Executive Summary
- The proposed source-code snapshot would leave this Irish bank exposed to the very failure it seeks to address. For a service supporting a critical or important function, DORA requires a sufficiently tested exit plan and continuity measures. It does not impose universal source-code or model-weight escrow, or create missing rights against upstream providers. (Regulation (EU) 2022/2554, arts 28(8), 29(2), 30(2)(d), 30(3)(f).)
- The bank must classify the supported function by the consequences of disruption. Slow replacement is relevant, but does not alone establish the statutory classification. Nor does a critical function make the supplier a designated critical ICT provider; that designation follows a separate supervisory assessment. (Regulation (EU) 2022/2554, arts 3(22), 28(4)(a), 31(1)-(2).)
- Subject to required permissions, the supplier should grant defined continuity rights before distress, with immediate verification rights and production use upon an agreed release event. The grant should cover the bank and its approved replacement operator, necessary copying and modification, territories and duration. Employee and contractor title, upstream licences and successor notice require separate treatment. (Copyright Act 98 of 1978 (South Africa), ss 11B, 21-22; Copyright and Related Rights Act 2000 (Ireland), ss 80-82, 120.)
- A foreign continuity licence requires South African exchange-control analysis even if ownership remains with the supplier. The authorised-dealer route for qualifying non-resident IP licences has conditions concerning price, documentation and repatriation. A licence must not be treated mechanically as an assignment, and an escrow agreement is not evidence of regulatory permission. (Exchange Control Regulations 1961, reg 10(1)(c), (4); SARB, Currency and Exchanges Manual for Authorised Dealers, B.2(A)(iii)-(iv).)
- Business rescue and liquidation can delay release, affect continuing obligations and expose transactions to challenge. Neither an Irish governing-law clause nor an irrevocable instruction to a custodian guarantees survival. A present licence reduces dependence on a new post-failure grant, but cannot eliminate those legal constraints. (Companies Act 71 of 2008 (South Africa), ss 133-136; Companies Act 61 of 1973, ss 339-341, 348; Pick 'n Pay Retailers (Pty) Ltd v Ramalho NO [2025] ZASCA 97, paras 20-30.)
- The deployable variant should use production-matched deposits, independent rebuilds, lawful model access and a recovery environment that does not depend on transferring the supplier's cloud account. The bank should measure recovery time, data loss, fraud-alert performance and operator capacity. A file hash alone establishes none of those operational results. (Regulation (EU) 2022/2554, arts 11(6), 28(8); Commission Delegated Regulation (EU) 2024/1773, art 10.)
- Deposits should contain only the personal data, confidential materials and access mechanisms necessary for the agreed recovery task. Processor contracts, security measures and international-transfer safeguards remain applicable during testing and release. Fraud-alert triage is not automatically high-risk under the AI Act, but human final decisions do not excuse prohibited criminal-risk profiling or remove every future provider obligation. (Regulation (EU) 2016/679, arts 5, 28, 32, 44-46; Regulation (EU) 2024/1689, arts 5(1)(d), 25, 113, Annex III, point 5(b), as amended by Regulation (EU) 2026/1744.)
- For an API-only model whose weights and service cannot transfer, the bank needs a tested migration route, an independently available alternative and interim fraud controls. Data Act switching duties can assist where the service qualifies, but do not require an upstream provider to transfer its protected model technology. (Regulation (EU) 2022/2554, art 28(8); Regulation (EU) 2023/2854, arts 2(8), 23-25, 30(6).)
The service the bank must recover
The bank should define the service it needs to restore before agreeing what goes into escrow. An escrow agent holds specified materials and releases them under agreed conditions. Here, the supplier proposes only a source-code snapshot. That proposal covers the human-readable instructions for part of the software, while the bank relies on a working fraud-alert process. DORA's critical-function exit requirements concern continued business activity and customer service, so the proposed control must be assessed against that operational result. (Regulation (EU) 2022/2554, art 28(8).)
The supplier owns its orchestration code, which coordinates the processing steps, and some model weights, the learned numerical parameters used by a model. It separately licenses another model, uses cloud deployment scripts and processes bank-owned data. The bank's staff make final decisions after the engine prioritises operational fraud alerts. Restoring that process may require model architecture, weights, configuration, data transformations and sufficient computing capacity alongside the orchestration code. A file that starts successfully can still produce unusable alert rankings or an unmanageable review queue.
