Regulatory Arbitrage

5 automated security scanners

Service Delivery Jurisdiction Shifting

Purpose: The Service Delivery Jurisdiction Shifting Scanner is designed to identify potential regulatory arbitrage by detecting manipulation of access points, service routing optimization, and delivery pathway selection. This tool aims to uncover attempts to evade stricter regulations in one region by utilizing services or infrastructure located in less stringent regions.

What It Detects:

Subdomain Discovery for Jurisdictional Clues: Identifies subdomains that may be hosted in different jurisdictions, with a focus on cloud providers like AWS and Azure.
Breach Mentions and Incident Reporting: Searches for mentions of data breaches or security incidents to detect any attempts to shift jurisdictional responsibility without strict regulations.
Technology Stack Disclosure: Uncovers the technology stack components that indicate use of services in different jurisdictions, specifically noting cloud service providers like AWS, Azure, Google Cloud Platform (GCP), and container orchestration platforms like Kubernetes.
Certification Claims: Checks for claims of certifications more easily obtained in certain jurisdictions such as SOC 2, ISO 27001, PCI DSS, and HIPAA compliance.
News and Job Board Analysis: Analyzes news articles and job board postings to identify mentions of jurisdictional shifts or regulatory arbitrage, providing insights into specific regions or cloud providers used by the company.

Inputs Required:

domain (string): Primary domain to analyze (e.g., acme.com)
company_name (string): Company name for statement searching (e.g., “Acme Corporation”)

Business Impact: This scanner is crucial as it helps organizations understand their exposure to regulatory risks associated with jurisdictional shifts, enabling proactive measures to comply with local and international regulations, thereby safeguarding the organization’s reputation and legal standing.

Risk Levels:

Critical: Conditions that directly lead to significant compliance violations or severe data breaches are critical. These include unauthorized access disclosures and immediate compromises on the platform.
High: High risk conditions involve substantial exposure to non-compliance with regulatory standards, such as persistent use of uncertified services in sensitive sectors like healthcare (HIPAA compliance).
Medium: Medium risk conditions pertain to moderate exposure to regulatory risks, requiring attention for potential improvements in service provider certifications and incident disclosure practices.
Low: Low risk conditions are informational findings that do not pose immediate threats but should be monitored for trends or changes affecting the security posture.
Info: Informational findings include mentions of jurisdictional shifts in news articles and job board postings, which while not critical, provide context for ongoing regulatory compliance efforts.

Example Findings: The scanner might flag a company using subdomains primarily hosted in jurisdictions with weaker data protection regulations to avoid GDPR requirements, or identify a lack of disclosure regarding a significant security incident that could lead to legal repercussions.

Data Localization Manipulation

Purpose: The Data Localization Manipulation Scanner is designed to analyze strategic data placement, processing location selection, and storage jurisdiction optimization within organizations. It aims to ensure compliance with regulatory requirements and best practices by identifying potential misconfigurations or manipulations that could lead to non-compliance.

What It Detects:

Strategic Data Placement: The scanner detects mentions of specific cloud providers (AWS, Azure, GCP) in job postings or technology disclosures, as well as identifies references to data centers located in jurisdictions with different regulatory standards.
Processing Location Selection: It searches for language indicating the use of specific regions or countries for data processing and looks for mentions of compliance certifications related to data processing locations (e.g., SOC 2, ISO 27001).
Storage Jurisdiction Optimization: The scanner identifies references to storage solutions in different jurisdictions and detects claims of compliance with regional data protection laws (e.g., GDPR, CCPA).
Technology Stack Disclosure: It searches for mentions of specific technologies and platforms used for data management and processing and looks for indications of adherence to best practices in data handling and security.
Certification Claims: The scanner identifies claims of compliance with major certifications (SOC 2, ISO 27001, PCI DSS) and verifies the presence of these certifications in public records and job postings.

Inputs Required:

domain (string): Primary domain to analyze (e.g., acme.com)
company_name (string): Company name for statement searching (e.g., “Acme Corporation”)

Business Impact: This scanner is crucial as it helps organizations maintain compliance with various regulatory standards, which can significantly impact their security posture and reputation. Misconfigurations or non-compliance could lead to legal repercussions, financial penalties, and damage to the organization’s credibility.

