AI compliance is confusing. HIPAA, SOC2, GDPR, BAAs, data residency—it's overwhelming, especially if you're not technical. But ignoring compliance isn't an option: violations can result in $50,000+ fines and loss of customer trust.
This guide breaks down AI compliance into simple, actionable steps. No legal jargon—just what you need to know as a manager.
Real Risk: $50,000+ Fines
In 2024, a healthcare startup was fined $75,000 for using ChatGPT Free to process patient data. The violation: No BAA (Business Associate Agreement), data used for training, no audit trail.
Don't let this happen to you. This guide will help you avoid costly mistakes.
The 3 Critical Questions
Before using ANY AI tool, ask these 3 questions. If you can't answer them, don't use the tool.
Where is the data going?
US servers? EU? China? Vendor's cloud?
Why This Matters:
- • HIPAA: Requires data stay in US (or with BAA-covered vendors)
- • GDPR: Requires data stay in EU (or with Standard Contractual Clauses)
- • SOC2: Requires documented data flow and vendor risk assessment
How to Check:
- 1. Read the vendor's privacy policy (look for "data residency")
- 2. Check their security page (usually vendor.com/security)
- 3. Ask vendor directly: "Where is our data stored?"
Is data used for training?
Will the vendor train their AI model on your data?
Why This Matters:
- • HIPAA: PHI cannot be used for training (violates minimum necessary rule)
- • GDPR: Personal data cannot be used without explicit consent
- • Competitive risk: Your proprietary data could leak to competitors
❌ Trains on Your Data
- • ChatGPT Free
- • ChatGPT Plus
- • GitHub Copilot Individual
- • Most free AI tools
✅ Does NOT Train
- • ChatGPT Enterprise
- • GitHub Copilot Business
- • Anthropic Claude (paid)
- • Most Business/Enterprise tiers
Do you have a BAA?
Business Associate Agreement (for HIPAA compliance)
What is a BAA?
A legal contract required by HIPAA when a vendor will have access to Protected Health Information (PHI). Without a BAA, you CANNOT use the tool for PHI.
Penalty for violation: $50,000+ per incident, potential criminal charges
⚠️ Common Mistake
"We're using ChatGPT Plus, so we're compliant." WRONG. ChatGPT Plus does NOT offer BAA. You need ChatGPT Enterprise ($60/user/month minimum).
✅ Tools with BAA Available
- • ChatGPT Enterprise: $60/user/month (5-user minimum)
- • GitHub Copilot Business: $19/user/month
- • Otter.ai Business: $10/user/month
- • Google Workspace (with BAA): Included
Compliance Requirements by Industry
Healthcare (HIPAA)
Must have BAA for any tool processing PHI
No exceptions. Even for meeting transcripts if they mention patient names.
Data must stay in US (or with BAA-covered vendors)
Check vendor's data residency policy.
Audit logs required (7-year retention)
Track who accessed what PHI, when.
Breach notification within 60 days
Vendor must notify you of any data breach.
Finance (SOC2, PCI-DSS)
SOC2 Type II certification required
Vendor must have annual SOC2 audit report.
PCI-DSS if handling credit cards
Never process credit card data through AI tools.
Data encryption required (at rest + in transit)
AES-256 encryption minimum.
Annual vendor audits
Review vendor security practices yearly.
SaaS (SOC2, ISO27001, GDPR)
SOC2 Type II for enterprise customers
Required by most B2B SaaS customers.
ISO27001 for international customers
Global security standard.
GDPR compliance for EU customers
Data residency, consent, right to deletion.
8-Point AI Compliance Checklist
Use this checklist before deploying ANY AI tool. If you can't check all boxes, don't use the tool.
How HAIEC Helps with AI Compliance
🔍Automated Compliance Scanning: HAIEC's GitHub App automatically scans your repos for AI security issues, generating audit-ready evidence for SOC2, HIPAA, and ISO27001.
📋Compliance Wizards: Step-by-step wizards guide you through SOC2, HIPAA, ISO27001, GDPR, and NIST CSF requirements—no compliance expertise needed.
🎯Deterministic Evidence: Unlike AI-based tools that "guess," HAIEC uses rule-based engines for zero-hallucination accuracy. Auditors trust it.
⚡Real-Time Monitoring: Get Slack alerts when compliance issues are detected. Fix problems before audits, not during.
Don't Risk $50,000+ Fines
AI compliance is complex, but the consequences of getting it wrong are severe. Use this guide, download the checklist, and implement proper controls.
Related Resources
AI Program Management Framework (CSM6)
A structured approach to AI governance. Free interactive checklist, templates, and step-by-step guide for project managers.
Download: AI Compliance Checklist
5-minute assessment tool with scoring, action plans, and compliance roadmap. Know exactly where you stand and what to fix first.
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