GDPR and Global Debt Collection

As of May 25, 2018, the GDPR became enforceable. It affects business worldwide and has had a permanent impact on compliance and due diligence.

What does GDPR mean? And how does GDPR affect global debt collection?

What Does GDPR Mean?

GDPR Debt RecoveryGDPR is the abbreviation of “General Data Protection Regulation”. GDPR is a regulation that requires businesses to protect the personal data and privacy of citizens of the European Economic Area (EEA) for transactions that take placewithin the EEAmember states, as well as the transfer of personal data outside the EEA. The EEA includes all countries of the European Union plus Iceland, Liechtenstein and Norway.

The GDPR contains provisions and requirements related to the processing of personal data of individuals. Any company that stores or processes personal information about EEA citizens must comply with the GDPR, even if they do not have a business presence in any of the EEA member states.

The specific criteria for companies required to comply are:

  1. Companies that have apresence in an EEAcountry;
  2. Companies without apresence in the EEA, but whichprocesses personal data of residentsof EEA members;
  3. Companies with more than 250 employees;
  4. Companies with lessthan 250 employees but whosedata-processing impacts the rights and freedoms of data subjects.

In reality, this means that the GDPR covers almost all companies that process personal data of individuals being citizens or residents of any of the EEA members.

How Does GDPR Impact International Debt Collection?

Debt collection agency typically process information, in order to provide their debt collection services. This is especially the case for debt collection agencies dedicated to B2C collections, but it may also cover B2B collections, if the data that is processed contains personal information of individuals.

It impacts international debt collection, if there is a transfer of data from a creditor to a(n) (international) debt collection agency, or from one debt collection agency to another (foreign one), and if the data is related to an individual being a citizen or a resident of any of the EEA members, or if in any other way a collection agency is collecting a cross border claim with personal data of a citizen or a resident of any of the EEA members involved.

Stay Compliant: Having A GDPR Policy In Place

GDPR debt collection protocolsThe so called “data controllers”and “data processors”of personal data must put in place appropriate technical and organizational measures to implement the data protection principles. That also goes for debt collection agencies active in international debt collection, whereby the creditor or the sending debt collection agency is the “data controller” and the receiving debt collection agency the “data processor.

The GDPR basically definesseven key principles, to be taken into account by companies when putting together a protocol for processing personal data of EEA residents:lawfulness, fairness and transparency; purpose limitation; data minimization; accuracy; storage limitation; integrity and confidentiality; and accountability.

The GDPR protects the following information, and technical and organizational protocols should take them into account to build the appropriate GDPR-proof protection mechanisms:

  1. Basic identity information such as nameand last name, address and ID info;
  2. Web data such as location, IP address and cookie data;
  3. Health and genetic data;
  4. Biometric data;
  5. Racial or ethnic data;
  6. Political opinions;
  7. S$xual orientation.

The General Data Protection Regulation(GDPR) requires businesses to protect the personal data and privacy of citizens of the European Economic Area (EEA). The GDPR impact international debt collection, since there is a transfer of personal data from the creditor or a local debt collection agency, to another (foreign) debt collection agency. It is important for the international debt collection agency to be compliant and to have a GDPR policy in place.

If you want to know more about international debt collectionin general, and debt collection in Latin America and the Caribbean in particular, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni

KYC Policies in Global B2B Collections

In global business, as part of compliance, it is essential to have a so called “Know Your Client” (KYC) policy in place.

For debt collection agencies that operate in international B2B collections, it is important to understand the nature and background of its clients and the debts the agency handles.

Often the debt collection agency’s client is the creditor of an outstanding debt, but not always. Sometimes, the debt collection agency represents another, foreign collection agency and hence the client’s client is actually the original creditor.

How does this affect a debt collection agency’s KYC policy? 

Definitions of KYC and KYCC Policies

Let’s first define KYC.

As per Wikipedia, KYC is the process of a business verifying the identity of its clients and assessing their suitability, along with the potential risks of illegal intentions towards the business relationship.

KYC also enables businesses to better understand their customers, the kind of business they run, and the transactions they carry out.This helps company to mitigate risk.