Risk Levels:

Critical: Conditions that directly lead to severe compliance violations or significant data exposure without adequate mitigation.
High: Conditions that indicate potential risks of non-compliance with critical regulations, leading to high exposure if not addressed promptly.
Medium: Conditions that suggest moderate risk but still require attention for optimal security practices.
Low: Informal findings that do not pose significant immediate risks but may warrant future monitoring or improvement.
Info: General informational disclosures that provide minimal actionable insights beyond general awareness.

If the README doesn’t specify exact risk levels, infer them based on the scanner’s purpose and impact.

Example Findings:

“We exclusively use AWS cloud services for all data processing to comply with SOC 2 Type II standards.” - This finding indicates a critical compliance measure but could be mitigated by specific certifications aligned with regulatory requirements.
“Data is processed in the EU to meet GDPR compliance, ensuring robust data protection.” - This example highlights a high-risk scenario where data processing location significantly impacts compliance obligations.

Legal Entity Jurisdiction Selection

Purpose: The Legal Entity Jurisdiction Selection Scanner is designed to help organizations understand their global footprint by identifying strategic corporate locations, optimizing subsidiary placements, and selecting operational bases through the analysis of public records and open-source intelligence (OSINT) sources. This tool assists in understanding a company’s compliance with regulatory requirements across different jurisdictions.

What It Detects:

Subdomain Discovery: Identifies subdomains associated with the primary domain to uncover additional operational bases or subsidiaries.
SEC Filing Analysis: Extracts risk factor disclosures from SEC filings to identify regulatory compliance issues and potential jurisdictional risks.
LinkedIn Profile Scrapping: Analyzes LinkedIn profiles of company employees for mentions of jurisdictions, subsidiaries, or operational bases.
GitHub Repository Analysis: Searches GitHub repositories for code comments and documentation that mention jurisdictions, subsidiaries, or operational bases.
News API Coverage: Scrapes news articles for mentions of the company’s strategic location decisions, regulatory compliance issues, or operational base placements.

Inputs Required:

domain (string): The primary domain to analyze (e.g., acme.com)
company_name (string): The company name for statement searching (e.g., “Acme Corporation”)

Business Impact: This scanner is crucial for organizations looking to expand globally, as it helps in understanding the regulatory compliance landscape and strategic positioning across different jurisdictions. It aids in making informed decisions about corporate structure, risk management, and operational efficiency.

Risk Levels:

Critical: Findings that directly indicate significant non-compliance with legal requirements or substantial risks to business operations.
High: Findings that suggest potential compliance issues or high jurisdictional risks that need immediate attention.
Medium: Findings indicating moderate risk, which may require strategic planning and monitoring for escalation if necessary.
Low: Informative findings that provide supplementary insights but do not pose significant risks.
Info: General information about the company’s presence in various jurisdictions without direct implications on compliance or operational risks.

Example Findings:

A subdomain sub.acme.com discovered, potentially indicating an additional operational base outside of the primary jurisdiction.
Risk factor disclosures from SEC filings revealing potential compliance issues with regulations in multiple jurisdictions.

Corporate Structure Optimization

Purpose: The Corporate Structure Optimization Scanner is designed to analyze and identify potential regulatory arbitrage opportunities by examining a company’s entity relationship design, ownership structure engineering, and responsibility distribution. This tool helps in detecting ways to optimize the organizational structure for reduced compliance costs or effective regulation navigation.

What It Detects:

Entity Relationship Design: Identifies complex structures with multiple subsidiaries or holding companies that may be used for tax optimization or regulatory avoidance through offshore entities.
Ownership Structure Engineering: Exposes conflicts of interest and hidden ownership through nominee directors or shell companies, as well as assesses the transparency of ownership disclosures in public records.
Responsibility Distribution: Uncovers gaps in accountability where critical functions are outsourced or delegated, affecting regulatory compliance within the corporate structure.

Inputs Required:

domain (string): The primary domain to analyze, such as “acme.com”, which helps in searching for relevant statements and disclosures.
company_name (string): The name of the company, like “Acme Corporation”, used for specific statement searches within SEC EDGAR filings and on the company’s website.