The failure variant exposes the weakness in the proposed deposit. The supplier enters business rescue or liquidation; the bank receives the code, but the essential model licence and cloud dependency cannot transfer. Delivery has then achieved custody without establishing the permissions and services needed for recovery. For ICT services supporting a critical or important function, DORA expressly requires the bank to consider applicable supplier insolvency law and constraints on urgent data recovery. Contractual data-return rights do not themselves supply a third-party software licence. (Regulation (EU) 2022/2554, arts 29(2), 30(2)(d); Copyright and Related Rights Act 2000, ss 37(1)-(2), 80-82.)
The recommended design has two branches. A model that can run on the bank's own infrastructure can support a tested recovery deployment if all necessary rights and dependencies are available. An API-only model, accessed through an upstream provider's remote interface, requires a migration route when that service cannot be preserved. Each branch also needs temporary operating arrangements if recovery takes longer than the bank can tolerate. The bank should retain manual review capacity or a ready alternative service sufficient for that interval, as part of its continuity measures. (Regulation (EU) 2022/2554, arts 11(2), 28(8).)
DORA classification and contractual duties
The Irish bank remains responsible for its DORA obligations throughout the arrangement. Credit institutions fall within DORA, and an ongoing AI service delivered through digital systems falls within its definition of ICT services. The bank cannot transfer its regulatory responsibility to the supplier, escrow agent or replacement operator. It must assess the service before contracting, conduct due diligence and maintain the required contractual information register. For a planned arrangement supporting a critical or important function, it must inform the competent authority in a timely manner and assess applicable supervisory conditions for contracting. (Regulation (EU) 2022/2554, arts 2(1)(a), 3(21), 28(1), 28(3)-(5).)
A critical or important function is one whose disruption would materially impair financial performance, service soundness or continuity, or continuing compliance with authorisation conditions or financial-services law. The bank should assess alert volumes, available human reviewers, tolerable delay, customer effects and the consequences of accumulated alerts. Difficulty replacing the supplier supports concern about substitutability, but the statutory test turns on material impairment. If another service and sufficient manual capacity prevent that impairment, the enhanced critical-function provisions may not apply. The general ICT-contract requirements still do. (Regulation (EU) 2022/2554, arts 3(22), 28(4)(a), 29(1), 30(2)-(3).)
The bank's classification does not designate the Cape Town company as a critical ICT third-party service provider. The European Supervisory Authorities make that separate designation under criteria addressing systemic impact, reliance and substitutability. Serving this bank supplies no basis for assuming designation or the associated EU-subsidiary requirement. The distinction matters commercially: the bank must secure appropriate contractual controls even where its supplier has not entered that direct oversight regime. (Regulation (EU) 2022/2554, art 31(1)-(2), (12).)
Every covered ICT contract must describe the services and processing locations and specify whether subcontracting is permitted for ICT services supporting a critical or important function or for material parts of those services, and on what conditions. It must address data protection, service levels, incident assistance, authority cooperation and termination. Article 30(2)(d) specifically requires access, recovery and return of processed personal and non-personal data in an accessible format on supplier insolvency, resolution, cessation or contractual termination. For critical or important functions, the contract needs more detailed performance targets, contingency testing, effective access and audit rights, and an adequate transition period. Those duties support continuity negotiations, but contain no general requirement to surrender source code, weights or training datasets. (Regulation (EU) 2022/2554, art 30(1)-(3).)
For the critical-function branch, the bank must document, sufficiently test and periodically review an exit plan covering failure, deterioration and disruption. The plan must identify alternative solutions and arrangements for moving the service and data to another provider or bringing them in-house. Commission Delegated Regulation (EU) 2024/1773 requires a realistic, feasible plan with a schedule compatible with contractual exit terms. A supplier's promise to assist throughout a transition does not establish that its staff or upstream services will remain available after failure. The bank therefore needs evidence that its recovery arrangements can operate without that cooperation. (Regulation (EU) 2022/2554, art 28(8); Commission Delegated Regulation (EU) 2024/1773, art 10.)
The subcontracting analysis must reach the dependencies that support the critical service or material parts of it. The final subcontracting rules require relevant subcontractor identification, due diligence, continuity protections, monitoring and controls over material changes. The supplier should identify the upstream model, cloud, package repository and key-management services that meet that test. Required contractual protections do not create a sublicense or bind an upstream provider that never agreed to the proposed use. A refused permission should lead to a different recovery design. (Commission Delegated Regulation (EU) 2025/532, arts 3-6.)
