Spain's government has approved a bill that will impose massive fines on companies failing to properly label content generated by artificial intelligence, marking one of the first implementations of the European Union's landmark AI Act.

The legislation, which still requires approval from the lower house, classifies non-compliance with AI content labelling as a "serious offence" punishable by fines of up to €35 million or 7 per cent of a company's global annual turnover.

"AI is a very powerful tool that can be used to improve our lives... or to spread misinformation and attack democracy," digital transformation minister Oscar Lopez told reporters during the announcement on Tuesday.

The bill aims to combat the spread of "deepfakes" – AI-generated videos, photographs or audio recordings that appear authentic but are synthetic – which Lopez warned could potentially target anyone.

Spain's approach stands in contrast to the United States' regulatory framework, which largely relies on voluntary compliance and varies between states. This more comprehensive European regulation comes amid growing concerns about AI technologies since OpenAI's ChatGPT demonstrated sophisticated capabilities in late 2022.

Beyond labelling requirements, the legislation also prohibits using subliminal AI techniques to manipulate vulnerable groups. Lopez cited examples including chatbots that might encourage people with gambling addictions to place bets or AI-powered toys that could prompt children to perform dangerous challenges.

The bill further restricts organisations from using AI to classify individuals through biometric data, or rating people based on personal traits to determine access to benefits or assess their likelihood of committing crimes.

However, authorities will retain permission to use real-time biometric surveillance in public spaces when national security concerns arise.

Enforcement responsibilities will primarily fall to the newly-created AI supervisory agency AESIA, with specific exceptions for cases involving data privacy, crime, elections, credit ratings, insurance or capital market systems, which will be overseen by their corresponding regulatory bodies.

Spain's proactive stance highlights the country's commitment to mitigating risks posed by emerging AI technologies while establishing a framework for their responsible development and use.

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