What Risks Do Companies Face if They Fail to Comply With Data Transfer Rules Between the EU and US?

When companies fail to comply with data transfer rules between the EU and the US, they expose themselves to a range of serious consequences that can affect their legal standing, financial health, and public reputation.

One of the most significant risks is the potential for regulatory enforcement under the GDPR. Authorities in the EU can impose fines that reach up to €20 million or 4% of a company’s global annual turnover, whichever is greater. High-profile cases such as Meta’s €1.2 billion penalty for inadequate safeguards in transatlantic data transfers have made it clear that regulators are prepared to use the full force of the law when violations occur. In another instance, Uber was fined €290 million for similar failures in protecting the data of EU drivers.

These legal consequences often come with operational demands as well. Regulators may require companies to halt ongoing data transfers, delete personal data that was unlawfully moved to the US, or take corrective action to bring systems into compliance. These orders are typically subject to tight deadlines, putting pressure on internal resources and disrupting business continuity.

Reputation is another area where non-compliance can be costly. Public trust is easily damaged when a company is known to mishandle personal data, especially when the case is highly publicised. This can lead to strained relationships with customers, loss of business partnerships, and long-term brand damage that goes far beyond the initial fine.

From a compliance perspective, the rules around EU-US data transfers are strict. Transfers are only permitted if there is a legal basis, such as the EU-US Data Privacy Framework or enforceable safeguards like standard contractual clauses. Using outdated or invalid mechanisms, like the defunct Privacy Shield, or failing to ensure proper protections with third-party vendors, can easily result in breaches.

Even indirect data transfers, like storing customer data with US-based cloud providers, require due diligence. Companies must assess whether their vendors meet EU standards and are capable of enforcing data protection obligations. Regulators have made it clear that relying on third parties does not excuse non-compliance.