Data privacy and protection are now more widely discussed and debated than ever before. Many consumers demand increasing transparency and security of their sensitive data, while governments worldwide are enacting new laws with parameters on how to transfer data from one country to another legally.
In this challenging data climate, entities involved in global trade have much to consider when establishing internal SOPs for data handling.
What do you need to know about data security compliance? What are the pros and cons of cross-border data flows? How can you keep up with the latest data compliance regulations, and what tools can help you stay compliant?
First, let’s zoom in on the astounding trends behind data growth.
Daily Data Flows – Trends & Practices
Multinational corporations, global firms, research centers, traders, and individuals transfer incomprehensible amounts of data every day.
According to the World Bank’s World Development Report 2021, “In 2020, global internet traffic was estimated to be more than 3 zettabytes, or 3,000,000,000,000 gigabytes (GB). This is an unimaginable big and abstract number, but it translates roughly into the equivalent of:
- 32 GB for each person on the planet per month, or 1 GB per person per day
- 100,000 gigabytes per second
- 325 million households watching Netflix simultaneously, at all times.”
Now, fast forward to the present. What does the day-to-day data flow of 2024 look like? We can only imagine. However, data creation and sharing are only expected to increase with the staggering acceleration of technological innovation and usage across the globe.
Meanwhile, new challenges are arising for governing bodies and consumers alike.
Pros, Cons, & Complexity of Cross-Border Data Flows
Cross-border data sharing is a progressively unfolding practice holding both risks and rewards. Access to cross-border digital services, especially in fields dealing with particularly sensitive data like finances and medicine, is creating fresh opportunities and challenges for many.
Take the following imaginary scenario, for example:
An accounting company in Country A outsources its clients’ tax filing processes to a firm in Country B. The accountants in Country B gain access to the sensitive personal data of the clients from Country A without the clients’ knowledge. An accountant from the firm in Country B has their email hacked, and sensitive client data is leaked. Several cases of identity theft occur. Clients of the accounting company in Country A find out and initiate legal action. The ordeal is costly and results in reputational damage for both companies.
The above hypothetical highlights the dangers of sharing sensitive data across borders, especially without consent.
However, did sharing the data bring any potential reward for the companies and clients involved? Perhaps the firm in Country A could offer lower rates to their clients by outsourcing, albeit at increased risk. Additionally, the company in Country B had an opportunity to compete in the global market and enrich their local economy.
Consider these other questions, further illustrating the complexity of the issue:
- Could the data have been leaked domestically?
- Was the firm in Country A acting within its legal rights when sharing the data?
- Should the clients have been given an opportunity to consent to cross-border data sharing? If so, when and how?
- Could the data have been shared more safely?
- How much data should be stored, and for how long?
- What safeguards could have prevented the outcome of this scenario?
Let’s get an overview of how governments and other international regulators are addressing this hot-button issue.
Data Governance: Data Compliance Regulations
Most countries and international organizations with jurisdiction over data governance are scrambling to keep pace with addressing threats to human rights, privacy, and international security that arise with advancing technology. Data protection laws vary significantly from country to country, ranging from very open to very restricted.
“Many jurisdictions, most notably the European Union, place significant restrictions on such transfers. The EU requires that the receiving jurisdiction be judged to have ‘adequate’ data protection practices,” explains the International Association of Privacy Professionals. The EU published a strict data protection regime in 2016 known as the General Data Protection Regulation (GDPR).
Meanwhile, “The United States has various federal and state laws that cover different aspects of data privacy, like health data, financial information or data collected from children,” says Forbes. “Data privacy in the United States is notably different than in the European Union, which has a comprehensive data privacy law—General Data Protection Regulation—though some states have passed their own comprehensive data privacy laws that have drawn comparisons to the EU system.”
Additionally, some countries, including the US, have laws governing the transfer of technical data to foreign nationals, treating the transfer as an actual export to the individual’s home country.
Beyond the US and EU, many countries have developed their own data privacy and transfer laws. As with import and export laws, the regulations governing data transfers between any two countries can be unique. If you do business in Country A and want to transfer sensitive data to a company in Country B, you’ll need to find out the laws governing the transaction based on the laws of the countries involved. Some nations have trade agreements that ease data transfer restrictions between participating parties. Others allow data transfers to certain countries only when the potential data receiver has demonstrated data security compliance by enacting specified safeguards.
Other governing bodies like the World Trade Organization have also issued data flow governance. “World Trade Organization ( WTO) rules cover measures affecting trade in services, including measures relating to cross-border data transfers and personal data. Some of the latest generation of preferential trade agreements feature substantial disciplines supporting cross-border data flows. Digital trade agreements, focusing exclusively on digital trade, have emerged as a new trend in the regulation of data flows,” says The World Bank. “Despite these initiatives, the future of global trade rules on data flows remains uncertain, particularly at the global level.”
How can global traders stay compliant and agile in this ever-shifting digital landscape?
How to Create an Internal Framework for Compliance in Data Transfers
Data security and compliance are top priorities in today’s globalized economic landscape. Internationally operating organizations must prioritize data security and compliance. How?
Following these three key steps can promote data security compliance:
- Stay informed – Designate an in-house privacy team and assign talent toward understanding and implementing the latest data and privacy laws governing relevant transactions. Remember that even transferring data within your organization but across borders may be subject to regulation. Ensure that your team views compliance as an ongoing effort, regularly conducts audits, and applies current best practices.
- Create data safeguards – “It is essential to implement technical and organizational safeguards to protect your data transfers and sharing from any unauthorized access, use, disclosure, modification, or loss,” advises LinkedIn, along with suggestions such as using encryption, anonymization, access control, and data minimization.
- Consult data compliance professionals – Seek counsel from legal and trade compliance experts when in doubt. Refrain from initiating a transaction until you fully understand your legal obligations.
Yes, creating in-house standard operating procedures that prioritize compliance and data security is critical. Investing in cutting-edge compliance software can centralize the process.
Data Transfer Compliance Software
OCR Global Trade Management provides scalable compliance software for your business. Our end-to-end solution can help you maximize efficiency without compromising on security at every stage in the import/export lifecycle. Our full suite of compliance tools makes it easy for your team to prioritize compliance, detailed recordkeeping, and data security.
Learn more about how to get on the path to full trade compliance.