Irish supervisory guidance reinforces the need for viable exits, transfer-time estimates, interim continuity and a realistic assessment of step-in arrangements. The ECB's cloud guide likewise distinguishes immediate continuity from longer-term exit; its particular supervisory audience is directly supervised banks. These are guidance sources, and the binding duties above remain the legal starting point. Licentium's guide to DORA compliance requirements provides wider context for the bank's incident, testing and third-party controls. (Central Bank of Ireland, Cross-Industry Guidance on Outsourcing, December 2021, Part A, section 5, Part B, section 9.1; ECB, Guide on outsourcing cloud services to cloud service providers, July 2025, sections 1.1-1.2, 2.4.)
Supplier title and the bank's continuity licence
The parties should settle the necessary title, upstream and exchange-control permissions before the supplier grants a signed non-exclusive continuity licence. The grant should occur when they contract, with production exercise dependent on an agreed release event and limited verification rights operating immediately. This reduces reliance on obtaining a fresh grant after distress. The licence must identify the protected materials and permitted acts, rather than infer permission from delivery of a storage device or repository. South African copyright law reserves specified acts in computer programs to the owner and recognises licences over existing and future works. (Copyright Act 98 of 1978, ss 11B, 22(4)-(5); Exchange Control Regulations 1961, reg 10(1)(c), (4).)
The stated ownership of orchestration code and some weights does not settle title to every deposited component. For computer programs, South African law identifies the author by control over their making. The employee-ownership rule, its contractual qualifications and the actual development arrangements matter. Commissioning a contractor to write software does not itself fall within the special ownership rule for specified commissioned works. Contractor assignments and any relevant employee agreements should therefore be checked against the contribution history. An assignment or exclusive copyright licence requires signed writing; a non-exclusive licence has different formalities. (Copyright Act 98 of 1978, s 1, definition of author, ss 21(1)(a)-(e), 22(3)-(4).)
Ownership of a weight file also should not be treated as proof that every numerical parameter attracts independent copyright protection. Copyright requires a qualifying work; software protection concerns expression, with the applicable originality requirement. The agreement should identify any copyright, contractual rights and confidential know-how actually relied on. Whatever the legal classification, the supplier cannot grant broader rights in a separately licensed model than it holds. The parties should confirm that existing rights authorise the required deposit, verification and recovery uses. Where those rights are insufficient or uncertain, they should obtain documented permission from an authorised upstream licensor or redesign recovery. (Copyright Act 98 of 1978, ss 2, 11B, 22; Directive 2009/24/EC, arts 1(1)-(3), 5-6, 8; Copyright and Related Rights Act 2000, ss 80-82, 120.)
The recommended licence should cover running the agreed fraud-alert service, making necessary copies, building and deploying the software, correcting errors, maintaining security and making defined operational changes. It should name the bank entities and permit an approved replacement operator to act for them under matching confidentiality and use restrictions. If that operator needs a sublicense, the grant must permit one; merely describing it as a contractor cannot cure missing rights. Territories must cover the intended recovery and support locations. Duration should support a viable transition, with agreed fees, rather than end before migration can be completed. (Copyright Act 98 of 1978, ss 11B, 22; Copyright and Related Rights Act 2000, ss 37(1)-(2), 120.)
Irish law already permits certain acts by lawful software users, including necessary backups, intended-purpose use and error correction. It also permits limited interoperability work and observation or testing under specified conditions. Contractual prohibitions do not simply erase statutory permitted acts. In Top System, the Court of Justice recognised necessary decompilation for error correction without importing the separate interoperability conditions. These rights qualify any claim that every maintenance act needs fresh permission. They do not furnish an unavailable model, confer unlimited exploitation rights or compel a cloud provider to supply resources. An express continuity licence should resolve the broader operational permissions. (Copyright and Related Rights Act 2000, ss 2(10), 80-82; Directive 2009/24/EC, arts 5-6, 8; Top System SA v Belgian State, C-13/20, EU:C:2021:811, paras 53, 55-74.)
The supplier can protect its remaining commercial market through purpose limits, access controls and restrictions on resale or use for other customers. It should also give notice of the licence to prospective purchasers and require disclosure in any asset-sale process. Both South African and Irish copyright statutes contain successor-binding licence rules with exceptions for qualifying purchasers without notice. Those provisions support a notice covenant, but do not establish universal survival through insolvency. (Copyright Act 98 of 1978, s 22(7)-(8); Copyright and Related Rights Act 2000, s 120(4)-(5).)
