Compliance with regulations and laws is crucial for businesses across industries for several reasons. First and foremost, it is a legal requirement, and non-compliance can result in significant penalties, fines, lawsuits, and reputational damage. Furthermore, compliance protects consumers’ rights, privacy, and security, which helps to prevent fraud, misrepresentation, and abuse, ensuring that businesses operate with honesty and integrity.
Compliance requirements also help to manage risks associated with business operations, such as financial risk, legal risk, operational risk, and reputational risk. In addition, it can be a source of competitive advantage as businesses that comply with laws and regulations may be more trusted by customers, partners, investors, and regulators. Finally, compliance helps to maintain a good reputation in the market, demonstrating that a business operates ethically and is committed to complying with laws and regulations. Therefore, it is essential for businesses to prioritize compliance efforts to fulfill their legal obligations, protect consumers, manage risks, gain a competitive advantage, and maintain a good reputation in the market.
Some record breaking penalties and fines on the top organisations for not complying with the regulations –
- JPMorgan Chase: In 2020, JPMorgan Chase agreed to pay $920 million in fines to settle charges that it had engaged in manipulative trading practices and failed to maintain adequate internal controls related to AML compliance.
- Wells Fargo: In 2018, Wells Fargo was fined $1 billion by regulators for failures in its risk management and compliance practices, including AML and KYC compliance.
- Deutsche Bank: In 2020, Deutsche Bank agreed to pay more than $120 million in penalties to settle charges that it had violated US sanctions laws and failed to maintain adequate AML controls.
- Standard Chartered: In 2019, Standard Chartered agreed to pay $1.1 billion in fines to US and UK regulators to settle charges that it had violated US sanctions laws and failed to maintain adequate AML controls.
Let us have a look at the compliances that govern various segments in the US
Money Service Businesses (MSBs) (Remittances and Fintech)
Money service businesses (MSBs) are subject to various regulations and compliances to ensure that they are not being used for illegal activities like money laundering and terrorist financing. The most important of these regulations are the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations, which require MSBs to establish effective AML programs, including customer identification and verification, transaction monitoring, and reporting suspicious activity. It is important that MSBs establish policies and procedures to comply with BSA/AML regulations and keep records of their compliance efforts.
MSBs should also follow the dos and don’ts to ensure their compliance with the regulations. Some of the dos include establishing and maintaining an effective AML program, keeping records of customer identification and verification, transaction monitoring, and reporting suspicious activity. MSBs should also perform risk assessments and have policies and procedures to mitigate identified risks. They should also ensure that their employees are trained in AML compliance.
On the other hand, some of the don’ts that MSBs should avoid include facilitating transactions that involve illegal activities, failing to report suspicious activity, failing to establish an effective AML program, failing to perform customer identification and verification, and failing to keep records of transactions. By following these dos and don’ts, MSBs can comply with regulations and reduce the risk of being used for illegal activities.
Below is a list of the important compliances and regulations that a money service business needs to follow –
- Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations
- Financial Industry Regulatory Authority (FINRA) rules – (which are applicable to all financial institutions)
- Electronic Funds Transfer Act (EFTA)
- Truth in Lending Act (TILA)
- Consumer Financial Protection Bureau (CFPB) regulations
- Securities and Exchange Commission (SEC) regulations
- USA PATRIOT Act
- Gramm-Leach-Bliley Act (GLBA)
- Payment Card Industry Data Security Standard (PCI DSS)
- Fair Credit Reporting Act (FCRA)
- Uniform Commercial Code (UCC)
- Dodd-Frank Wall Street Reform and Consumer Protection Act
- KYC (Know Your Customer) and AML (Anti-Money Laundering) checks
- Consumer Due Diligence – FATF recommends the CDD measures for Financial Institutions
- FATF and MONEYVAL are 2 global bodies that overlook and recommend regulations for money transfer.
- Crypto – CFTC Compliance
Except this, every state in the US has their own regulations which need to be followed.
