Though outsourcing may result in 40% cost-saving, it becomes risky if operations are not managed properly
Growth of Banking Captives
Growing Risks in Captives
• The BPO industry has evolved from the outsourcing of quasi-clerical activities (e.g., printing and data storage) in 1970s to high-end functions such as credit analytics and risk management in 2013 • The main driver behind the outsourcing by banks is cost reduction, which might be in the tune of 20% to 40%
• As per the regulatory body, US Office of Foreign Assets Control (OFAC ), Standard Chartered entered into financial transactions with Iranian clients eyeing the millions that they could make by means of transaction fees – Standard Chartered’s captive unit in Chennai (India) handled compliance system, and was deficient to track the illegal transactions that their parent company was involved with – Once the scam was disclosed the bank was fined US$ 340 Mn by New York bank regulator • In 2006, HSBC Electronic Data Processing India Ltd., which handles the bank's back-office work from outsourcing centers in India, filed a complaint saying one of its employees accessed "personal, security and debit card information" and passed them on to associates involved in the fraud – The employee siphoned US$ 420,000 from the accounts of 20 customers
Source: Sutherland Research
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www.sutherlandglobal.com September 26, 2013
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