Cross border compliance in the digital era
The goal of most entrepreneurs is to have their business present in many markets and to continuously capture more market shares. Before the digital era, expanding the business was too expensive for most SMEs. Back in those days, the larger enterprises captured and dominated the bigger markets since it was costly for smaller businesses to get started, let alone to get bigger or to expand operations cross border. Today, affordable digitization is rewriting the rules of competition and we’re past the point where utilizing the latest technology is confined to big businesses that flex their economical muscles. The expanding reach of digital technologies and changing customer behaviour has fundamentally altered the prerequisites of doing business globally. A widespread digital-first mindset along with better connectivity amongst consumers and the growing reach of online platforms all make it easier for companies to enter new markets quickly on reasonable investment capital. But with this comes the emergence of an increasingly complex and stringent regulatory environment where companies within regulated industries with operations in several markets across the globe face regulatory divergence. There are differences between countries as it obtains to regulation, assuredly they are based on AML laws (Anti-Money Laundering) and KYC requirements (Know Your Customer), but there are national variants. Regulated companies that provide services and products from their home jurisdiction into other countries must comply with the rules of the host country.
What further complicates cross border compliance is the fact that almost every country is at different stages of digital transformation, are adopting various national digitization strategies and have diverse prerequisites regarding how the identity of its citizens can be verified online. In some countries, a citizen can utilize their verified electronic identity to access public and private online services. In those cases, it is optimal for an international online service provider to integrate with that national eID scheme for smooth identity verification of customers from that specific country. Whereas individuals in some other country need to submit a photo of their physical ID document along with a selfie or video for online identity verification. This means that the customer onboarding, due diligence, and monitoring will be done differently due to the various prerequisites for identification and according to the legal frameworks and regulatory interpretations specific to each country. Also, regulators are increasingly monitoring commercial activity across international borders, and their demand for reporting and information is growing all the time.