Data Residency Laws and Requirements by Region

Imagine sending a letter to your friend in another country. 

Simple enough, right? But when that letter contains sensitive business information, suddenly, the rules change. The envelope can’t just travel anywhere – it needs to follow specific paths, stop at certain locations, and maybe even stay within particular borders.

That’s what happens with digital data today. 

When your business collects customer information, those digital “letters” need to follow precise rules about where they can be stored. And yes, these rules change depending on which country’s mailbox you’re trying to reach.

So, when a European customer shares their details with your US-based company, or when a Middle Eastern business partner sends sensitive data to your Asian branch: Where exactly can this information live? Which servers can host it? What rules apply?

You’ll have answers to all your questions by the final paragraph. Let’s dive in directly. 

What is Data Residency and Why Does it Matter?

Data residency is about where an organization’s data physically lives and gets processed. When organizations collect data from users or customers, they must comply with specific requirements about storing and handling that data based on its geographical location.

Think about personal data for a moment. When a customer shares their information with your business, various laws might require you to keep that data within specific borders. 

Some countries demand all citizen data stay local, while others focus on protecting certain types of sensitive information, such as healthcare records or financial details.

Why does this matter right now? Several factors are pushing data residency to the top of business priorities:

• Governments worldwide are taking stronger steps to protect their citizens’ information: Governments want oversight of how businesses handle personal data, and they’re backing these requirements with serious enforcement measures.
• Organizations face mounting pressure from cybersecurity threats: When data stays within specific jurisdictions, it’s often easier to maintain security standards and respond to threats effectively.
• Customers are becoming more aware of their data rights: They want to know where their information is stored and how it’s being protected. This awareness directly affects customer trust and, ultimately, business success.

Even the financial stakes are significant. Organizations that don’t meet data residency requirements might face substantial fines – we’re talking millions in penalties. For example, in 2023, Meta faced fines of €1.2 billion ($1.3 billion) for data transfer violations.

Global Data Residency Laws by Region

While some regions have established comprehensive frameworks, others are still developing their regulations. And yes, this can make compliance complex for businesses operating internationally.

Let’s examine how major global markets approach data residency and what specific rules businesses need to follow in each location.

1.  United States

The US follows a sectoral approach to data residency and privacy, with various laws covering different industries and data types. 

At the federal level, there’s no single comprehensive data protection law. Instead, the Federal Trade Commission (FTC) serves as the primary enforcement authority for data privacy violations.

The Gramm-Leach-Bliley Act (GLBA) is a key federal regulation for financial institutions. It requires financial organizations to:

• Explain their data-sharing practices to customers
• Protect sensitive customer data.
• Allow customers to opt out of having their information shared with third parties.
• Implement comprehensive security programs.

At the state level, California and Virginia have some laws related to data residency. 

California Consumer Privacy Act (CCPA)

This law was enhanced by the California Privacy Rights Act (CPRA) in 2023. These laws give California residents substantial control over their personal information, including:

• The right to know what personal information businesses collect and how they use it
• The right to delete personal information businesses store about them.
• The right to opt out of the sale or sharing of their personal information
• The right to non-discrimination for exercising their privacy rights

Virginia Consumer Data Protection Act (VCDPA) 

This law represents another significant state-level regulation. It applies to businesses that:

• Process personal data of 100,000 or more Virginia consumers in a calendar year
• Process personal data of at least 25,000 Virginia consumers and derive more than 50% of gross revenue from selling personal data.

Virginia Consumer Data Protection Act requires businesses to conduct data protection assessments for certain processing activities, obtain clear consent for processing sensitive data, and implement reasonable security practices. In case of any consumer rights requests, this law asks companies to respond within 45 days.

2. UK

The UK’s data residency regulations center on the UK Data Protection Act 2018. This law was updated after Brexit to maintain strong data protection standards while creating an independent framework. Moreover, this Act builds on GDPR principles but adds UK-specific provisions.

Under the UK Data Protection Act 2018, organizations must register with the Information Commissioner’s Office (ICO), and many need to appoint Data Protection Officers, particularly public authorities and organizations processing large amounts of personal data. 

The framework includes specific provisions for law enforcement and intelligence services, along with special protections for particularly sensitive personal data.

