New regulatory challenges for a changing digital world

In 2025 and beyond, the regulatory framework in which international businesses operate will become ever more complex. 

This eBook outlines some of the key challenges cross-border entities must confront. It offers insight into the nature of each challenge and is designed to give you a starting point in understanding whether your business’s operations require improvement as your international growth continues.   

We trust you will find it valuable as you embrace an exciting new future. 

Michael Sheehy 

Chief Compliance Officer, Payoneer 

About the author

Jani Gode is Payoneer’s Chief Compliance Officer. She is also a Certified Anti Money Laundering (AML) Specialist and Financial Crimes Specialist. Jani has 20+ years of experience managing risk and regulatory compliance for financial institutions.

Currently, she serves as the head of Payoneer’s AML and KYC programs.

In this ebook, Jani discusses the challenges that companies face regarding multijurisdictional regulation. This is done from the perspective of a prospective payout provider. 

Jani explains how global companies can navigate the world of compliance. 

Global trends to monitor and prepare for

As the world changes at speed, regulations are struggling to keep pace. Lawmakers around the world are faced with a constant battle. They must create the legal frameworks necessary to ensure business-friendly environments. But they must do so while enabling the changes needed to tackle international challenges such as climate change. According to Deloitte, eight main trends are driving global regulatory changes:

• Creating a sustainable economy, with a focus on meeting climate pledges, developing ESG disclosures, and increasing the scrutiny of greenwashing. 
• Managing climate-related risks, including scenario analysis and capturing nature-related risks. 
• Innovation, driven in large part by the emergence of new digital business models and crypto assets. 
• Operational resilience that embeds consistency and efficiency in international firms, as well as addressing operational vulnerabilities. 
• Regulatory structure, with firms needing to prepare for revisions to data privacy laws and the existing AML framework.  
• Value for money, with the principal of fairness embedded into consumer price calculations considering the value being delivered in the given product or service. 
• Financial crime, with more enforcement action expected for banks who fail to improve their AML/CTF processes. 
• Updates in governance frameworks, particularly in areas of complex business environments and with regards to climate, diversity, and inclusion. 

More than a legal requirement

It’s important to remember that regulations also have cultural components. For example, not every country has street addresses like those in the U.S. In Costa Rica, a house is identified based on local landmarks and descriptors. Collecting that kind of information isn’t difficult, but verifying it is extremely challenging for foreign companies. 

Other regulations require that a company makes a ‘reasonable effort’ to mitigate certain risks, but the way a government defines ‘reasonable effort’ can vary significantly from region to region. This is where deep local knowledge becomes a vital resource. 

Finally, it is crucial to understand digital IDs, which have advanced rapidly during the pandemic. Government-issued digital IDs can present challenges when it comes to assessing their authenticity. And because not every regulator accepts digital IDs, having a firm grasp of different jurisdictional requirements is key.  

Understanding local differences: translation isn’t enough

To address the many ways in which compliance must be adapted across various geographies, Payoneer invests in our large international community. We have touchpoints across many jurisdictions, and hands-on experience in these regions. We also have highly tailored tools; you may need to work with a small company in China that specializes in domestic ID verification, or an agency in Japan that will help you mail required codes to new payees. When looking at local laws, translation isn’t enough. You need a local perspective to be able to identify and interpret the grey areas.  

It’s also not enough to interpret regulations in a literal way; you need to consider best practices and common sense. Consider, for example, multiple customers with the same IP address or PC. When a group of people is using the same computer, this could be flagged as fraud. A company could shut down these payees and this activity. However, there locations where shared computer usage is common, and then the story changes; it may be multiple users in an internet café. A red flag in one country shouldn’t necessarily be interpreted the same as in another. A deep understanding of country-specific nuances and the spirit of the law is crucial to being able to serve the needs of your customers without sacrificing safety, security, or compliance. 

Finally, the growing use of cryptocurrency is also adding even more complexity between different jurisdictions. Some, such as China and Pakistan, strictly prohibit the use of cryptocurrencies. Others, such as the United States, take a more permissible and free-market view. Care needs to be taken to understand these practices in at a jurisdictional level. 

