INDIAN BPOS TO FACE US REGULATOR
After Indian tax authorities, it's now US financial regulators'
turn to train their guns on Indian BPO firms.
Expecting audits from the US comptroller of currency early
next year, Indian BPO companies and captive units of multinationals
are working overtime, holding discussions with consultants
and their US counterparts to understand the nuances of these
audits.
Most contracts in the industry allow for these kind of audits
by regulators in the outsourcing firm's country.
Though details on what constitutes these audits is not forthcoming,
BPO majors confirm they are aware of them and are preparing
their Indian operations to face them.
The prime targets are likely to be the companies to which
financial services are outsourced, especially from banks and
credit card companies.
The office of the comptroller of the currency (OCC) charters,
regulates and supervises national banks to ensure a safe,
sound and competitive banking system in the US.
"These audits are expected early next year. Not only
are they likely to check for regulatory compliance, but also
for systems and procedures and risk management and confidentiality
clauses being followed. We are following up with our US office
to get off the ground," said Ram Aggarwal, partner, Ernst
& Young. E&Y already conducts quality control reviews
for several BPO units here.
Auditors from the US could come down to India to check the
BPO companies here or even conduct them remotely.
A host of top international banks including American Express,
Citibank, ABN Amro Bank, Barclays, HSBC and Stanchart have
outsourced their financial transactions to India.
Though they began on a low key, they have ramped up operations
over the years, thanks to cost savings of around 50-60% when
jobs are transferred from Europe and the US.
"They have the authority to audit anywhere the financial
work moves to. Our contracts already allow for it. Just as
RBI can look at our transactions, they can check if the processes
being laid out by the company are being followed here and
if they are in line with the regulation," said Vikram
Talwar, vice-chairman, EXL.
Though BPO units in India cannot pinpoint anything fundamentally
wrong with the audits, they fear it could be used to discriminate
against some vendors while outsourcing financial jobs.
News of the audit has shocked a section of the industry more
because it comes hot on the heels of the backlash against
outsourcing fading after the US elections.
