AIDA Compliance Guide for Canadian Businesses

Canada's Artificial Intelligence and Data Act (AIDA) is poised to become the country's first dedicated AI regulation. For businesses that build, deploy, or rely on AI systems, understanding AIDA is no longer optional. This guide breaks down what the legislation requires, who it applies to, and exactly how to prepare your organisation before enforcement begins.

What Is AIDA?

The Artificial Intelligence and Data Act (AIDA) is Part 3 of Bill C-27, the Digital Charter Implementation Act. It represents Canada's first purpose-built framework for regulating AI systems and sits alongside the Consumer Privacy Protection Act (CPPA) and the Personal Information and Data Protection Tribunal Act within the same omnibus bill.

AIDA's core objective is to ensure that AI systems used in Canada are designed and deployed responsibly. It targets the highest-risk AI applications while establishing baseline transparency requirements for all AI systems that interact with the public. Unlike a voluntary code of conduct, AIDA carries binding legal obligations and substantial penalties for non-compliance.

The act establishes a new AI and Data Commissioner responsible for administering and enforcing the legislation. This commissioner will have the authority to audit AI systems, order compliance measures, and impose penalties. For Canadian businesses, this means there will be a dedicated regulatory body with the mandate and resources to enforce AI-specific rules.

What Are AIDA's Key Provisions?

High-Impact AI Systems Classification

AIDA introduces the concept of "high-impact" AI systems, which are subject to the most stringent regulatory requirements. The specific criteria for high-impact classification will be defined through regulations, but the legislation indicates they will consider:

• The potential for harm to individuals, including physical, psychological, or economic harm
• Whether the system affects decisions related to employment, financial services, healthcare, or essential services
• The degree of autonomy the system exercises in decision-making
• The number of individuals potentially affected by the system's outputs
• Whether the system operates in a sector with existing regulatory oversight

Transparency Requirements

Organisations that make AI systems available for use must publish plain-language descriptions of how those systems work. For high-impact systems, this includes:

• A general description of the system's capabilities and limitations
• The types of content the system generates or decisions it makes
• Mitigation measures in place to address identified risks
• Disclosure to individuals when they are interacting with or subject to decisions by an AI system

Algorithmic Impact Assessments

Operators of high-impact AI systems must conduct and maintain algorithmic impact assessments. These assessments evaluate the system's potential effects on individuals and communities, with particular attention to risks of bias, discrimination, and disproportionate impact on vulnerable populations. Assessments must be updated whenever the system undergoes material changes.

Prohibited Uses

AIDA prohibits certain AI uses outright. While the full list will be specified in regulations, the legislation targets AI systems that:

• Cause serious physical or psychological harm to individuals
• Are designed to manipulate individuals in ways that could cause significant harm
• Are used in ways that contravene federal or provincial law

Penalties and Enforcement

AIDA's penalty framework is substantial and designed to deter non-compliance:

Who Needs to Comply with AIDA?

AIDA applies to organisations that are involved in the AI supply chain in Canada. This includes three categories of actors:

1. Persons who design AI systems. If your organisation develops AI models or systems, whether for internal use or commercial distribution, you have obligations around risk assessment, documentation, and mitigation measures.
2. Persons who make AI systems available for use. If you sell, license, or otherwise provide AI systems to others, you must ensure transparency requirements are met and that users have the information they need to operate the system responsibly.
3. Persons who manage the operation of AI systems. If you deploy and operate AI systems in your business, even if you did not build them, you have obligations around monitoring, impact assessment, and ensuring that the system continues to operate within acceptable parameters.

In practical terms, most Canadian businesses using AI will fall into the third category. If you use AI-powered tools for customer service, hiring, lending decisions, insurance underwriting, or other functions that affect individuals, AIDA's requirements are likely to apply to you.

How Does AIDA Compare to the EU AI Act?

Canadian businesses with European operations or customers will already be aware of the EU AI Act, which came into force in 2024. The two frameworks share common principles but differ in important ways:

The key takeaway for Canadian businesses: if you are already preparing for or compliant with the EU AI Act, you have a significant head start on AIDA compliance. The underlying principles of risk assessment, transparency, and human oversight are common to both frameworks.

AIDA Compliance Checklist for Canadian Businesses

Use this checklist to assess your readiness and identify gaps. Each item maps to specific AIDA requirements and represents practical work your organisation should be doing now.

1. AI System Inventory

2. Risk Assessment

3. Transparency Documentation

4. Bias Testing and Monitoring

5. Human Oversight Mechanisms

6. Record-Keeping Requirements

How Does AIDA Interact with PIPEDA?

AIDA does not replace PIPEDA. The two frameworks are complementary, and businesses must comply with both. Here is how they interact:

• PIPEDA governs personal data; AIDA governs AI systems. PIPEDA controls how personal information is collected, used, and disclosed. AIDA regulates the AI systems that process that data. If your AI system uses personal data, you need to satisfy both sets of requirements.
• Consent requirements stack. Under PIPEDA, you need meaningful consent for collecting and using personal data. Under AIDA, you need to be transparent about the fact that an AI system is processing that data and making decisions. Both obligations must be met.
• Impact assessments overlap but are not identical. A privacy impact assessment under PIPEDA focuses on data protection risks. An algorithmic impact assessment under AIDA focuses on the AI system's potential for harm. For AI systems that process personal data, you may need both assessments, though they can share common elements.
• The CPPA will strengthen the connection. The Consumer Privacy Protection Act (CPPA), which is Part 1 of the same Bill C-27, will replace PIPEDA and includes explicit provisions for automated decision-making that align with AIDA's transparency requirements.

