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The Morning Risk Report: Marriott Faces $124 Million Fine Over Breach
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Marriott said it would contest the British regulator’s ruling. Above, the Westbury Mayfair hotel in London, a Marriott Starwood hotel. PHOTO: DOMINIC LIPINSKI/PA WIRE/ZUMA PRESS
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Good morning. Marriott International Inc. faces a potential £99.2 million ($123.6 million) fine from the U.K.’s privacy watchdog over a consumer-data breach, as the regulator raises pressure on businesses to comply with Europe’s data-protection rules.
The fine—related to a breach of the Starwood Hotels guest reservation database—comes a day after the same regulator, the Information Commissioner’s Office, proposed a record $230 million fine against British Airways for failing to protect passenger data after a hack last year.
[Continued below…]
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Marriott said it would contest the ruling and that it was cooperating with the regulator. Europe’s privacy rules, known as General Data Protection Regulation, or GDPR, aim to hold companies accountable for safeguarding personal data. National regulators are tasked with enforcing the rules and can fine companies up to 4% of their annual sales for violations.
Until this week, most fines have typically amounted to less than $1 million. The proposed fine against Marriott represents 2.5% of the company’s global revenue. The proposed fine against British Airways amounted to 1.5% of the airline’s revenue.
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From Risk & Compliance Journal
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U.K. Regulator Imposes Record Fine Total Against Individuals
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The U.K’s Financial Conduct Authority issued the largest total amount in fines against individuals during the 2019 fiscal year, the regulator said in its annual report published Tuesday. The record comes as the U.K.’s lead financial regulator, established in 2013, focuses more on criminal cases and opens more investigations into entities and individuals, said Chris Warren-Smith, a partner at law firm Morgan Lewis & Bockius LLP in London, tells Risk & Compliance Journal’s Mengqi Sun.
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Compliance Officers Playing Bigger Role in Business-Line Decisions
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Ethics and compliance officers are playing a bigger role in decisions companies make to choose suppliers, acquire competitors and expand to new markets, according to a survey by compliance advisory firm Ethisphere.
Ninety-five percent of companies say their compliance division plays a significant role in procurement and product-sourcing, up from 67% in 2015. And 89% of companies surveyed said their compliance units have significant input on business development, including mergers and expansions, compared with 77% five years earlier.
Companies are more worried about third-party risks, such as the potential for a supplier to cause reputational or legal headaches, according to Erica Salmon Byrne, head of data and services at Ethisphere. They are also concerned about the cost of “buying a problem” through an acquisition, she said, pointing to General Electric Co.’s 2015 purchase of Alstom SA’s power business, which resulted in billions in write-downs.
“The roles these teams are playing is as an adviser,” said Ms. Salmon Byrne, who also serves as chair of Ethisphere’s Business Ethics Leadership Alliance. The survey was based on responses from about 120 companies that have been designated by Ethisphere as models of corporate citizenship.
—Kristin Broughton
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Commerce Secretary Wilbur Ross has outlined some exemptions to the U.S. blacklisting of Huawei Technologies, the Chinese tech giant. PHOTO: ANDREW HARRER/BLOOMBERG NEWS
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Commerce Secretary Wilbur Ross said the U.S. would grant licenses to U.S. companies that want to sell technology to Huawei Technologies Co. as long as the sales wouldn’t put national security at risk, expanding on a pledge made last month by President Trump to Chinese President Xi Jinping. Huawei will remain on the Commerce Department’s “entity list,” Mr. Ross said, meaning that companies that want to sell U.S.-sourced technology to Huawei must first apply for a license.
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The Trump administration levied sanctions against two Hezbollah members of Lebanon’s parliament and a senior security official in the organization, which the U.S. has designated a terrorist group. The action, the first time the U.S. has targeted Hezbollah’s parliamentarians, escalates the administration’s broader pressure against Iran and its regional allies by hitting Hezbollah lawmakers aligned with Tehran.
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Federal Reserve Vice Chairman for Supervision Randal Quarles said his agency’s tests of whether big banks can withstand a future economic shock need to be more predictable and easier for firms to pass. Mr. Quarles and Fed Chairman Jerome Powell said that stress tests must evolve to remain relevant at a time when the financial system is better capitalized than it was before the 2008 financial crisis.