KYCC policies debt recoveryInformation a company may look for to receive from their clients includes:organization charts(containing the full legal name, the registered address, description of business activities, and extract from a formal register, like the Chamber of Commerce); details of the Ultimate Beneficial Owner(s) (UBO(s)); the source of funds and / or wealth of the client and its UBO(s); and public office or government position(s) held by the UBO(s).

 In addition, there is also Know Your Client’sClient (KCC).KCC is a verification process that identifies a client’s client activities and nature.

Global B2B Debt Collection: KYC, KYCC & Key Case Information

Debt collection agencies operating in international business, should have a KYC policy in place, which stresses the understanding not only of the client and their business activities, but also the specific cases or sorts of claims the debt collection agency is hired for to collect.

In addition, in those cases in which a local debt collection agency acts on behalf of another, foreign debt collection agency, it is important to know their client’s client and their business activities; and therefore, have a KYCC policy in place as well (as part of the KYC policy).

Key Case Information Debt CollectionFinally, the international debt collection agency should understand the nature of each case it handles. Key case information may consist of: a detailed breakdown of the debt; the full legal name, registered address and business activities of the debtor, as well as key contact persons (which may include the signatory parties or owners); and all supporting documents in connection with the claim, including but not limited to, contracts, invoices, order forms, order confirmations and (relevant, email) correspondence.

In international B2B debt collection it is important to implement a KYC policy. Since in international collections, the debt collection agency often acts as third party as representative of another, foreign debt collection agency, such policy should include KYCC verification. Also, part of the compliance process should be to receive and verify certain key information of the case(s) the debt collection agency will handle.

If you want to know more about international B2B collectionsand compliance, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

David Zannoni

5 aspects of company research in Latin America & the Caribbean

Whether you are at the verge of starting a business relationship with a Latin American or Caribbean company, or you have a claim on a business in Latin America or the Caribbean:  it is fundamental to gather the appropriate information about your business relationship.

You should always ask your business partner for basic information including corporate structure, tax numbers, commercial referrals and identification documents of its principals. This information may turn out to be vital later on in the business relationship, as you just never know when you start doing business if there will be concerns or claims, or if simply such information will be required in connection with for example credit insurances or logistic purposes.

In addition to what your business relationship provides from their own sources, you can do your own independent company research as part of your due diligence and compliance procedures for Latin America and the Caribbean.

There are companies specialized in providing B2B information research services, and servicing specifically international companies. Often such companies operate in account receivables or debt collection sectors.

Below is some of the information list we recommend each foreign company that does business in Latin America and the Caribbean, to search for.

The company’s corporate structure

What type of a company is your business relationship? Is it a sole proprietorship or is it an incorporated business with limited liability? When was the company founded? Where is the company registered and to which national and local jurisdiction(s) is your relationship subject? All very important information to determine the legal nature of your business relationship.

Assets and financial situation of the company

How much is the starting capital of your business relationship? Are there financial statements available or deposited at local registries or chambers of commerce? Which are the principal assets of the company? Does it possess real estate and is there any lien on such properties? Is there any information on your relationship’s payment behavior available? This information might be essential for providing credit lines and for any future claims on your business relationship in Latin America or the Caribbean.

Your business relationship’s commercial activities and operations

Which are the principal commercial activities of your business relationship? Where does these activities take place; which is or are the principal place(s) of business? Is there information available on providers or vendors? Does your business relationship represent any other foreign businesses? Are there commercial referrals or testimonials available concerning your business relationship? This information is essential to get a feel of performance of your relationship, before you enter into a deal or to compare with your experiences.

Executives and owners of the company

Who are the main executives of the company? And who are the owners, the shareholders or otherwise the principles? Do they have any links to other businesses and is there any information on them available, or referrals or testimonials? Be sure you gather this information as these people will be the ones who eventually take the decisions on your business relatonship’s end.

Legal information and law suits your business relationship is involved in

Is there any legal information available on your business relationship, like lawsuits? This information may provide you with indications on possible defaults, amongst others, or otherwise legal conflicts your business relationship in Latin America or the Caribbean is involved in.

We recommend international companies that do business in Latin America to assess the following information on (potential) business relationships in Latin America and the Caribbean: the corporate structure, assets and financial situation, commercial activities and operations, executives and owners, and legal information and law suits.

