classification system |
| Compliance Structure | Risk-based mandatory requirements | Varies widely by state and sector |
| Due Diligence Requirements | Includes assessments, documentation, and ongoing monitoring | Depends on specific state or sector rules |
| Implementation Timeline | Effective August 2024; fully applied by 2026 | Continues to develop at the state level |
| Enforcement Mechanism | Centralized enforcement by EU authorities | Handled by individual states and sectors

The EU's centralized system offers a clearer path to compliance but demands thorough documentation and monitoring. In contrast, the U.S.'s piecemeal approach leaves gaps, especially in private-sector oversight [1][2]. The EU AI Act emphasizes transparency and accountability, particularly for federal agencies, setting detailed requirements for global operations [1][3].

These divergent approaches not only affect current compliance efforts but also hint at how regulations might evolve internationally. As the first major AI law of its kind, the EU AI Act serves as a model for global governance, making it essential for companies to grasp these differences when working with AI on an international scale [1][2].

Future Developments in AI Regulation and Due Diligence

How the EU Could Shape Global AI Standards

The EU AI Act is setting the stage as a global regulatory reference point. Its broad reach means businesses worldwide need to align with its standards, effectively making it a global benchmark [1][3]. A key aspect of the Act is its requirement for fundamental rights impact assessments (FRIAs) for high-risk AI systems. These assessments demand documentation of how AI systems affect fundamental rights, raising the bar for compliance practices [5].

What Changes Are Expected in U.S. AI Laws?

The U.S. is moving toward a more unified regulatory framework, though it maintains its distinct approach. The proposed Federal AI Governance and Transparency Act points to an effort to create consistent federal standards [1][2]. Unlike the EU's all-encompassing approach, U.S. regulations focus on specific areas:

| Focus Area | Expected Changes |
| --- | --- |
| Critical Areas | Increased oversight in sectors like infrastructure, elections, and industry-specific applications |
| State-Level Implementation | Expansion of state-specific AI laws and regulations

As these frameworks develop, businesses will need advanced tools to keep up with the growing complexity of compliance.

Why AI-Powered Platforms Are Important for the Future

With the EU and U.S. taking different regulatory paths, AI-powered platforms like TRACT are becoming crucial for managing compliance across jurisdictions. TRACT, for example, offers tools to conduct thorough investigations across more than 9,500 data sources, helping organizations meet shifting regulatory demands.

To stay ahead, businesses should:

Monitor regulatory changes on a global scale
Implement transparent and flexible risk management systems
Keep detailed records of compliance measures

The contrasting approaches of the EU and U.S. create challenges for global organizations. While the EU provides clear, standardized rules, the U.S. continues to develop a more specialized, sector-focused framework [2]. This evolving landscape means businesses must adopt flexible due diligence processes capable of addressing both systems while staying prepared for future shifts.

EU AI Act Explained: Everything You Must Know

Conclusion: Comparing AI Laws and Their Impact on Due Diligence

The EU AI Act and U.S. AI laws require organizations to manage compliance on two fronts, each with its own challenges [1][2]. These frameworks differ in their approach to risk management, compliance structures, and scope:

| Aspect | EU AI Act | U.S. AI Laws |
| --- | --- | --- |
| Risk Management | Focuses on prevention with mandatory assessments | Emphasizes damage control after issues arise |
| Compliance Framework | Centralized and unified system | A mix of state and federal guidelines |
| Global Reach | Applies globally, impacting U.S. providers | Primarily focused on domestic regulations

These contrasts influence how companies handle due diligence, especially in areas like risk evaluation, maintaining records, and verifying compliance. For instance, the EU's requirement for fundamental rights impact assessments - evaluating how AI systems affect privacy, equality, and other core rights - has pushed organizations to adopt more rigorous standards [1][3].

To meet these demands, organizations need to refine their due diligence processes, including:

Risk Assessment Protocols: Setting up monitoring systems and keeping detailed audit trails.
Documentation Standards: Adhering to the EU’s stringent requirements [4][5] and tracking AI development and deployment workflows.
Compliance Checks: Ensuring adherence to rules across regions and using real-time monitoring tools.

Platforms like TRACT help businesses navigate these challenges by providing real-time compliance insights from over 9,500 data sources. As regulations continue to change, companies must adapt their due diligence processes to stay compliant while maintaining smooth operations [4][6].

FAQs

How does AI regulation differ in the US and EU?

The EU AI Act and U.S. AI regulations take very different approaches, which means companies working in both regions need distinct strategies to stay compliant. Here's a quick comparison:

| Aspect | EU AI Act | U.S. AI Laws |
| --- | --- | --- |
| Regulatory Approach | Unified framework | Sector-specific regulations |
| Risk Classification | Four-tier system (unacceptable to minimal risk) | No universal risk system |
| Geographic Scope | Applies globally | Mostly domestic focus |
| Primary Focus | Protecting individual rights and ethical concerns | National security and specific risks |
| Compliance Structure | Centralized requirements | A mix of federal and state rules

The EU requires detailed risk assessments, documentation, and evaluations of how systems impact fundamental rights, especially for high-risk AI systems [4][5]. On the other hand, U.S. regulations focus on specific industries and risks, without a uniform framework [1][2].

TRACT supports businesses by analyzing risks and offering clear, actionable steps to meet both EU and U.S. requirements [3]. Adapting to these regulatory differences is essential, and using AI-driven tools can help ensure compliance while reducing operational risks.