Over the past decade, global compliance has evolved from being treated as almost an afterthought by organizations to becoming seen as integral to growth strategy and operational success.

In this week’s CT Expert Insights, Antonio Soler, Vice President and Head of Global Services at CT, describes the worldwide trend towards more regulation on a range of issues, including anti-money laundering, anti-bribery, and data protection. There are also increasing penalties for noncompliance that companies need to be aware of, which can not only impact an organization financially but also negatively affect their reputation and ability to do business.

Soler provides tips on how to efficiently and effectively tackle the challenge of global compliance and gain better oversight for all a company’s entities around the world. 

TRANSCRIPT

Greg Corombos: Our guest this week on Expert Insights is Antonio Soler. He is the Vice President and Head of Global Services at CT Corp. And on today's conversation, we're going to be looking at the basics of global compliance. Why is it important to have all of this well understood before your company starts branching out into other nations? And Antonio, thanks so much for your time today. We greatly appreciate it.

Antonio Soler: Thank you.

Greg Corombos: Great. So let's talk about just the importance of it. Why is it so important to understand compliance really, really well, before you start dealing with other nations?

Antonio Soler: Until about 10, 15 years ago, I think global compliance was not that important. And the reality is that many companies operated around the world and I would say were quite lackadaisical about their compliance, especially at the local level. But those countries with the...especially with the focus on tax and fiscal matters around the world have started to clamp down. And therefore, the penalties now for noncompliance have increased pretty dramatically over the past 10 years or so. And, to make matters worse, it's not just a financial impact that it can have on the company. But it can also have an operational and reputational impact.

Operationally, for example, if you haven't complied with all the local legislation and aspects that may exist in a particular country, you could find your business itself being shut down. Or you could find some kind of impediment being put in place to pay your employees. And all of those can have, as you can imagine, pretty serious impact on your local operations. And of course, reputationally, the reality is that noncompliance hits the media and the company’s brand, which often is one of their most prized assets, can be negatively affected in a particular country for a simple misstep, or oversight, which can be quite common and now has serious implications.

Greg Corombos: We're talking with Antonio Soler, Vice President and Head of Global Services at CT Corporation. And so let's talk about some of the challenges. Not only that global compliance is challenging because different countries have different compliance that you have to be following here. But it's also becoming increasingly so. In other words, more diverse and perhaps in a lot of different places, more things to keep track of. So how do you keep track of it all?

Antonio Soler: Well, that's where I think working with a service provider that has the knowledge, both at the local level, but also the ability to give a consolidated view of the situation to the clients, is so fundamental. The business model that I think has been the traditional business model, is a firm that operated internationally, would probably contact their law firm in the U.S., who would, in turn, have a local branch in the country in question or would have some correspondent firm that they would work with. And as they branch out into more and more countries, they're basically working with more and more different providers. And it becomes the company's responsibility to somehow keep track of what is going on in all those countries.

Today, there are firms who are dedicated to just that, to providing a single one-stop shop for global compliance, who both have the service level that a large multinational may need, and also has the tools, the technological tools specifically, to give that level of oversight. And, frankly, finding a provider that has the service, the tools and the knowledge, the content, about what is going on the local country these days has become absolutely critical. And to make matters perhaps, slightly more complex for those who are already operating or who are already operating internationally, very often you have countries that pass changes in legislation or in regulation, and they can do it retroactively. So again, it becomes a challenge not just to keep on track with what is happening in the future, but often to re-stake what you may have done in the past. And falling behind or not keeping up with local legislation can be very punitive.

Greg Corombos: Antonio, there are obviously changes in law, there's change in different regulations as well that need to be addressed. And those can certainly change even more frequently than laws, because you've got different officials that can kind of tweak those by their own decision making. And so those can constantly be in flux and become even more complex. What are some of the ones that folks really need to keep track of, regardless of where they're setting up shop overseas?

Antonio Soler: Yeah, that's absolutely right, Greg. I think, you know, the last 10 years, as I said, we've seen a real clamp down on regulations and issues such as anti-money laundering, anti-bribery, the global data protection regulation GDPR. All of these issues fall under the banner of KYC and compliance. And, you know, in the past, were restricted to some of the most regulated entities out there. And today, it's becoming business as usual for those non-regulated entities.

So firms that are really just operating in a non-regulated environment find themselves having to comply with the local legislation in order to be permitted to operate in that country. It is the reality, you know. Whether it's good or bad, I think is a separate discussion. Today, the trend is towards more regulation. Perhaps 20 years ago, it was the opposite. And it may turn around and swing the other way in the future. But for now, this is our reality. And if any organization that wants to operate globally has to make sure that they are aware of what the anti-money laundering or anti-bribery regulations are, as well as the recent data protection, and other regulations that have come in.

Greg Corombos: So especially in an era of additional regulations, it would seem that having a comprehensive handle on what you're dealing with, whether it's region to region, country to country, or some other level, that a fragmented approach to getting ready for compliance in all these other countries is not going to get the job done for you.

Antonio Soler: That is absolutely right. One can get away with it perhaps for a little while. But again, with so much complexity, with so many changes happening so rapidly, it's unlikely that you will have the comfort that you would want if you were a Chief Compliance Officer, or a general counsel, to be able to go to your shareholders and say that everything is under control.