South African exchange control
The proposed foreign licence should be submitted through the supplier's authorised dealer before it takes effect. Retaining IP ownership does not remove exchange-control questions. Regulation 10(1)(c) restricts transactions that export capital or a right to capital without permission; the definition expressly reaches intellectual-property rights. The SARB manual provides distinct conditions for qualifying IP assignments and licences, so the transaction must be classified by its substance. (Exchange Control Regulations 1961, reg 10(1)(c), (4); SARB, Currency and Exchanges Manual for Authorised Dealers, B.2(A)(iii)-(iv).)
For the qualifying licensing route, an authorised dealer may approve licensing to a non-resident at an arm's-length and fair market-related price. The manual requires the licence agreement and an auditor's letter confirming the basis for calculating the royalty or licence fee. Royalties and fees must be repatriated within 30 days of entitlement, with appropriate tax treatment for the transaction. The supplier should present the complete licence, contingent exercise terms, consideration and relationship between the parties. An apparently free emergency right may have value within the overall supply price; the documents should explain that allocation rather than assume zero value or automatic permission. (SARB, Currency and Exchanges Manual for Authorised Dealers, B.2(A)(iv)-(v).)
The dealer should confirm that the proposed grant falls within its delegated authority, determine the correct reporting classification and identify any referral required. Assignment rules should not be applied merely because copies leave South Africa, nor should the parties conceal an economic transfer behind the word licence. Later changes to the beneficiary, territory, operator rights or consideration should return to the agreed compliance process. These are implementation conditions for the proposed transaction; nothing in the facts establishes an existing approval. (Exchange Control Regulations 1961, reg 10(1)(c), (4); SARB, Currency and Exchanges Manual for Authorised Dealers, B.2(A)(iii)-(iv).)
Business rescue and liquidation
The bank should treat insolvency release as a legally constrained recovery route. South African business rescue aims to facilitate rehabilitation or a better return than immediate liquidation; it is not the same process as liquidation. Section 133 generally stays legal proceedings, including enforcement action against the company or relevant property, subject to listed exceptions, written practitioner consent or court leave. Section 134 separately regulates dealings with property and the exercise of rights over property in the company's lawful possession. The exact right asserted and the assets involved therefore matter. (Companies Act 71 of 2008, ss 128(1)(b), 133-134.)
Continuing contractual performance is also exposed. During business rescue, the practitioner may suspend specified company obligations arising under pre-existing agreements and otherwise becoming due during rescue, subject to statutory exceptions. Cancellation under section 136(2) requires an urgent court application. The counterparty's statutory damages remedy does not substitute for a working model or available staff. The bank should minimise dependence on future supplier performance through an already completed deposit, an existing licence and independent access to necessary services. This design reduces operational dependence without determining every effect of section 136 on the particular licence. (Companies Act 71 of 2008, s 136(2)-(3).)
Business rescue does not automatically make contractual cancellation unlawful. In Murray, which concerned unpaid instalments, the Supreme Court of Appeal held that cancellation itself was not enforcement action prohibited by section 133. The court did not decide the separate section 134 issue. That distinction prevents both an absolute ban on termination and an assumption that termination permits immediate possession or unrestricted exploitation of assets. A service-cessation trigger may establish a contractual entitlement while the ensuing enforcement step still needs consent or judicial relief. (Cloete Murray NO v FirstRand Bank Ltd t/a Wesbank [2015] ZASCA 39, paras 3-4, 18-27, 31-33.)
Liquidation presents different risks. It does not automatically terminate every contract, but a liquidator can decline further performance of an executory agreement. For a company being wound up and unable to pay its debts, section 341(2) ordinarily makes dispositions after winding-up commencement void. Court winding-up is deemed to commence when its application is presented, if that application is subsequently granted. The validation discretion is limited to the period before the provisional winding-up order. A fresh licence after commencement is therefore more exposed than an earlier completed arrangement. Earlier execution still leaves the question whether a later release effects a new disposition. (Ellerine Bros (Pty) Ltd v McCarthy Ltd [2014] ZASCA 46, paras 10-13; Companies Act 71 of 2008, Schedule 5, item 9; Companies Act 61 of 1973, ss 339-341, 348; Blue Label Distribution (Pty) Ltd v St Clair Cooper NO [2026] ZASCA 61, paras 2-5, 19.)
The bank should document commercial consideration and avoid a transfer designed to defeat creditors. South African avoidance provisions address dispositions without value, voidable or undue preferences and collusive dealings, each with its own elements. An unfavourable price is not automatically a disposition without value: Strydom explains that section 26 requires no value at all. The proposed ordinary-course licence still requires examination against the relevant timing, solvency and preference facts. It should not promise the bank rights exceeding those that were validly granted. (Insolvency Act 24 of 1936, ss 26, 29-31; Strydom NO v Snowball Wealth (Pty) Ltd [2022] ZASCA 91, paras 26-30, 36; Companies Act 61 of 1973, s 340.)
