Laws and regulations in global economic

Directions:

As the global economy expands, the need for knowledge, awareness, and enforcement of business laws is growing. Jurisdictional differences, especially with the rise of technology, may become redefined as more companies pursue international opportunities.

Initial Post

Please read the article and answer the questions below in your initial post.

Setting Your Sights on Business Abroad: Navigating International Laws and Regulations

What are your impressions of the topics addressed?

Do you expect worldwide business practices to change or to develop in the upcoming years?

Reply Post

Respond to at least one classmate’s post. Consider new laws or regulations that might be necessary for fostering a strong, thriving global economy. What additional laws might you propose? Would you amend any existing laws, and if so, what provisions would you change?

Please remember to acknowledge any source you use.

S e l e c t ed t o p i c
Setting Your Sights on Business
Abroad: Navigating International
Laws and Regulations
Greg Carmean
For many U.S.-based businesses, expanding into international markets holds the lure of potentially lucrative
growth opportunities. At the same time, domestic businesses may encounter a number of unique obstacles,
including a variety of international laws and regulations, when working with customers, merchants and
vendors overseas. Conducting business cross-borders
can be fraught with regulatory and compliance risk
challenges. Even the best-intentioned organizations can
struggle to navigate myriad complex regulations found
at the national and international level.
For example, failure to fully understand the regulatory
environment and comply with the latest data transfer
and data privacy regulations can prove extremely costly.
According to the U.S. Department of Treasury (DOT),
$599.7 million in Office of Foreign Assets Control
(OFAC) civil penalties were issued in 2015. With a growing list of global economic and trade sanctions, antimoney laundering (AML) regulations, data protection
and due diligence provisions, it’s little wonder that many
companies struggle to stay in compliance. The Treasury
reported that the average OFAC civil penalty grew from
$7.4 million in 2010 to nearly $40 million in 2015.
U.S. businesses would be well advised to gain a
clearer understanding of the regulatory landscape.
On the path toward international expansion, U.S.
businesses would be well advised to gain a clearer
understanding of the regulatory landscape to ensure
that they’re ready to handle the many complexities of
managing commercial accounts overseas. Business
professionals should ask themselves questions such as
the following: What do I need to consider regarding
regulatory compliance when expanding abroad? What
type of information on businesses and consumers is
available outside the United States, and how can I use
it legally? What types of truly global systems exist in
the market to help assist in regulatory compliance and
risk management?
Improving Know-Your-Customer Processes
Punitive fines, enforcement actions and reputational
risks are driving increased regulatory compliance concerns about know-your-customer (KYC) regulatory
requirements for doing business in the United States
46
B u s i n e ss C r e d i t m a y 2 0 1 6
and abroad. In fact, KPMG’s Global Anti-Money Laundering Survey 2014 finds that 70% of respondents had
received a regulatory visit focusing on KYC. This has led
to a 53% increase in investments for AML processes.
The challenge, however, is that implementing adequate
controls and processes can be complex, and current
solutions are often expensive, incomplete and difficult
to integrate. No single tool or source of data enables
seamless compliance.
Gaining reliable information about companies and
individuals outside the United States is far more difficult than in this country. Access to data around the
globe varies greatly. The U.S. information infrastructure
is far more robust due to stringent regulatory oversight
that requires companies to disclose data about themselves and who’s behind the business. Without reliable
customer information, it becomes more difficult to
make a good risk assessment of the businesses in an
organization’s overseas portfolio.
Adding to the challenge, businesses also must consider
the importance of streamlining processes to ensure that
the supplier/customer experience isn’t impacted
adversely. Conducting due diligence outside the United
States can create significant friction with clients and
suppliers because of the depth of information being
requested. Some may become frustrated with the intrusive nature of the inquiries and move their business to
companies that manage the process more efficiently. For
this reason, working with a vendor—one that has a
global footprint and tier-one credit partners worldwide—can help provide credible, up-to-date information that can automate processes, while meeting KYC
requirements, as well as supporting risk management
decision-making.
Data Privacy and Transfer Restrictions
For organizations conducting business overseas, transferring data (such as commercial credit reports) back to
the United States can present data privacy challenges.
Data being sent from another country or region to the
United States may be subject to restrictions or prohibited under regulations such as the European Union
(EU) Data Protection Directive or the U.K. Data Protection Act. Understanding data privacy and transfer
restrictions is critical for both maintaining regulatory
compliance and determining the extent to which KYC
functions can be offshored to manage costs.
Staying abreast of the latest data privacy laws is no simple
task, particularly in light of recent changes. For the past
decade and a half, Safe Harbor Privacy Principles have allowed
U.S. companies to register with the U.S. Department of Commerce, which allowed them to send and receive personal
information about EU residents across EU borders. However,
this practice was declared illegal last year. Concerns over disclosures of sensitive information, such as those highlighted by
the Edward Snowden leaks, potentially could have put U.S.
companies into conflict with the EU’s broadly written privacy
directives. Safe Harbor subsequently has been replaced by the
EU-U.S. Privacy Shield. However, it remains to be seen if
these new restrictions will be acceptable with EU authorities.
risks associated with cross-border data transfer to stay compliant with data privacy laws.
Today, organizations operating in Europe must either obtain
consent of the beneficial owner whose data they are transferring or utilize model contractual clauses as published by the
European Commission. These standard contractual clauses
were developed for the purpose of transmitting personal data
from the European economic area to any third countries.
Model clauses are intended to provide safeguards for the protection of the privacy of individuals.
It is critical for organizations to choose the right vendor when
it comes to supporting global data transfer and maintaining
compliance with data privacy regulations across a range of
countries. Such a vendor should supply current, accurate
information for each respective market, allowing organizations to automate processes while meeting KYC requirements.
Some vendors may boast about having extensive online regulatory data for a multitude of countries, but if that data is
incomplete or dated, it will prove less than effective. The right
vendor will provide organizations with the most up-to-date
information, which will allow them to make the right decisions for their business.
Failure to understand how data must be treated—and what
safeguards must be in place to ensure compliance with data
privacy regulations—can result in hefty fines.
Best Practices in Mitigating Risk
As U.S.-based businesses look to capitalize on international
growth opportunities, they need to be aware of the complex
regulatory environment and put strategies in place to mitigate
Organizations should look to implement industry best practices, such as developing plans that take country, business climate and transparency risks from country to country into
account. Conducting regularly scheduled compliance and risk
reviews will enable organizations to stay abreast of the latest
regulatory changes and prepare for future challenges. Companies should strive to gain a better understanding of how consumer legislation may impact checks of sole traders and business contacts, so they can stay compliant with pertinent
regulations and avoid onerous fines.
Greg Carmean is a senior product manager for Experian’s Business
Information Services. He is responsible for overseeing the company’s
core commercial products, including domestic and international credit
reports. Greg can be contact through his colleague Jordan Takeyama at
jordan.takeyama@experian.com.
No Math involved!
Completing the monthly Credit Managers’ Index (CMI) survey is easy. Just
indicate if something is better, the same or worse than the month before.
That’s it!
Most importantly, your knowledge and experience can help make
the CMI as accurate as possible. The CMI is a leading economic
indicator that has been covered by, among others,
The Washington Post, Bloomberg,
BusinessWeek and
The Wall Street Journal.
Please sign up today for our monthly email reminder at nacm.org/cmi.
m a y 2016 Business Credit
47
Copyright of Business Credit is the property of National Association of Credit Management,
Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv
without the copyright holder’s express written permission. However, users may print,
download, or email articles for individual use.