Greg Corombos: Let's take a look at what compliance actually looks like and what the penalties are for not doing it in different places. And I'm guessing that the consequences will vary from place to place. But let's start with that just to get everyone's attention. What kind of penalties could you as a business owner, or more importantly the firm, face for not being in compliance, or not even knowing what to be complying within some of these places?

Antonio Soler: The horror stories that one hears, you know, are often quite frightening, but should not be ignored. And so, perhaps we give you an example without using any specific names. The tradition, I would say, especially for U.S. companies, that is to name their senior management as the directors of all their international entities. And so if there is a situation in a particularly punitive country, whether it be a Brazil or France or in Italy, or wherever it may be where the legislation can be quite punitive. And that local entity is not compliant, or has not filed their taxes or has had some kind of situation that has not been dealt with properly at the local level. That director again, a U.S. individual who may be completely unaware of what is occurring in that country could find themselves, when entering that country, either being stopped or potentially arrested. And very simply, you know, their lives can be made incredibly difficult for something that they had no control over. Furthermore, in many of these countries, this is the terrifying thing, especially for those of us in the U.S. who are used to operating behind the corporate veil, non-compliance also means that the directors can have their personal assets seized if there is a particular issue. And that, as you could imagine, is a situation that nobody wants to be in

Greg Corombos: One of the most important areas of compliance in most other countries that you've got to have on your radar screen, even if you're hiring outside people to really help you make sure you're dotting all the I's and, and crossing all the T's. What does it look like in most other places, and does it largely look like it does here? Or is it quite different?

Antonio Soler: No, it is quite different. I mean, we're spoiled in the U.S. Because if you set up a corporation, or you set up an entity in the U.S., the obligations that you have on an ongoing basis are pretty minimal. You don't really need much in order to keep the company in good standing. You basically have to pay your taxes and report that you've done just that.

In other parts of the world you have to have shareholder meetings, you have to have minutes and shareholder meeting at that, you have to have resolutions signed off in the right way. Documents need to be apostilled, need to be notarized according to the Hague Convention. There are dozens and dozens of little subtleties that can be very different from how we do things here that need to be done. I mean, there are examples of minute books that are actually physical minute books, that have to be biked over to the local Chamber of Commerce, and entered into the register, so to speak, in order to make something official. And so again, depending on where you're operating around the world, you really need to ensure that you're working with a firm or a or a setup firm that know what they're doing.

Greg Corombos: Antonio, just a couple minutes left in our conversation here. And as you mentioned, a couple of decades ago, we saw less regulation. Now it seems like we're seeing more regulation in most parts of the world. How do you see compliance evolving here in the near future, whether we're talking about technological advancements, which make it a whole lot easier, hopefully, or world events, whether it's Brexit or something else going on around the globe?

Antonio Soler: Yeah, so this is one of those areas where we're a combination of technology and service and content can be so incredibly powerful. And that's because the reality is, is that compliance, and this is maybe not a popular thing to say, that compliance is really a hassle. It's something that we all just have to handle. And it's a checkbox exercise that needs to be taken care of. Therefore, having a, you know, a partner firm that has the technology to proactively inform you when certain obligations have to be handled or taken care of a compliance calendar, so to speak. That firm also being able to come to you with the format in which those compliance obligations have to be entered or handled is also fundamental. And when there are changes or any kind of legislative, bits of evolution, to ensure that their clients are informed of it becomes part of the package. And therefore, you know, if you look at the future, I think what you will see are firms that first of all specialize in compliance, which we're starting to see already. But perhaps most importantly, it's not just a service or throwing people at the problem, but rather giving their clients a technological tool that gives them the oversight over all of their entities around the world, with the right kind of compliance calendar that informs them ahead of time of what’s to be filed or what is necessary, and how it has to be done. And then that has the service to accompany those clients through the various obligations. Because as experienced as we all are, the reality is that things change, legislations change. And the way you file something in one year may not be the way you need to file it in the next year. So that kind of triple service level of technology, knowledge and service becomes the way I think it will be handled in the future.

Greg Corombos: A lot to keep track of. And we hope to dive into other areas of global compliance and in some future conversations. But what I think I'm hearing from, Antonio, as we close here, is that while there is a lot of things to keep track of here, the opportunities that are out there for businesses on a global scale, make it worth it. Especially if you take the time to put the plan in place to make sure you are in compliance. So definitely a time of optimism, even though there's a lot of responsibilities, too.

Antonio Soler: That's absolutely right, Greg. Operating in the world is no longer a question. I think it's mandatory for any global firm. However, focusing on things that are non-essential, such as compliance, should not be where the firms should be spending their time. They should be outsourcing it to a partner that just handles it. And that I believe, that partner with the right kind of technological tools is the future.

Greg Corombos: Fantastic. Antonio, thanks very much for your expertise and your time today. We greatly appreciate it.

Antonio Soler: Thank you, Greg.

Greg Corombos: Antonio Soler is Vice President and Head of Global Services for CT Corporation. I'm Greg Corombos reporting for Expert Insights.