Independent custody alone is insufficient. In Pick 'n Pay, an express irrevocable mandate to release company-owned trust funds did not survive liquidation so as to prefer one creditor. That decision concerned funds, not software licences, and does not decide this escrow arrangement. It does defeat the broader premise that a custodian's irrevocable release instruction necessarily outranks the insolvency process. A substantive licence granted before failure, clear ownership records and separate custody should therefore accompany the release machinery, with a fallback if an office-holder challenges access. (Pick 'n Pay Retailers (Pty) Ltd v Ramalho NO [2025] ZASCA 97, paras 20-30.)
Irish law and cross-border enforcement
The contracts should identify governing law, forum, the escrow agent's jurisdiction and each material place of performance. An Irish-law package can make contractual interpretation more coherent for the bank, but cannot settle every ownership or insolvency issue. Rome I permits contractual choice and defines its contractual effects; it excludes corporate winding-up and preserves relevant overriding mandatory rules. Its treatment of the law of the place of performance is conditional, not a direction to apply all South African rules to every Irish contract claim. (Regulation (EC) No 593/2008, arts 1(2)(f), 3, 9, 12.)
A court clause is a separate decision. Brussels I bis can support a properly formed agreement choosing an Irish court for ordinary contractual disputes, while excluding bankruptcy and analogous proceedings from its scope. The supply agreement, continuity licence and tripartite escrow terms should use compatible dispute arrangements and preserve access to competent courts for urgent relief. A technical expert can decide whether a service threshold was missed; that appointment cannot displace a statutory stay or determine every proprietary claim against a nonparty. (Regulation (EU) No 1215/2012, arts 1(2)(b), 25; Companies Act 71 of 2008, s 133.)
Assuming the supplier's centre of main interests remains in South Africa, the EU Insolvency Regulation's automatic recognition mechanism does not recognise its South African proceeding merely because the customer or a deposited copy is in Ireland. The regulation addresses debtors with their centre of main interests in the Union and recognition of qualifying Member State proceedings. This territorial limit does not prevent Irish common-law recognition or assistance. (Regulation (EU) 2015/848, recital 25, arts 3, 19.)
In Mercer Agencies, the Irish High Court recognised Northern Irish administration for particular asset-realisation and litigation purposes. It assessed equivalence and legitimate purpose, while preserving affected parties' ability to apply to the court. The decision does not establish that every South African rescue power will be recognised, or decide whether this licence survives. It does show why Irish custody cannot be presented as protection from every foreign office-holder. The bank should budget for urgent local relief and maintain an operational fallback while any recognition or release dispute is resolved. (Re Mercer Agencies Ltd (In Administration) [2025] IEHC 261, paras 45, 50-53.)
Tripartite terms and release procedure
The bank, supplier and escrow agent should sign a coordinated agreement that gives the bank direct, enforceable rights against the relevant parties. It should identify the deposited materials, the existing continuity licence and the separate permissions for verification. The full ICT contract, including service levels and incorporated schedules, should be maintained as one downloadable, durable and accessible written document. The parties should identify and retain the agreed version of every incorporated term; mutable website terms otherwise create avoidable uncertainty about recovery rights. (Regulation (EU) 2022/2554, art 30(1); Copyright Act 98 of 1978, s 22; Copyright and Related Rights Act 2000, s 120.)
The escrow terms should allocate custody, updates, testing, security, notification, release and payment responsibilities. They should address the agent's own insolvency, substitute custody and an independent backup deposit, with access records and restrictions on any lien over the materials. The bank should be able to pay overdue custodial fees directly before a deposit is lost or withdrawn. Liability limits and insurance should be assessed against the costs of failed custody or wrongful disclosure. These are proposed commercial protections; DORA does not prescribe a universal escrow-agent contract. (Regulation (EU) 2022/2554, arts 28(4), 28(8), 30(1)-(3).)
Release should cover defined operational failure as well as specified insolvency events. Waiting for formal insolvency may leave the bank without support during a prolonged outage. The contract should specify the service-cessation period, support obligations whose material failure permits release, evidence required and a cure period consistent with the bank's maximum tolerable disruption. Formal process evidence may include the relevant court order or filing; operational evidence can include contemporaneous service records and an independent technical report. A release event should activate only the agreed rights and materials necessary for continuity. (Regulation (EU) 2022/2554, arts 28(7)-(8), 30(3)(a)-(b); Companies Act 71 of 2008, ss 133-136.)