Marketplace
Marketplaces need to comply with various regulations and compliances to operate lawfully and safeguard their customers. Some of the most critical regulations include the Internal Revenue Service (IRS) rules, which require marketplaces to collect and report income earned by sellers, and sales tax nexus and registration requirements in each state, which mandate marketplaces to collect and remit sales tax on behalf of sellers.
Moreover, marketplaces must also comply with consumer protection laws, such as the Uniform Commercial Code (UCC) and the Federal Trade Commission Act (FTC Act), which ensure fair and transparent commercial practices. Marketplaces should also adhere to product safety regulations, such as the Consumer Product Safety Improvement Act (CPSIA) and the Consumer Product Safety Commission (CPSC) regulations, to prevent harm to consumers.
To comply with these regulations, marketplaces should establish policies and procedures, train their employees on regulatory compliance, and keep records of their compliance efforts. Failure to comply with these regulations can result in significant penalties, loss of reputation, and legal liabilities. Therefore, it is crucial for marketplaces to prioritize regulatory compliance and implement measures to mitigate risks.
Below is a list of the important compliances and regulations that a marketplace needs to follow –
- Internal Revenue Service (IRS) rules – This also includes 1099 form filling
- Sales tax nexus and registration requirements in each state
- Uniform Commercial Code (UCC)
- Consumer Product Safety Improvement Act (CPSIA)
- Federal Trade Commission Act (FTC Act)
- Truth in Advertising laws
- Consumer Review Fairness Act (CRFA)
- Consumer Product Safety Commission (CPSC) regulations
- Fair Credit Reporting Act (FCRA)
Gaming
The gaming industry is subject to various regulations and compliances that aim to ensure responsible gaming practices and prevent illegal activities. Some of the most critical regulations that gaming companies need to comply with include the Unlawful Internet Gambling Enforcement Act (UIGEA) and the Federal Wire Act, which prohibit online gambling activities and interstate gambling transactions.
Gaming companies must also comply with state gambling laws and regulations, as well as payment card industry data security standards (PCI DSS) to ensure that they protect customers’ payment information. Additionally, gaming companies need to comply with Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations and Know Your Customer (KYC) and Customer Due Diligence (CDD) requirements to prevent money laundering and terrorist financing.
Moreover, gaming companies must adhere to privacy laws such as the Fair Credit Reporting Act (FCRA), the Electronic Fund Transfer Act (EFTA), and the Children’s Online Privacy Protection Act (COPPA) to protect their customers’ privacy and security. They must also comply with accessibility regulations such as the Americans with Disabilities Act (ADA) to ensure that their games are accessible to individuals with disabilities.
Gaming companies must prioritize responsible gaming practices, such as preventing underage gambling, self-exclusion programs, and limiting problem gambling behavior. Failure to comply with these regulations can result in significant penalties, loss of reputation, and legal liabilities. Therefore, gaming companies must implement measures to mitigate risks and comply with these regulations, such as establishing policies and procedures, training employees on regulatory compliance, and keeping records of their compliance efforts.
Below is a list of the important compliances and regulations that a gaming company needs to follow –
- Unlawful Internet Gambling Enforcement Act (UIGEA)
- Federal Wire Act
- State gambling laws and regulations
- Payment Card Industry Data Security Standard (PCI DSS)
- Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations
- Know Your Customer (KYC) and Customer Due Diligence (CDD) requirements
- Fair Credit Reporting Act (FCRA)
- Electronic Funds Transfer Act (EFTA)
- Children’s Online Privacy Protection Act (COPPA)
- Internal Revenue Service (IRS) rules
- State tax rules and requirements.
- Responsible Gaming practices
- Uniform Commercial Code (UCC)
- State Gaming Licenses
- Advertising Regulations
Except this, every state in the US has their own regulations which need to be followed.