Business Impact: This scanner is crucial as it directly impacts a company’s regulatory compliance posture by identifying potential weaknesses in its organizational structure that could lead to costly violations or inefficiencies. Proper optimization can significantly reduce compliance costs and improve overall regulatory adherence.

Risk Levels:

Critical: Identifies complex structures with multiple subsidiaries or holding companies used for tax optimization or regulatory avoidance through offshore entities, posing significant risks to the company’s financial stability and legal exposure.
High: Conflicts of interest from key shareholders or hidden ownership through nominee directors or shell companies can lead to governance issues and potential conflicts that affect decision-making processes critically.
Medium: Gaps in accountability where critical functions are outsourced or delegated, leading to compliance gaps and increased risk of regulatory non-compliance.
Low: Informal risk factor descriptions without detailed insights into specific regulatory challenges might not pose significant risks but still warrant attention for continuous improvement.
Info: Compliance claims that lack supporting documentation or evidence may indicate insufficient transparency, which is informative but does not directly impact critical business functions.

If the README doesn’t specify exact risk levels, infer them based on the scanner’s purpose and impact.

Example Findings:

“Acme Corporation has several subsidiaries in offshore jurisdictions for tax optimization, indicating a potential risk of regulatory scrutiny.”
“John Doe is a nominee director representing an offshore entity, which could lead to hidden ownership structures that are not transparently disclosed.”

Contractual Governing Law Selection

Purpose: The Contractual Governing Law Selection Scanner is designed to identify potential regulatory arbitrage strategies employed by organizations through manipulation of terms of service, selection of legal frameworks, and optimization of dispute resolution mechanisms. This tool aims to detect unusual language in terms of service documents, analyze the choice of governing law for potential regulatory advantages, examine clauses that may exploit differences in legal standards across jurisdictions, and verify claims of compliance with industry standards and certifications.

What It Detects:

Terms of Service Manipulation: Identifies unusual or ambiguous language that favors the organization over users/customers, including hidden fees, limitations on liability, and data usage policies.
Legal Framework Selection: Analyzes the choice of governing law to determine if it aligns with the company’s operations or offers regulatory advantages, identifying jurisdictions known for favorable legal environments for businesses and clauses that may exploit differences in legal standards across jurisdictions.
Dispute Resolution Optimization: Examines dispute resolution mechanisms such as arbitration clauses, jurisdiction selection, and class action waivers, identifying provisions that may limit user/customer rights or increase the burden of litigation.
Breach Disclosure Language Analysis: Detects patterns in breach disclosure statements that may indicate regulatory arbitrage, including language shifts to minimize organizational responsibility.
Certification Claims Verification: Verifies claims of compliance with industry standards and certifications (e.g., SOC 2, ISO 27001), checking for discrepancies between stated certifications and actual practices or disclosures.

Inputs Required:

domain (string): The primary domain to analyze, such as “acme.com”.
company_name (string): The company name for statement searching, such as “Acme Corporation”.

Business Impact: This scanner is crucial for organizations operating in regulated industries or those concerned with contractual compliance and legal disputes. It helps identify potential vulnerabilities that could lead to regulatory fines, loss of customer trust, and increased litigation risks.

Risk Levels:

Critical: Conditions where the terms of service are highly ambiguous, governing law does not align with business operations, or dispute resolution mechanisms significantly favor the organization.
High: Conditions where legal frameworks or clauses in contracts could be exploited for regulatory arbitrage, leading to increased litigation risks.
Medium: Conditions where there is potential for abuse in contractual terms, such as hidden fees or limitations on liability that might not be immediately apparent.
Low: Conditions where certification claims are overemphasized without supporting evidence, and breach disclosure statements do not indicate significant organizational responsibility.
Info: Conditions where the scanner identifies minor inconsistencies or ambiguities in legal documents that do not significantly impact business operations but may warrant further investigation for compliance purposes.

Example Findings:

The terms of service document contains a clause that limits user liability to $100, which could be seen as an attempt to minimize organizational responsibility during disputes.
A governing law chosen for international contracts is not aligned with the company’s primary market, potentially exposing it to legal risks in multiple jurisdictions.