Cobroamericas is a boutique service providers offering debt collection, credit consultancy and company research information services to international companies doing business in Latin America and the Caribbean.

If you are interested in doing a company research in Latin America or the Caribbean, please connect with Cobroamericas on Linked-In or follow us on Twitter.

To participate in the conversation about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

 

Due Diligence In Latin America: Prior To Debt Collection

The issues we deal with in international debt collection in Latin America often could have been flagged, avoided or dealt with before companies actually started to do business.

due diligence procedure Latin AmericaHaving proper due diligence and compliance procedures in place for your international operations in general, and in our context of Latin American debt collection, in particular with respect to business transactions in Latin America is key to substantially reducing the financial risk and avoiding overdue accounts at a later stage.

Due Diligence in Latin America may seem challenging

For foreign businesses it might be challenging to perform due diligence and compliance procedures in Latin America. The reasons might be:

  1. Lack of access to information and transparency in Latin America;
  2. Resistance from local business partners in Latin America;
  3. Cultural differences and other languages spoken between your company and your local business partner;
  4. Limited in-house knowledge on Latin American business culture, languages, geography, socio-economic and political circumstances, amongst others;
  5. The often informal nature of economy and business in Latin America;

What does Due Diligence in Latin America mean?

Before starting to do business in Latin America, and to mitigate financial risk, reduce overdue accounts later on and hence optimize positive economic results, it is important for foreign businesses to:

  1. Understand the socio-economic reality of the Latin American country or countries you do business in;
  2. Be aware of political circumstances and potential (in)stability in the Latin American country or countries your business partners are based in;
  3. Understand local legal and administrative requirements and regulations your business sector is subject to, locally in Latin America;
  4. Know your client: get familiar, inside-out, with the company you do business with – its officers and their backgrounds and connections, the financial side, assets, business activities and performance and local clients;

Due Diligence in Latin America: what the focus on

So what to focus on when you do your due diligence in Latin America?

Here is a check list you can follow:

  1. How does your business and your local business partner comply with local regulations and which local regulations are applicable to your business and your local partner?
  2. Financial due diligence: what is your local business partner’s financial situation and is it currently in a position to pay its financial obligations, and, based on future development, will it continue to be so?
  3. Accounting due diligence: how does your business partner comply with local and international accounting standards?
  4. Legal due diligence: what is your exposure as to contracts entered into with your local partner and other parties, and potential litigation?
  5. Documentation assessment: in connection with the above, which documents are required locally and international to complete the business transaction, collect on (overdue) invoices and, in the worst case scenario, legally enforce payment of overdue invoices, locally? Documents that might be taken in consideration are contracts, order forms and confirmation, shipping bills, invoices, amongst others;
  6. Judicial check: has your business partner had any warning letters, fines, civil penalties, audits or other enforcement actions, or is your business partner, or any of its officers, otherwise involved in legal actions or lawsuits?
  7. Background check: get to know as much as possible about your business partner and its officers, and their backgrounds and connections, (business) activities, performance and local clients and partners;
  8. Local partners and specialists: make sure you engage the right local partners and specialists who can help you with the due diligence and compliance, and otherwise any accounting, administrative or legal issues that might come up. Such partners and specialists could be business advisors, law firms or local representatives.

Reduce the need for Debt Collection in Latin America: do your Due Diligence!

Due Diligence Latin AmericaIn order to avoid debt collection issues later on, it is important for foreign business to do proper due diligence and compliance in Latin America before closing business transactions. The objective is to understand the socio-economic reality of the Latin American country you do business in, its political environment, local legal and administrative requirements and regulations, and to know your client inside-out.

This post does not provide a legal opinion nor a completely summary in any way. When you do business in Latin America, make sure you engage local advisors, partners and law firms to make sure that your due diligence and compliance procedures are in proper shape for your business operations and transactions in Latin America.

Cobroamericas is a provider of international debt collection services and focuses on collections in Latin America and the Caribbean. If you are interested in learning more or discussing issues in connection due diligence and compliance procedures in Latin America, potentially in connection with international debt collection in Latin America and the Caribbean, please connect with Cobroamericas on Linked-In or follow us on Twitter.

To participate in the conversation about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.