A trial date provides a timely reminder to Singapore firms

On August 8^th two foreign nationals will stand trial in China accused of illegally purchasing personal information about Chinese Nationals. This is a timely reminder to Singaporean companies conducting due diligence outside of Singapore to exercise caution.

The case concerns a UK National Peter Humphrey and his wife, Yu Yingzeng, a US citizen. When they were arrested in August last year Xinhua news agency reported allegations that “The couple illegally trafficked a huge amount of personal information to seek profits via registering so called research companies in Hong Kong and Shanghai.”

It further reported “that more than 10 reports seized by police were found to have infringed on Chinese citizens’ rights of privacy.” They have been held in custody since their arrest.

Beyond the shores of Singapore business practices are often not as transparent or fair as they are at home. A look at Transparency International’s 2013 Corruption Perception Index shows that several neighbouring countries rank poorly in global terms.

These include some of the most attractive markets for Singaporean companies looking for growth. Out of 177 countries, China ranks 80^th; Philippines, a country that has shown significant improvement in its ranking in recent years, comes in at 94^th; Indonesia and Vietnam are in 114^th and 116^th position, respectively; and Myanmar, the “hot market” of today, lies in 157^th place. Compare these positions to Singapore’s 5^th place slot. 

Effective due diligence is essential for any company considering an investment in a joint venture, an acquisition, or appointing an agent or distributor. This should include background checks on the potential partner to be sure they conduct business in a manner that is not going to hurt your company’s reputation or bottom line in the future.

These enquiries should not be limited to the company but should extend to include key decisionmakers within the company. And this is where it is easy for unwary to fall foul of privacy laws that countries have enacted to protect their citizens.

Asia Pacific has seen a rapid increase in legislation covering privacy rights recently and companies that use, store, or handle personal information face stricter compliance standards. Singapore passed the Personal Data Protection Act in 2012. The main provisions regarding data protection came into effect on July 2, 2014.

Compared to European countries, the Singaporean legislation takes a business-friendly approach, but the Data Protection Commission can issue fines up to S$1 million for violations.

Organisations should also note there are laws in several countries including Australia and South Korea regulating the transfer of personal information across national boundaries. So personal information legally gathered in one country could become illegal when sent abroad.

What lessons can be taken from the upcoming case? It should be clear that no company should conduct their own background research; this is a job for a knowledgeable professional.

Singaporeans should work closely with the company they select to conduct sensitive background checks to understand the privacy laws in their target country. Make sure you understand what information can and what information cannot be legally obtained and how it can be used. With this knowledge you can plan your due diligence effectively and legally.