Regulating ecommerce: Balancing risk with bureaucracy

Regulation becomes even more challenging when it comes to eCommerce. Regulation is still behind in this area, and while some payment companies choose to become licensed, some do not, which can lead to an unlevel playing field and pose risk to the ecosystem. In addition, marketplaces that act as an intermediary between a buyer and a third-party seller may be labeled as Money Transmitters if they touch the funds; even if they don’t see themselves as offering financial services. It’s a designation many try to avoid as it brings with it a number of challenges; including difficulty obtaining and keeping bank accounts and the increased cost of maintaining compliance. Because of this lack of clarity, there are loopholes to be found that money launderers will exploit. Companies without compliance programs, whether required or voluntary, are putting themselves at significant risk for abuse. 
 
Further, if you dip into technicalities, you find several problematic issues; for example, all US businesses are technically required to comply with OFAC regulations, yet you’ve never seen a grocery store clerk pull out a list of sanctioned individuals or countries before ringing up a shopper. However, if you’re a massive online food retailer, you’ll certainly be expected to check on a farmer with whom you’re carrying out large transactions abroad. This example may seem absurd, but businesses face a similar conundrum. They may not be expected to meet regulations now, but if they grow or if they plan to go public, they most certainly will fall under legal scrutiny. They must consider how they will handle it.  

New rules for new business

We see a lot of new and innovative business lines that arise on the internet – companies like Airbnb, Rakuten, Tradedoubler, or Upwork, for example. In many cases, they’re operating under a totally new business model which creates a host of new questions and challenges. 

At Payoneer, we are often exposed to these new businesses early on because we handle their payments. It is critical to quickly understand how old business models transition to the internet, what the new fraud schemes are, and how money laundering finds new paths. To build good monitoring programs, you must first identify areas of risk correctly.  

It is also no longer about processing payments for goods or services. On livestreaming platforms such as Bigo, Tiktok, or Yoho, creators are receiving financial ‘gifts’ from their viewers as well as traditional sponsorships. These new types of business model create new risks. In turn, that means new monitoring or due diligence will be essential to ensure all created content is legal. 

For these reasons, companies that are operating in the new digital economy cannot rely on yesterday’s regulatory programs and experts. They need to make sure their risk and regulatory capabilities are innovative and agile enough to adapt to new types of threats. For most firms, it’s challenging to even begin to find the right expertise and the type of investment that this requires is prohibitive. It makes more sense to rely on companies like Payoneer, who are experts in this space and who have the experience in understanding how regulations apply to the changing digital world. We’re constantly investing in new processes and technologies that help our clients navigate the complex landscape of multijurisdictional compliance.

About Payoneer

Payoneer Inc. is a registered Money Services Business (MSB) with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), and has obtained the proper State-level Money Transmitter licensing in every State where it is required. As a U.S. entity, Payoneer complies with OFAC, and the requirements of the Bank Secrecy Act (BSA).   

In addition, Payoneer has regulated companies around the world.  Payoneer EU is a regulated Electronic Money Institution that has passported its license across the entire EU. Payoneer is also an Online Payment Gateway Service Provider in India, has a Money Service Operator License in Hong Kong, is a Funds Transfer Provider in Japan, is a Money Service Business in Canada, is licensed by the Australian Securities and Investments Commission (ASIC) to deal in non-cash payment products, and is PCI DSS Level 1 compliant. 

Manage your global payments with Payoneer

State-of-the-art technology. Automate your user payments flow, pay less for your transactions, access flexible online reports, guarantee the integrity of all your payment traffic…and much more. 

Trusted global partner. We are experts in international payments and make sure your transactions meet the requirements of every country you send money to. Know you’re in safe hands with our secure and tightly audited payments platform. 

Around-the-clock care. Your payees will be served by in-house multi-lingual customer care team freeing up your time from dealing with payment related issues and reducing overheads. You will get expert integration support, followed by personal account management support and marketing support. 

Strong global ecosystem. Connect with our ecosystem of millions of professionals and businesses around the world, through our events, promote yourself online, discover new markets, and scale your business in target markets. 

Contact us: 

Contact our team for a free, easy demo 

partnersales@payoneer.com