General Regulations
Some of the general regulations that are needed to be followed by most industry segments are-
- Licensing and Registration Requirements: Companies may be required to obtain licenses or register with regulatory bodies such as the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), the Consumer Financial Protection Bureau (CFPB), or state-level regulatory agencies.
- Privacy and Data Security: Companies must comply with federal and state privacy laws, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), and implement adequate data security measures to protect customer information.
- Consumer Protection: This includes the Truth in Lending Act (TILA), the Fair Credit Reporting Act (FCRA), and the Fair Debt Collection Practices Act (FDCPA).
- Tax Compliance: Companies must comply with federal and state tax laws and regulations, including filing tax returns and paying applicable taxes.
- Intellectual Property Protection: Companies must protect their intellectual property, including trademarks, patents, and copyrights, and ensure that they do not infringe on the intellectual property rights of others.
- Employment Law Compliance: Companies must comply with federal and state employment laws, including wage and hour laws, anti-discrimination laws, and workplace safety regulations.
GDPR & CCPA
The General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) are both data privacy regulations that apply to companies that collect and process personal information from individuals. The GDPR was implemented by the European Union (EU) in 2018, while the CCPA went into effect in California, USA in 2020. The GDPR applies to any company that collects or processes personal data of EU citizens, regardless of where the company is based. The CCPA applies to companies that do business in California and meet certain revenue or data processing thresholds.
Under the GDPR, companies must obtain clear and affirmative consent from individuals to collect and process their personal data. Individuals also have the right to request access to their personal data and information about how it is being used, the right to request the deletion of their personal data, and the right to receive their personal data in a structured, machine-readable format. Companies must also notify individuals and authorities in the event of a data breach that is likely to result in a high risk to individuals’ rights and freedoms.
Under the CCPA, consumers have the right to know what personal information is being collected about them and how it is being used, the right to request the deletion of their personal information, and the right to opt-out of the sale of their personal information. Companies cannot discriminate against consumers who exercise their rights under the CCPA, and they must notify consumers in the event of a data breach that is likely to result in a high risk to consumers’ rights and freedoms. Companies must also disclose the categories of personal information collected, the sources of the information, the purposes for which it is collected, and the categories of third parties with whom it is shared. Overall, both the GDPR and CCPA place a strong emphasis on protecting individuals’ personal information and ensuring transparency and accountability on the part of companies that collect and process such information.
How can Hyperverge help?
Hyperverge is GDPR, Soc2, ISO, FATF, VAPT, BaFin certified and offers a suite of compliance solutions for various industries including fintech, marketplaces, gaming, and remittances. Here’s how Hyperverge can help companies stay compliant:
- Identity Verification: Hyperverge provides a compliant identity verification software suite that helps fintech and remittance companies comply with KYC and AML regulations. The solution verifies the identity of customers in real-time by comparing their government-issued ID document with selfie, liveness and face-duplication checks.
- Document Verification: Hyperverge’s document verification solutions help companies verify the authenticity of documents such as passports, driver’s licenses, and other ID documents from central databases.
- Privacy Compliance: Hyperverge’s privacy compliance solutions help companies comply with regulations such as GDPR and CCPA.
- Risk Assessment: Hyperverge’s identity verification helps in verifying the identity of customers in real-time and detecting any fraudulent or suspicious activities.
Overall, Hyperverge’s suite of compliance solutions can help companies stay compliant with regulations, reduce the risk of fraud, and improve the customer experience.
FAQs
What are some of the key regulatory requirements that companies need to be aware of in the US?
The regulatory requirements that companies need to be aware of in the US can vary depending on their industry and the products or services they offer. However, common examples include the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations, Payment Card Industry Data Security Standard (PCI DSS), Fair Credit Reporting Act (FCRA), and various state and federal tax regulations.
What are the consequences of non-compliance with regulations in the US?
The consequences of non-compliance with regulations in the US can include hefty fines, legal action, damage to reputation, and even loss of business licenses. It is crucial for businesses to take regulatory compliance seriously to avoid these potential consequences.
