Cross-Border Compliance Issues Flashcards

Under the Foreign Account Tax Compliance Act (FATCA), what obligation does a foreign financial institution (FFI) have regarding US account holders?

Answer: FFIs must report US account holder information to the IRS or withhold 30% on certain US-source payments

FATCA requires FFIs to identify and report US account holders' financial information to the IRS or face a 30% withholding tax on certain US-source income.

A company operating in a country with strict data localization laws (e.g., Russia's Federal Law 242-FZ) must ensure that:

Answer: Personal data of Russian citizens is stored on servers physically located in Russia

Russia's Federal Law 242-FZ requires that personal data of Russian citizens be stored and initially processed on databases located within Russian territory.

Which international standard provides a framework for anti-bribery management systems that organizations can implement to demonstrate cross-border compliance efforts?

Answer: ISO 37001 (Anti-Bribery Management Systems)

ISO 37001 is the international standard specifically designed for anti-bribery management systems and is recognized by enforcement authorities worldwide.

A US company's foreign subsidiary in Country Y is subject to a local law that requires paying a 'facilitation fee' to customs officials to release goods. Under the FCPA, this payment:

Answer: May qualify for the narrow FCPA facilitating payments exception only if it expedites a routine governmental action

The FCPA provides a narrow exception for facilitating payments made to expedite routine, non-discretionary governmental actions, though this exception has been narrowly interpreted.

The Common Reporting Standard (CRS) developed by the OECD requires participating jurisdictions to:

Answer: Automatically exchange financial account information between tax authorities of member countries

CRS is an OECD framework under which participating countries automatically exchange financial account information to combat global tax evasion.

A supply chain compliance audit reveals that a third-party supplier in Southeast Asia uses forced labor. Under US law, which provision most directly prohibits importing goods made with forced labor?

Answer: Tariff Act of 1930, Section 307

Section 307 of the Tariff Act of 1930 prohibits importing goods manufactured wholly or in part with convict, forced, or indentured labor into the United States.

When conducting cross-border due diligence on a target company in an emerging market, which red flag most directly indicates potential FCPA exposure?

Answer: The target uses undisclosed third-party agents to win government contracts and cannot document their fees

Undisclosed third-party agents receiving unaccounted fees to secure government contracts is a classic FCPA red flag indicating potential bribery through intermediaries.