US to audit BPOs servicing banks

Indian BPO firms servicing US Banks and financial institutions will be subject to OCC (The Office of the Comptroller of the Currency, USA) audit from early next calendar.

Senior executives across several financial BPO firms in Bangalore and Chennai said that the review will most likely be in January-February next year.

This audit marks the concerns of the US regulator over outsourcing critical financial and banking information like customer data, pattern of advances and deposits.

Globally, outsourcing of financial services is put at $15 billion, representing just over 12 per cent of the total outsourcing that is happening.

Sources said that the audit will primarily focus on information security and physical security compliances at the Indian firms and the systems in place for it.

They said that not all financial BPOs will come under the scanner. "Only those engaged in high-end transaction work, and those who manage critical databases of banks and FIs will be subject to the review."

Though third party financial services is not quite as advanced as other services, several top BPOs in India have a strong presence in the segment. They include the likes of Office Tiger, Wipro Spectramind, Progeon, ICICI OneSource.

efunds and iSeva. Despite the growing number of firms in this segment, several US-based financial institutions like American Express, Citibank and Standard Chartered prefer to just offshore their back-end activities to captive units in low cost countries like India and not outsource them.

Industry players said that probably only those BPOs that manage/analyse loan and investment portfolios, manage funds and capital earnings will be audited by OCC. They added that they are yet to hear formally from OCC, but their principals have already alerted them.

"Typically, OCC just needs to inform our principals to inspect or audit the systems here," they added.

The Office of the Comptroller of the Currency (OCC) charters, regulates and supervises all US banks, as also the federal branches and agencies of foreign banks.

Added to it, the regulator reviews the banks' internal controls, internal and external audit, and compliance with the law. It also evaluates bank managements' ability to identify and control risk.