The practical implication is that compliance teams should not treat AIDA and privacy compliance as separate workstreams. Building a unified governance framework that addresses both AI risk and data protection is more efficient and reduces the chance of gaps. For guidance on data residency considerations, see our post on AI data residency in Canada.

What Practical Steps Should You Take Now?

Even though AIDA has not yet passed into law, waiting until enforcement is a mistake. The organisations that will be best positioned are those that start building compliance infrastructure now. Here are concrete steps to take today:

1. Conduct an AI audit. You cannot govern what you cannot see. Start by identifying every AI system in use across your organisation, including tools embedded in SaaS platforms that your teams may not think of as "AI." Many CRM, HR, and ERP platforms now include AI features that may fall under AIDA's scope.
2. Classify your AI systems by risk. Using the high-impact criteria outlined in AIDA, assess which of your AI systems are likely to be classified as high-impact. Prioritise governance efforts on those systems first.
3. Build your documentation foundation. Start creating model cards, system descriptions, and impact assessments for your highest-risk AI systems. This documentation takes time to develop properly and should not be rushed when regulations are finalised.
4. Establish governance roles. Appoint an AI governance lead and form a cross-functional governance committee that includes legal, compliance, IT, and business stakeholders. Governance without clear ownership does not work.
5. Review vendor contracts. Examine your agreements with AI vendors and SaaS providers. Ensure you have the right to audit, request transparency information, and receive notification of material changes to AI models. Many existing contracts do not include these provisions.
6. Implement bias testing. For AI systems that affect decisions about individuals, begin testing for bias across protected characteristics. This is both a compliance requirement and good business practice.
7. Train your teams. Ensure that employees who interact with or are affected by AI systems understand their responsibilities. This includes both technical teams who build and maintain AI systems and business users who rely on AI outputs.
8. Monitor legislative developments. AIDA's final form will depend on regulations that have not yet been published. Stay informed about developments through Innovation, Science and Economic Development Canada (ISED) and consider participating in public consultation periods when they arise.

How Our AI Solutions Are Built with AIDA Compliance in Mind

At ChatGPT.ca, we build AI solutions for Canadian businesses with regulatory compliance as a foundational design principle, not an afterthought. Here is how our approach aligns with AIDA's requirements:

• Transparency by default. Every AI solution we deploy includes clear documentation of what the system does, how it works, and what its limitations are. We provide the transparency artefacts you need for regulatory compliance.
• Built-in human oversight. Our AI systems are designed with human-in-the-loop controls for high-stakes decisions. We configure escalation paths, confidence thresholds, and review mechanisms based on your risk tolerance.
• Bias testing integrated into development. We test for bias across protected characteristics before deployment and implement ongoing monitoring to detect bias drift in production.
• Audit-ready logging. Our solutions maintain detailed audit trails that satisfy both AIDA's record-keeping requirements and PIPEDA's accountability principles. Logs capture inputs, outputs, model versions, and human override decisions.
• Canadian data residency options. For organisations that require it, we deploy AI infrastructure using Canadian data centres, ensuring that data processing stays within Canadian jurisdiction. See our data residency guide for details.
• Vendor-neutral architecture. We avoid lock-in to any single AI provider, making it straightforward to swap or update models as regulatory requirements evolve without rebuilding your entire system.

Frequently Asked Questions

When does AIDA take effect?

AIDA is part of Bill C-27, which is still moving through the legislative process as of early 2026. Once passed, a transition period of 12 to 24 months is expected before enforcement begins. However, the practical work of compliance, including building AI inventories, conducting impact assessments, and establishing governance structures, takes significant time. Businesses that wait for the final regulations to begin preparing will be at a serious disadvantage.

Does AIDA apply to all AI systems?

No. AIDA's most stringent requirements focus on "high-impact" AI systems. The criteria for high-impact classification will be defined through regulations but are expected to consider the potential for harm, the nature of decisions being made, and the sector in which the system operates. Lower-risk AI tools, such as internal productivity assistants, content generation tools, or basic automation, are unlikely to trigger the full compliance requirements. However, general transparency obligations and prohibitions on harmful AI uses apply broadly.

What are the penalties under AIDA?

AIDA proposes a tiered penalty structure. Administrative monetary penalties can reach up to $10 million or 3% of global gross revenue, whichever is greater. For the most serious offences, including knowingly deploying AI systems that cause serious harm while failing to comply with the act, criminal penalties of up to $25 million or 5% of global gross revenue are possible. These figures are designed to be meaningful even for large multinational organisations.

Do I need to disclose AI use to customers?

Yes. AIDA requires transparency about AI use, particularly when AI systems interact with individuals or make decisions that affect them. This means informing customers when they are communicating with an AI chatbot, when an AI system is being used to assess their application or claim, or when AI-generated content is being presented to them. This transparency requirement aligns with and reinforces existing PIPEDA obligations around openness and accountability.

How does AIDA affect AI chatbots?

AI chatbots are directly affected by AIDA in two ways. First, chatbots that interact with customers must comply with transparency requirements: users need to know they are communicating with an AI system. Second, if a chatbot makes or influences decisions that materially affect individuals, such as triaging insurance claims, pre-qualifying loan applicants, or providing medical information, it may be classified as a high-impact system. High-impact chatbots would need algorithmic impact assessments, bias testing, human oversight mechanisms, and comprehensive documentation.