Visa 2007 Annual Report Download - page 36

Table of Contents
service fee prior to its repeal that entered into an agreement with Visa U.S.A. that includes offline debit issuance on or after June 20, 2003 is now permitted to
terminate that agreement, provided that the issuer has entered into an agreement to issue MasterCard-branded debit cards and has repaid to Visa U.S.A. any
unearned benefits or financial incentives under its Visa U.S.A. agreement. The settlement service fee bylaw was rescinded as of the effective date of the order,
but Visa U.S.A. has appealed other aspects of the court's decision, including the contract termination portion of the court's remedy. See Item 3—"Legal
Proceedings—Other Legal and Regulatory Proceedings—Department of Justice Antitrust Case and Related Litigation."
The developments discussed above and any future limitations on our business resulting from settlements of, or judgments in, pending or potential
litigation could limit the fees we charge and reduce our payments volume, which could materially and adversely affect our revenues, operating results,
prospects for future growth and overall business.
If we are partially or wholly unable to realize the benefit of our deferred tax assets related to our litigation expenses incurred in connection with the
covered litigation, our financial results and cash flows may be materially and adversely affected.
The fiscal 2007 statement of operations of Visa U.S.A. reflects a litigation provision of $2.7 billion associated with the settlement of the American
Express litigation and management's liability estimate under the guidelines of SFAS No. 5 related to the Discover litigation and other matters. For tax
purposes, the deduction related to these matters is deferred until the payments are made and thus Visa U.S.A. established a deferred tax asset of $778 million
related to these payments, which is net of a reserve to reflect our best estimate of the amount of the benefit to be realized. Although we believe that the
estimates and judgments we made in establishing our deferred tax asset and related reserves are reasonable, some or all of these judgments are subject to
review by the taxing authorities. If one or more of the taxing authorities were to successfully challenge our right to realize some or all of the tax benefit we
have recorded and we were unable to realize this benefit, it could have a material and adverse effect on our financial results and cash flows.
The payments industry is the subject of increasing global regulatory focus, which may result in costly new compliance burdens being imposed on us
and our customers and lead to increased costs and decreased payments volume and revenues.
We and our customers are subject to regulations that affect the payments industry in many countries in which our cards are used. Regulation of the
payments industry has increased significantly in recent years. Examples of such regulation include:
• Anti-money laundering regulation. Most jurisdictions in which we and our customers operate have implemented, amended or have pending anti-
money laundering regulations, such as the U.S.A. PATRIOT Act, which requires the creation and implementation of comprehensive anti-money
laundering programs.
• U.S. Treasury Office of Foreign Assets Control regulation. Visa U.S.A. and Visa International are subject to regulations imposed by the U.S.
Treasury Office of Foreign Assets Control, or OFAC. OFAC restricts financial dealings with Cuba, Iran, Myanmar and Sudan, as well as
financial dealings with certain restricted parties, such as identified money laundering fronts for terrorists or narcotics traffickers. While we
prohibit financial institutions that are domiciled in those countries or are restricted parties from being Visa members, many Visa International
members are non-U.S. financial institutions, and thus are not subject to OFAC restrictions. Accordingly, our payments system may be used for
transactions in or involving countries or parties subject to OFAC-administered sanctions.
• Regulation of the Price of Credit. In recent years, legislation, regulations or other legal requirements affecting credit cards have been adopted in a
number of the jurisdictions in which our cards are used. For example, in the United States, congress and the federal banking agencies have
increased their
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