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U.S. authorities have seized a large container ship operated by Switzerland-based Mediterranean Shipping Co., three weeks after customs authorities found 20 tons of cocaine on the vessel.
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Harvard University dismissed its longtime fencing coach in the wake of an investigation into financial transactions he made with the family of a current and former student on his team, highlighting concerns about the potential for corruption in college athletics and admissions.
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Twitter and other social-media companies face mounting calls by users and activists to stiffen their treatment of offensive content. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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Twitter Inc. said it updated its policy on hateful conduct to better protect religious groups, the latest effort by the company to police speech and curb abuse on its platform despite the potential risk of offending some users.
Under the modified terms, tweets with language that “dehumanizes on the basis of religion” will be removed when reported by users or identified by the company itself, the social-media giant said. The change was made, in part, in response to a user survey conducted last year that drew more than 8,000 comments, Twitter said.
The move comes as Twitter and other social-media companies face mounting calls by users and activists to stiffen their treatment of content on their platforms that is deemed offensive and bullying.
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The sun sets over London. PHOTO: TOM NICHOLSON/ZUMA PRESS
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Financial statement audits of large British companies continue to miss regulatory standards, according to the U.K.’s Financial Reporting Council. The finding comes as the country’s audit sector braces for a potential shake-up amid concerns around the quality of such assessments.
The British watchdog for audit and accounting said 75% of audits of large U.K. companies conducted in 2018 were good or required no more than limited improvements. That is better than the 73% of audits that met the standard in 2017, but still significantly below the FRC’s target of 90% of audits to meet the quality standard.
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Mary Hogan Preusse currently serves on the board of four real-estate investment trusts in the U.S. She is seen here with her son, Charlie Preusse, in their summer home in Chatham, Mass. PHOTO: M. SCOTT BRAUER FOR THE WALL STREET JOURNAL
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Public real-estate companies are adding slightly more women than men as directors to their boards, a sign that this male-dominated industry may be starting to heed a call for gender diversity.
Boards of real-estate investment trusts added 60 new female members, or 50.4% of the 119 new directors, during the 2019 spring proxy season, according to professional-services company Ferguson Partners. During the 2018 proxy period, 52% of the newly elected directors were women, marking the first time females comprised the majority of new board members. By comparison, only a quarter of new real-estate board members were women in 2015.
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A worker harvests coffee on a farm in Alfenas, Minas Gerais state, Brazil, in May. PHOTO: VICTOR MORIYAMA/BLOOMBERG NEWS
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Coffee growers from Brazil, Colombia and more than two dozen other countries will meet in Brazil this week to talk about how to get more money to farmers suffering from the lowest prices on world markets in more than a decade. Growers are encouraged by the recent advances by the world’s two biggest cocoa producers, Cote d’Ivoire and Ghana, in pushing buyers to agree to pay more for the key ingredient in chocolate.
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Cisco Systems Inc. has agreed to buy equipment manufacturer Acacia Communications Inc. for about $2.6 billion, as it looks to serve rising performance demands on networking gear from data center operators and telecom-service providers. Cisco said it will pay about $70 in cash for each Acacia share outstanding, a 46% premium to Acacia’s Monday closing price of $48.06.
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When Taylor Swift takes the stage Wednesday night in New York City, only around 2,000 fans will be on hand to see the concert in person, but millions more are expected to watch live online via Amazon.com Inc.’s Prime Day promotion. Music-streaming services including Apple Music and Spotify are counting on live events to set themselves apart from one another, further connect fans with artists and keep their subscription payments flowing. They have been experimenting with concerts based on popular playlists, album-listening parties and Q&A sessions with hard-core fans, identified via their streaming habits.
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As Walt Disney Co., AT&T Inc.’s WarnerMedia and Apple Inc. prepare to enter the crowded streaming-entertainment market, they are racing to stand out with eye-catching shows that cost as much for a season as a big-budget movie. These new services are hoping their planned television epics will capture the cultural conversation, like “Game of Thrones” did. They are also hoping to convince subscribers that their offerings are worth paying for in a market dominated by Netflix Inc., HBO and Hulu.
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