EU AI Act Penalties: What Your Company Faces in 2026
The EU AI Act introduces some of the most severe penalties in European regulatory history. Understanding the fine structure is essential for any organisation deploying AI systems that interact with EU markets.
Three Tiers of Penalties
The AI Act establishes a tiered penalty structure based on the severity of the violation. The highest fines apply to prohibited AI practices — systems that manipulate human behaviour, exploit vulnerabilities, or conduct untargeted facial recognition in public spaces. These carry penalties of up to €35 million or 7% of global annual turnover, whichever is higher.
The second tier covers violations of high-risk AI system requirements, including failure to comply with risk management, data governance, transparency, or human oversight obligations. These attract fines of up to €15 million or 3% of global annual turnover.
The third tier addresses providing incorrect or misleading information to authorities, with penalties of up to €7.5 million or 1% of global annual turnover.
Real Enforcement Is Already Happening
Enforcement is not theoretical. Italy fined OpenAI €15 million in early 2025 under existing data protection rules related to AI, and Finland became the first EU member state to activate full national AI Act supervision in January 2026. National authorities across all 27 member states must be operational by August 2025.
SME Considerations
The AI Act includes proportionality provisions for small and medium enterprises. Fines for SMEs are calculated on a sliding scale, and regulatory sandboxes allow smaller organisations to test compliance approaches. However, SME status does not exempt companies from compliance — it only affects the penalty calculation.
The Cost of Non-Compliance vs. Compliance
Compliance costs for SMEs typically range from €500K to €2M, while mid-size companies budget €2-5M and large enterprises €8-15M. These figures are substantial, but they pale in comparison to potential penalties of tens of millions of euros — not to mention reputational damage and loss of market access.
Next Steps
The most effective way to manage regulatory risk is to engage a qualified compliance consultant who understands your specific sector and risk profile. Early engagement reduces costs and provides time to implement changes before enforcement deadlines.