The warning was carried in a report entitled Offshore Operations: Industry Feedback, for which the FSA, an independent body which regulates the financial services industry in the UK, surveyed and visited a number of financial institutions’ operations in India.
The survey comes only weeks after 16 employees of Indian offshore provider Mphasis were arrested in connection with bank fraud. The suspects have been charged with stealing money from customers of Citigroup, a major client of Mphasis. Initial police inquiries carried out in early April suggested that employees involved in the fraud had stolen approximately $350,000 between February and March 2005. Further investigations have suggested the scale of the theft could be considerably larger.
The watchdog said: [The main risk of offshoring is] the complexity of achieving suitable management oversight and control from a distance. It said UK companies using offshore strategies have formal oversight structures, but offshoring greater volumes and more complex functions will affect a company’s risk profile, particularly in relation to operational risks.
UK industry body, the National Outsourcing Association, hit back in a statement in which it said: Indian workers are no less ethical than UK workers: media hype over offshore security breaches is generally unfounded.
The FSA report also expressed concern at the level of attrition in India, and found that during the early stages of offshoring, it was difficult to find acceptable candidates for managerial positions because salary expectations were on a par with those of their UK counterparts.
Despite the concerns, the FSA survey was generally positive about the security provisions made by UK firms in India. Companies have implemented systems to monitor phone conversations, protect data, and monitor staff. There is no evidence to suggest consumer data is at greater risk in India than in the UK, it concluded.