The agent should notify the supplier, bank and relevant office-holder, assess the contractually specified evidence and record its decision. Technical disagreements need a short expert procedure; legal disputes need a route to urgent court relief. An objection should not produce an indefinite contractual veto, but the agreement cannot authorise disregard of a binding order or statutory restriction. Restricted verification or temporary operating rights can be designed in advance, provided they are validly granted and their exercise remains lawful. (Companies Act 71 of 2008, ss 133-136; Companies Act 61 of 1973, ss 341, 348.)
Costs should be allocated before failure. The parties should price deposit updates, independent testing, emergency compute, replacement operation and exit assistance. DORA specifically requires incident-related assistance at no additional cost or a cost determined in advance; it does not set every commercial migration fee. The bank should know which payments keep direct upstream services available and who may authorise them. A contractual right to recovery remains operationally weak if no authorised operator or funded environment is ready to use it. (Regulation (EU) 2022/2554, arts 28(8), 30(2)(f), 30(3)(f).)
Deposits and recovery tests
The deployable branch should begin with a complete deposit before production acceptance. It should include the relevant source version, model architecture and lawfully depositable weights, tokenisers, adapters, configuration, build tools, dependency versions, container definitions and deployment scripts. A manifest should identify each component, owner, licence, version and external dependency. Documentation should cover installation, operation, recovery, rollback and the bank's data interfaces. This specification implements the chosen recovery design; it is not a statutory list imposed on every AI supplier. (Regulation (EU) 2022/2554, art 28(8); Commission Delegated Regulation (EU) 2024/1773, art 10.)
For this arrangement, the recommended schedule is a refreshed, verified deposit for each production release or model-version change before promotion. Emergency changes should be deposited within an agreed short period, proposed here as 24 hours, with the bank approving any temporary gap. Monthly reconciliation should compare the manifest with the running service and confirm that dependencies and permissions remain available. The deposit should retain the current production package and a usable rollback version. Those proposed intervals must be tightened where the bank's recovery or data-loss tolerance requires it; they are not DORA-prescribed frequencies. (Regulation (EU) 2022/2554, arts 11, 28(8); Commission Delegated Regulation (EU) 2024/1773, arts 9-10.)
An independent verifier should rebuild and deploy the package in a clean, authorised environment without undocumented supplier assistance. The exercise should assume that the supplier's repositories and cloud tenant are unavailable. The verifier needs lawful access to the dependencies and enough compute to perform the recovery task. Checksums help detect corruption or substitution, but cannot establish that a package contains the correct model, all build dependencies or a valid licence. The bank should retain the build record, defects, corrective actions and measured results. (Commission Delegated Regulation (EU) 2024/1773, arts 8-10.)
The test should run representative lawful or synthetic alerts through the restored process. It should check input mappings, alert ordering, false-positive and missed-alert patterns, throughput, logging, access controls and staff handling capacity. Recovery time and recoverable data loss should be measured against limits approved through the bank's business-impact assessment. The replacement operator should demonstrate restart, rollback and recovery of the bank's records. A successful installation alone cannot establish continuity where output quality or review capacity is inadequate. (Regulation (EU) 2022/2554, art 11(2), (5)-(6), art 12(6), art 28(8).)
Initial testing should precede acceptance, followed by tests after material changes to models, dependencies, licences, hosting or operators. Quarterly independent recovery exercises are a proposed starting schedule for this service. They should feed into the bank's wider continuity testing. DORA requires at least annual testing of its ICT business-continuity and response-and-recovery plans for ICT systems supporting all functions. It also requires testing when substantive changes affect ICT systems supporting critical or important functions. The law does not prescribe a quarterly escrow test. If demonstrated restoration takes too long, the bank should maintain a ready alternative, reduce dependence on the service or redesign the deployment. (Regulation (EU) 2022/2554, art 11(6), art 28(8).)
Data, confidential materials and privileged access
The recovery package should minimise disclosure while preserving the bank's ability to operate. Bank ownership of data does not answer whether particular records contain personal data, whether disclosure has a lawful basis or who controls the processing. The bank, supplier, verifier, agent and replacement operator should have roles assigned by their actual activities. Where a party acts as processor, the required written terms must govern instructions, confidentiality, security, subprocessors, assistance and deletion or return. Release does not suspend those obligations. (Regulation (EU) 2016/679, arts 4(7)-(8), 5-6, 28.)
