MILAN (Reuters) -Italy's data protection agency has fined the developer of artificial intelligence (AI) chatbot company Replika 5 million euros ($5.64 million) for breaching rules designed to protect users' personal data, the authority said on Monday.

Launched in 2017, San Francisco-based startup Replika offers users customised avatars that can have conversations with them. The 'virtual friend' is marketed as being able to improve the emotional wellbeing of users.

Italian privacy watchdog Garante ordered Replika to suspend its service in the country in February 2023, citing specific risks to children.

Following an investigation, it found that Replika lacked a legal basis for processing users' data and had no age-verification system to restrict children from accessing the service, resulting in the fine for its developer, Luka Inc.

Replika did not immediately respond to a Reuters request for comment.

The Italian authority has also announced a separate investigation to assess whether Replika's generative AI system is compliant with European Union privacy rules, especially around the training of its language model.

Garante is one of the European Union's most proactive regulators in assessing AI-platform compliance with the bloc's data privacy rules.

Last year, it fined ChatGPT maker OpenAI 15 million euros after briefly banning the use of the popular chatbot in Italy in 2023 over the alleged breach of EU privacy rules.

($1 = 0.8868 euros)