Businesses embark on international expansion for the allure of new markets. At the same time, expanding to new markets adds a new challenge of managing cross-border data transfers. Navigating the complex landscape of global data privacy regulations is paramount to safeguarding sensitive information and maintaining customer trust.
In this article, we outline practical strategies for navigating increasingly complex requirements.
Understanding Cross-Border Data Transfers
Cross-border data transfer involves the movement of personal data across national boundaries. This is essential for global operations, enabling seamless communication, customer service, and data analytics. However, it also introduces significant challenges related to privacy, security, and regulatory compliance.
Privacy Risks in Cross-Border Data Transfers
One of the primary concerns is the variation in data protection laws across countries. Each nation enforces its own set of regulations, which may differ in terms of data handling, storage, and transfer protocols.
For instance, the Personal Data Protection Act 2012 (PDPA) in Singapore requires organizations to ensure that any personal data transferred overseas is accorded a standard of protection comparable to that under the PDPA. Businesses must implement legally enforceable mechanisms, such as contracts or binding corporate rules, to safeguard personal data when conducting cross-border transfers. The Personal Data Protection Commission (PDPC) has the authority to investigate breaches and impose financial penalties, reinforcing the importance of robust compliance measures. Notably, in a 2023 enforcement decision, the PDPC fined a company S$58,000 for failing to protect user data in a cross-border data breach incident, highlighting the need for businesses to assess and manage their global data handling practices.
The Privacy Commissioner for Personal Data in Hong Kong highly recommends data users to adopt multiple measures so as to enhance protection when data is to be transferred outside of Hong Kong, including adopting recommended model clauses in data transfer agreements. This is said to be the minimal requirement in order to fulfil a wider range of duties that are on the way to be implemented. In general, data users should be mindful of their obligations under the existing legal regime, including the duty to explicitly inform data subjects of the classes of persons to whom the data may be transferred, obtain prescribed consent when there is a change of use, adopt contractual or other means to prevent any data from unauthorised or accidental access, process, erasure or loss, etc.
Under the PRC Personal Information Protection Law, the cross-border transfer of personal information is subject to stringent compliance requirements that vary based on volume and sensitivity of the data. Personal information processors must adhere to one of the following three specific mechanisms as applicable for transferring personal information outside China unless the transfer falls under one of the exemption scenarios outlined by the law: passing security assessment by the Cyberspace Administration of China, use of standard contractual clauses, or obtaining personal information protection certification. Non-compliance can lead to a range of sanctions, including but not limited to administrative fines of up to RMB 50 million or 5% of the previous year's annual revenue for the most serious offences, confiscation of unlawful income and even criminal sanctions against responsible entities or individuals.
The European Union's General Data Protection Regulation (GDPR) imposes strict requirements on data transfers to non-European Economic Area (EEA) countries. One unique requirement under the GDPR is that, if the European Commission has recognised the particular non-EEA country as providing adequate protection (known as "adequacy decision"), data transfer to that country does not require any specific authorisation. Data transfers to non-EEA countries without any adequacy decision are permitted where appropriate safeguards (such as standard data protection clauses adopted by the European Commission) have been provided for, and on condition that enforceable data subject rights and effective legal remedies for data subjects are available. Non-compliance can result in substantial fines, as evidenced by the €1.2 billion penalty imposed on a major tech company in 2023 for unlawful data transfers to the United States.
These examples show that businesses operating across multiple jurisdictions cannot assume that compliance in one country guarantees compliance elsewhere. Understanding and adapting to each country's specific requirements is crucial to mitigating risks and avoiding regulatory scrutiny.
Lessons from a Multi-Jurisdictional Data Breach
For further illustration, reference is made to a data breach incident involving a Singapore-based online marketplace with operations across multiple countries.
In 2022, the online marketplace experienced a data breach that exposed the personal information of millions of users, including over 324,000 in Hong Kong.
The company operated under a centralised model, where its Singapore entity controlled the system infrastructure and database used by various regional entities. However, when the breach occurred, both the Personal Data Protection Commission (PDPC) in Singapore and the Hong Kong Office of the Privacy Commissioner for Personal Data (HKPCPD) conducted independent investigations.
The PDPC found that the Singapore entity had breached its obligations under the PDPA by failing to implement adequate security safeguards, leading to a S$58,000 fine. Meanwhile, the HKPCPD determined that the Hong Kong entity, though relying on centralized data systems, was still responsible under Hong Kong's Personal Data (Privacy) Ordinance (PDPO). HKPDPC issued an enforcement notice requiring the company to rectify its data protection measures.
This case underscores several key points:
- Centralising resources in one country does not necessarily absolve regional entities from compliance obligations under local privacy laws.
- Different jurisdictions have distinct definitions of data responsibility, requiring businesses to adapt to varied compliance frameworks.
- As operations expand across borders, the complexity of regulatory compliance increases, necessitating robust governance mechanisms to mitigate risks.
Compliance Strategies
Businesses should consider the following strategies with a view to formulating a global compliance framework:
- Data mapping: Identify the types of data being collected and determine where they are stored and how they are processed. Data mapping helps businesses in effectively managing their data and in risk assessments so that only necessary data is transferred. This would in turn assist in complying with, for example, data localisation requirements, which typically require businesses to store and process data to be stored and processed in the country of origin.
- Data Transfer Agreements (DTAs) / Binding Corporate Rules (BCRs): As appropriate, enter into legally binding DTAs with businesses or customers setting out the terms under which data is transferred across different jurisdictions and/or develop and implement BCRs as a framework to ensure all entities within a corporate group adhere to consistent data protection standards. DTAs / BCRs facilitate lawful data transfers across borders.
- Robust security measures: Implement advanced security protocols, including encryption and regular security assessments, to protect data during transfer and storage. Regular audits and updates to security measures are essential to address emerging threats.
- Regular compliance audits: Conduct periodic reviews of data handling practices to ensure ongoing compliance with international regulations. Staying abreast of legal developments in data protection laws across all operating regions is crucial for proactive compliance.
Global strategy, local execution
While the risks arising from cross-border data transfers are multifaceted, proactive measures can help mitigate them significantly. Establishing a comprehensive global compliance framework that is also sufficiently adapted to local regulatory requirements is essential. Such an approach not only ensures legal compliance but also fosters trust with customers and partners worldwide.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