For international data transfers, the UK has established its own adequacy framework:

• Organizations can freely transfer data to countries with UK adequacy decisions
• The UK recognizes pre-Brexit EU adequacy decisions.
• Specific transfer mechanisms exist for countries without adequacy decisions.
• Organizations need appropriate safeguards for international transfers

The UK maintains strict breach notification requirements as well. Organizations must report serious breaches within 72 hours and maintain detailed records of all data breaches. The ICO holds substantial enforcement powers and can impose significant fines for non-compliance.

3. European Union

The European Commission maintains a list of countries with “adequate” data protection standards. For countries not on this list, organizations need additional safeguards such as Standard Contractual Clauses or Binding Corporate Rules (More on this in a minute).

European Union’s data residency regulations look after where and how organizations can store and process EU residents’ data. While GDPR serves as the overarching framework, its data residency requirements focus specifically on data storage locations and cross-border transfers.

Organizations can freely transfer and store data within the European Economic Area (EEA). However, when storing or processing data outside the EEA, strict requirements apply. Organizations must ensure that the receiving country provides adequate data protection levels.

The European Commission maintains primary control over data residency through its adequacy decisions. These decisions determine which non-EU countries provide sufficient data protection standards for EU data. When storing data in countries without adequate decisions, organizations need specific safeguards in place.

These safeguards typically include:

• Standard Contractual Clauses (SCCs): Legally binding terms ensuring data protection
• Binding Corporate Rules (BCRs): Internal rules for multinational companies
• Individual Adequacy Assessments: Case-by-case evaluations of protection measures
• Explicit Consent: In specific cases, with clear warnings about transfer risks

The practical impact means many organizations choose to store EU resident data within the EEA to simplify compliance. 

Major cloud service providers have responded by establishing EU-based data centers, allowing businesses to specify data storage locations explicitly.

4. Canada

Unlike others that we discussed, Canada follows a dual-level approach to data residency, with regulations existing at both federal and provincial levels. 

The Personal Information Protection and Electronic Documents Act (PIPEDA) serves as the primary federal legislation governing data privacy and residency.

PIPEDA states that data can only be transferred outside of Canada if the receiving country provides equivalent data and cybersecurity protections. This restriction can limit organizations’ ability to transfer data, especially to countries like the United States, where no federal law specifically safeguards user data.

Under PIPEDA, businesses collecting data must protect both personal and sensitive data during storage and transmission. The law places significant emphasis on consent – organizations must obtain permission from individuals before collecting and using their data. 

More importantly, the data can only serve the purpose for which it was originally collected. Any additional use requires fresh consent from the individuals involved.

At the provincial level, 

• Alberta’s Personal Information Protection Act (PIPA) requires organizations to notify consumers if their data will be transferred and processed outside Canada. 
• Quebec’s Private Sector Act mirrors this approach, requiring organizations to conduct data privacy assessments and implement safeguards before transferring data outside Quebec.

Other regions focusing on data residency

Here’s an overview of significant data residency laws:

• Brazil‘s Lei Geral de Proteção de Dados (LGPD) and Singapore‘s Personal Data Protection Act (PDPA) share similar approaches. Both laws require organizations to maintain detailed documentation of data storage locations and demonstrate robust security measures. Organizations must prove compliance through clear record-keeping and regular assessments.
• India‘s Digital Personal Data Protection Bill (DPDP), passed in 2023, brings new standards for data storage. Organizations handling Indian citizens’ data must ensure transparent record-keeping of storage locations. The bill emphasizes accountability in data storage practices and requires regular assessments of storage facilities.
• South Korea‘s Personal Information Protection Act (PIPA) focuses on documentation and security requirements for data storage. PIPA mandates organizations to maintain comprehensive records of their data storage locations and requires regular audits of these facilities to ensure compliance.

Silver lining: while approaches vary, they share common threads like transparency in data storage locations, clear documentation requirements, and the need for proper security measures.

Managing data residency compliance is just one piece of the regulatory puzzle. As organizations adapt to various regional requirements for data storage, they must also ensure secure customer onboarding across borders. This is where robust digital identity verification solutions become necessary.

Think of it this way: while data residency tells you where to store customer information, KYC and KYB solutions help you verify who that customer is – regardless of their location. Signzy’s identity verification APIs work seamlessly with your data residency strategy, helping you maintain both regional compliance and customer trust. 

When your verification processes align with local regulations, managing data residency becomes more straightforward. Learn more.