Blanket deposit of personal training data is unnecessary where the agreed task is inference and operational recovery. The package should use synthetic or suitably minimised verification data, schemas, feature definitions and bank-controlled export procedures where these suffice. If maintenance requires additional training material, its lawful availability and permitted use must be established separately. The bank should reassess any data-protection impact assessment when the replacement deployment materially changes processing risks. Fraud records can also contain offence-related information, for which Article 10 imposes additional conditions. In Ireland, section 55 includes alleged offences and requires an applicable permitted route with suitable safeguards alongside Article 6. Ownership or an ordinary confidentiality clause is insufficient. (Regulation (EU) 2016/679, arts 5(1)(b)-(c), 6, 10, 35(1), 35(11); Data Protection Act 2018, s 55(1), (9).)
South African processing requires its own analysis. POPIA applies under its territorial and processing conditions, rather than merely because a company appears somewhere in the supply chain. Where its responsible-party and operator provisions apply, the operator must act with the responsible party's knowledge or authorisation, preserve confidentiality and be governed by the required security contract. Where section 72 applies, the responsible party must establish a permitted route for transferring personal information to a third party abroad. That route can involve adequate protection or another applicable statutory ground. The agreement should map actual processing and onward access, including recovery support. (Protection of Personal Information Act 4 of 2013, ss 3, 19-21, 72.)
An EU deposit does not remove GDPR transfer issues if staff or an operator in South Africa can access personal data. The parties must establish an applicable Chapter V mechanism for the relevant transfer and onward transfers. Where eligible standard contractual clauses are used, the parties must assess destination-country laws and practices, document that assessment and provide necessary supplementary safeguards. The contract must accommodate suspension if adequate protection cannot be maintained. Neither a general security promise nor POPIA compliance by itself replaces that assessment. (Regulation (EU) 2016/679, arts 44-46; Commission Implementing Decision (EU) 2021/914, Annex, clauses 14-16.)
Source code and model materials may also contain protected trade secrets. Irish rules distinguish lawful acquisition from unauthorised copying and disclosure in breach of confidentiality or use restrictions. A restricted verifier environment, named recipients, access logs and purpose limits can protect the supplier while allowing meaningful testing. The arrangements should preserve legally required disclosures and statutory exceptions. Live credentials should stay out of a general plaintext deposit; authorised recovery should use controlled key access, independently provisioned accounts, rotation and revocation procedures tested before failure. (European Union (Protection of Trade Secrets) Regulations 2018, SI No 188/2018, regs 2-6; Regulation (EU) 2016/679, art 32.)
AI use and changes after release
The bank should classify the actual fraud-alert use, rather than infer AI Act high-risk status from DORA importance. Annex III's creditworthiness and credit-scoring category expressly excepts systems used to detect financial fraud. The stated triage purpose does not itself establish another listed high-risk use or a safety component within Annex I. Staff involvement is relevant to control design, but human final decisions alone do not exempt an otherwise listed system. The bank should record intended purpose and reassess a change into creditworthiness decisions, specified biometric uses or another regulated purpose. (Regulation (EU) 2024/1689, arts 3(12), 6, Annex III, point 5(b).)
The prohibition on certain criminal-risk predictions needs a separate check. Article 5(1)(d) prohibits assessments of a person's risk of committing a criminal offence based solely on profiling or personality traits. Its human-assessment exception requires objective, verifiable facts directly linked to criminal activity. Recital 42 gives fraud analytics concerning undertakings and based on suspicious transactions as an example, but does not excuse every product labelled fraud detection. For person-level assessments, the bank should document why the system falls outside the prohibition or satisfies its exception. Transaction-data inputs or final human sign-off alone do not answer that question. The facts described do not establish such a breach. (Regulation (EU) 2024/1689, art 5(1)(d), recital 42.)
The amended timetable matters to any proposed recovery deployment. The general application date remains 2 August 2026, but the relevant Chapter III sections 1-3 apply to Annex III systems from 2 December 2027, with Article 6(5) excepted from that postponement. For Article 6(1) product-related systems, the corresponding date is 2 August 2028. The prohibition just discussed already applies. For pre-existing high-risk systems used in this private-bank service, Article 111(2) preserves transitional treatment unless significant design changes occur from the relevant Chapter III application date. That condition concerns systems placed on the market or put into service before that date and does not displace prohibited-practices rules. It differs from the defined substantial-modification test and must be assessed for the particular recovered system. (Regulation (EU) 2024/1689, arts 111(2), 113, as amended by Regulation (EU) 2026/1744, art 1(39)-(40).)
