Sleepless nights

Is the problem of data fraud being blown out of proportion?

India's $23.6 billion business process outsourcing (BPO) industry has a lot at stake, and if BPO managers have been having sleepless nights, it's not entirely because India is on the other side of the globe.

The British press is full of data fraud reports from India. Even if these cases are few enough to be counted on fingertips, the image of India as a reliable BPO destination is getting tarnished.

Image management, suddenly, has become a cause for everyone's concern. "Recent incidents of data theft in India have been much publicised and politicised," say industry leaders, "Other countries with a history of data fraud should also be subject to the same level of scrutiny."

Raghu Raman, CEO of Mahindra Special Services Group (MSSG), a firm offering business de-risking solutions, wonders what the hue and cry is all about. Research conducted in 2005, he adds, reveals that there were more security breaches in the UK and US than in India that year.

According to reports by privacy watch groups, recorded incidents of identity theft in the US alone have touched 148 in the last 18 months, affecting nearly 94 million identities.

The surge in fraud recorded in the second half of 2005 has continued unabated into 2006, with more fraud (£653 million) in six months than in the whole of most recent years, according to KPMG Forensic's count.

In the UK alone, the Home Office estimates that identity thefts result in losses of over a billion pounds, and a quarter of all UK citizens have either been affected by ID theft or know someone who has been.

While Britons have already lost many many millions in the first six months of 2006 alone, chafe industry insiders, they cry foul over Indian data thefts that amount to $5 million or so.

What's more, West-based companies get their work done at almost one sixteenth of the cost in their home countries. "Chief executives, CIOs and shareholders would agree that outsourcing is a vital tool for developed economies to remain competitive, and would benefit the wider UK economy as the country's workers move on to higher value jobs," says Raman.

The benefits of outsourcing work to India, clearly, far outweigh the costs. Indeed, India is still very secure from a data protection viewpoint, adds Sunil Mehta, vice-president, Nasscom.

"The various initiatives that Nasscom has undertaken "" such as the National Skills Registry and Self Regulatory Organisation "" will ensure that the Indian IT-BPO industry is recognised as the global benchmark for security and India would be regarded as the Fort Knox for data," he says.

Nasscom rules out the possibility of clients pulling out from India. "...we do expect some concerns among customers in wake of such incidents, but the Information Commissioner in UK and even companies outsourcing to India have said they will not stop outsourcing work to India," states Nasscom.

Rajat Khare, co-founder, Appin Knowledge Solutions, feels that the existing growth rate of the IT-BPO industry of 30 per cent might see a slight dip in the next quarter, but rules out a bigger slowdown.

Says he, "With back-office services like call centres and online technology support making $6.3 billion last year and expected to reach $8.5 billion this year, the smaller outsourcing firms will have to re-assert their credibility with stricter anti-fraud policies."

Adds Pradeep Udhas, executive director, KPMG India, "India's answer should be strengthening of internal controls against fraud, integrating anti-fraud programmes, adapting to various compliance interfaces and beefing up the physical security at work," he suggests.

The articulation of anti-fraud policies could help. But this assumes that there exists a case that Indian BPO units are untrustworthy.

IT'S HAPPENING THERE...

In June 2006, a bank manager in Edinburgh was convicted of de-frauding the Royal Bank of Scotland of £21 million. In February 2006, 14 staff members at Tesco's main UK call centre in Dundee were sacked or suspended after auditors uncovered a massive fraud involving false discount vouchers used to buy groceries, alcohol, cigarettes and DVDs over the Internet.

The extent of the fraud is believed to run well into six figures London remains the hotbed for the highest value frauds. Over 80 per cent of frauds (worth around £540 million) were reportedly committed in London and the South East.

In March 2006, cybercrooks accessed a database at Kent State University in Ohio containing names and social security numbers of 19,000 applicants.

... MORE THAN HERE

Feb-March 2005: Pune-based rogue employees of MphasiS BFL accused of stealing money from Citigroup customers in New York. The accused employees had allegedly siphoned off $350,000

June 2005: A British tabloid, The Sun, reported that it was able to purchase confidential data on more than 1,000 Britons from an employee of an outsourcing company based in the New Delhi suburbs

July 2005: An employee of HSBC Electronic Data Processing India helped unidentified miscreants based in the UK steal £233,000 from 20 HSBC accounts

October 2006: A report by UK's Channel 4 claimed that an Indian middleman was offering credit card data, along with passport and driving license numbers, all stolen from call centres in India, to the highest bidders.

Another middleman, alleged the report, was offering details of customers of Halifax, Nationwide, Woolwich, Bank of Scotland and NatWest for £5 each.