Visa 2014 Annual Report Download - page 32

•Increased central bank oversight. Several central banks around the world have increased, or
are seeking to increase, their formal oversight of the electronic payments industry, in some
cases considering designating them as “systemically important payment systems” or “critical
infrastructure.” Any such oversight may lead to additional regulations by central banks and
other government regulators. These could include new settlement procedures, cyber security
requirements or other operational rules to address credit and operational risks. They could
also include new criteria for financial institution client participation and merchant access to our
payments system.
•Safety and soundness regulation. Recent banking regulations enacted in the United States
and elsewhere may make some financial institutions less likely to become an issuer of Visa-
branded cards, because they may be subject to increased risk management or higher capital
requirements.
•Regulation of Internet and mobile transactions. Proposed legislation in various jurisdictions
may make it less desirable or more costly to complete Internet transactions using Visa-
branded cards by affecting the legality of those transactions, the laws that govern the
transactions, their taxation or the allocation of various intellectual property rights. In addition,
new mobile regulatory requirements could impact our business practices.
•Money transfer regulations. As we expand our product offerings, we may become subject to
U.S. state money transfer regulations, as well as international payments laws, which could
increase our regulatory oversight and compliance costs.
Complying with these and other regulations increases our costs and can reduce our revenue
opportunities. Our programs and policies are designed to comply with anti-money laundering, anti-
terrorism, sanctions regulations, and other laws, and we continue to enhance them. But, as regulations
continue to evolve and regulatory oversight continues to increase, we cannot guarantee that our
programs and policies will be deemed compliant by all applicable regulatory authorities. In the event
our controls should fail or are found to be out of compliance for other reasons, we could be subject to
monetary damages, civil and criminal money penalties, litigation and damage to our global brand
reputation. The impact of such regulations on our clients and on us may increase compliance costs
and reduce the volume of payments we process. Moreover, such regulations can limit the types of
products and services that we offer, the countries in which Visa-branded cards are used and the types
of account holders and merchants who can obtain or accept Visa-branded cards. Any of these
occurrences could materially and adversely affect our overall business, revenues, prospects for future
growth, financial condition and results of operations.
Litigation Risks
Our retrospective responsibility plan may not adequately insulate us from the impact of
settlements or final judgments.
Our retrospective responsibility plan addresses monetary liabilities from settlements of, or final
judgments in, the covered litigation, which is described in Note 3—Retrospective Responsibility Plan to
our consolidated financial statements included in Item 8 of this report. The retrospective responsibility
plan consists of several related mechanisms to fund settlements or judgments in the covered litigation.
These include an escrow account funded with a portion of the net proceeds of our IPO and any
subsequent offerings of our shares of class A common stock (or deposits of cash into the escrow
account in lieu of such offerings). They also include a loss sharing agreement, a judgment sharing
agreement and an omnibus agreement, as amended. In addition, our U.S. financial institution clients
are obligated to indemnify us pursuant to Visa U.S.A. Inc.‘s certificate of incorporation and bylaws and
in accordance with their membership agreements. These mechanisms are unique, complicated and
18