Receiving escrow materials does not by itself determine provider status. Development and placing on the market or putting into service under a party's own name may do so. When the relevant high-risk rules apply, Article 25 separately addresses rebranding, substantial modification of a high-risk system, and changes of intended purpose that make another system high-risk. A substantial modification can require a new conformity assessment. The recovery plan should therefore distinguish operation of the existing version from redesign, retraining and deployment for a new purpose. (Regulation (EU) 2024/1689, arts 3(3)-(4), 3(23), 25(1), 43(4), 111, 113.)
The bank should assign change approval, model validation, documentation, logging, security and human-oversight responsibilities before the replacement operator begins work. Providers and deployers must also take measures supporting AI literacy among relevant staff and others operating the system on their behalf. For the replacement team, this should cover model limitations, escalation procedures and human review. The amended Article 25 contains defined cooperation and information duties in the high-risk supply chain, but creates no universal present entitlement to every provider's source code or weights. Its application date, triggering conditions and intellectual-property limits must be respected. Immediate continuity planning should secure contractual rights without waiting for those provisions to supply the missing permissions. (Regulation (EU) 2024/1689, art 4, art 25(2)-(5), art 113; Regulation (EU) 2026/1744, art 1(5), (12), (40); Regulation (EU) 2022/2554, arts 28(8), 30.)
The underlying model needs separate treatment if it is a general-purpose AI model. Restoring an ordinary specialised fraud classifier should not be equated with becoming a provider of such a model. Material downstream modification can change the assessment; the Commission's guidance addresses changes affecting generality, capabilities or systemic risk. The bank and replacement operator should assess resulting model-provider duties, including documentation, before any modification or further supply. These duties have their own commencement and legacy-model provisions, distinct from the postponed high-risk-system rules. (Regulation (EU) 2024/1689, arts 3(63), 53-54, 111(3), 113; European Commission, C(2025) 7719 final, paras 57-66.)
API-only continuity and migration
The API-only variant requires an independently usable alternative. Where the supplier cannot deposit weights or transfer the upstream service, an AI model escrow agreement should state that limitation precisely. It can preserve lawfully depositable integration code, adapters, configurations, prompts, evaluation material and migration instructions. It cannot turn that package into the upstream model or compel continued API access. The bank should obtain a direct relationship with a viable alternative provider, available capacity and permission for its replacement operator to deploy the relevant materials. (Regulation (EU) 2022/2554, arts 28(8), 29(1)-(2); Commission Delegated Regulation (EU) 2025/532, arts 3-4.)
Migration should be exercised before it becomes urgent. The bank should test a substitute model against relevant alert types, missed-fraud and false-positive patterns, latency, data mappings and review workloads. Output formats and audit records need to remain usable by staff. The supplier's upstream terms may limit what can be exported or used to develop another model, so the test should use data and materials the parties are entitled to use. Continued access under a direct contract with the original upstream provider can help with the supplier's failure, but does not solve failure of that upstream provider itself. (Regulation (EU) 2022/2554, arts 28(8), 29; Copyright and Related Rights Act 2000, ss 37(1)-(2), 80-82, 120; Regulation (EU) 2016/679, arts 5-6.)
The Data Act can support switching where the actual cloud or API offering meets its definition of a data processing service. That definition requires on-demand network access to a shared pool of configurable, scalable and elastic computing resources; an API label alone is insufficient. The switching provisions apply to qualifying providers serving EU customers regardless of establishment and require removal of specified switching obstacles and written contractual assistance arrangements. Article 31(1) removes specified functional-equivalence, switching-charge and interoperability duties for qualifying custom-built services not offered broadly through a service catalogue. It does not exempt them from the whole switching chapter. Limited-period non-production testing and evaluation services are excluded from that chapter under Article 31(2). (Regulation (EU) 2023/2854, arts 1(3)(f), 2(8), 23-25, 31, 50.)
Those rules do not require providers to develop new technology, transfer protected intellectual property or disclose trade secrets. Exportable data also has an express exclusion for provider or third-party protected assets. The bank should use any applicable switching rights alongside contractual export and migration arrangements, without treating them as a statutory right to receive foundation-model weights. Its acceptance decision should turn on a demonstrated lawful recovery route within its tolerances. If neither independent redeployment nor a validated substitute can meet those tolerances, the bank should reduce the service's operational role or change the architecture before relying on escrow. (Regulation (EU) 2023/2854, arts 2(38), 30(6); Regulation (EU) 2022/2554, art 28(8); Commission Delegated Regulation (EU) 2024/1773, art 10.)