What is global compliance?

Global compliance involves following a strict set of business rules, standards and regulations that are set by each country in which a business trades. Depending on the size of the business and the sector, these regulations may differ – for example, trading across multiple countries or trading products such as medicines.

The standards cover a range of business practices, including:

• Tax compliance
• Equal opportunities for employees
• Money laundering prevention
• Product and payment standards
• Data protection and reporting.

Whatever the industry or business size, every organisation needs to follow these compliance standards to avoid catastrophic business risks.

Why companies need to follow global regulatory compliance

Following global regulatory compliance is a legal requirement for all businesses, but it may affect some more than others. For example, if a business is looking to expand into new international markets, there may be different trade or employment laws to follow.

Similarly, this may affect future hires, particularly if a potential employee is emigrating to join the business from overseas. Immigration laws may affect this person’s right to work, so businesses must remain compliant.

If an employee is working oversea, they can only continue to be paid by the organisation’s home country if a hosting agreement is in place. These are subject to a lot of conditions, including working duration, immigration requirements and reporting regulations. Additionally, this agreement has to be between two entities that have a legal connection, such as a brand of the main company in another country.

These are used for short-term relocations where the employee will return to their home country at the end of their hosting period – they cannot be used for long-term relocations, or for when an employer wants to hire in a country in which they are not registered.

Global compliance helps to ensure the welfare of staff and the sustainability of a business, from profit margins to reputational protection. Working with a consultant may help a business to expand into new markets without inadvertently landing in hot water with compliance.

What are the different types of global compliance?

Global regulatory compliance is in place to maintain safety for staff, customers and wider stakeholders. For example, it may affect equal opportunities in the workplace, maintain high product standards, or protect a company from reputational damage.

Broadly speaking, global compliance touches on employees, finances and product or service standards.

International tax compliance

Any business that has a permanent establishment in a particular country must comply with that country’s tax laws. This may affect anything from income tax to corporation tax. Organisations must follow the OECD model tax convention, which means that if they have a base to carry out their activities, then they should follow the country’s tax obligations.

Notably, this is now expanding to companies who work digitally and make significant revenue in a country, but may not have an official residence.

Employees’ rights

Employment rights vary around the world, and legal obligations may cover anything from minimum wage requirements to sick leave, breaks and equal opportunities. Companies should not discriminate against employees based on factors such as gender or disability, but rules may vary from country to country.

Anti-money laundering

Companies that wish to establish a permanent residence internationally will need to follow international anti-money laundering regulations.

These come hand in hand with counter-terrorism laws, and require an anti-money laundering or counter-terrorism programme for monitoring larger financial transactions. Companies may also need to undergo staff training and follow strict reporting procedures.

Reporting on finances

Financial statements are crucial to an organisation’s compliance – demonstrating that they are acting within the obligations of tax laws and general good business practices. This is largely universal across many countries, preparing clear statements including taxes paid. Failure to report finances correctly could lead to financial penalties.

Data protection laws

Data protection laws vary from country to country but one of the most prominent belongs to the European Union: the General Data Protection Regulation or GDPR. Businesses trading within these areas must adhere to a strict set of guidelines, including using personal data for lawful purposes, and informing customers what their data is being used for. The customer must also be given the right to erase their data.

Anti-slavery laws

Anti-slavery legislation is growing in prominence around the world, with the United Kingdom leading the charge in anti-slavery practices. Other countries such as Australia are following suit, taking steps such as investigating and monitoring any exploitation in their supply chain.

Depending on the country you are trading in, you may have to create these reports – for example, the Modern Slavery Act 2015 applies to countries outside the UK as long as the business is carrying out business in the UK. Some countries may also follow anti-corruption laws, including the United States.

Payment standards

Financial transactions are subject to a huge range of rules that apply internationally, whether making or receiving payments. For example, organisations may have to follow security standards such as the Payment Card Industry Data Security Standard.

There may be additional checks to approve payments and there may also be further considerations for exchange rates, depending on whom you’re paying or receiving money from.

Service and product standards

These standards vary enormously depending on the industry. They could be something relatively insignificant, such as the size of an A4 piece of paper in one country versus another. In other cases, they could have a severe impact on people’s wellbeing, such as compliance of medical products or cybersecurity services. Many companies follow ISO standards, though there will be different rules for individual countries or large areas such as the European Union.

Global trade compliance regulations

Trading goods internationally will incur tariffs, as well as import and export controls. Companies may have to apply for licences or permits depending on the goods they are trading. There may also be specific rules for goods being brought into the country, such as the value of the goods.

What will happen to an organisation is there is non-compliance?

Failure to comply with international laws can have devastating impacts on a business. It could result in:

• Financial penalties – fines may be issued for breaking rules such as GDPR
• Reputational damage – data breaches, for example, may harm your reputation with customers
• Broken contracts – certain trade relationships may be broken if your organisation does not comply with the terms
• Legal action – companies could lose large sums or even lose licences, such as financial services licences.

How to maintain global compliance

Whether you’re moving into a new market or simply trading in another country right now, it’s important to review your practices. You should do this regularly, either at intervals such as once a year, or whenever new legislation comes in.

If you don’t have one already, put together a compliance plan, including checks, reporting, and training your employees. Keep your employees abreast of the changes with regular meetings.

You can even take it one step further and attain a partner to manage global compliance. This person can assist with the training of employees, as well as staying one step ahead of the curve when it comes to new legislation.

Stay compliant internationally with consultancy from Mauve

Trading internationally can work wonders for your business and put you on the path to growth and all-round success. But there are tricky guidelines to navigate, particularly if you don’t have the resources in-house. With the right guidance, you can safeguard the welfare of your employees and your wider stakeholders.

To avoid risking your capital, your reputation and your customers, contact the Mauve team and discuss our consultancy services today.

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