MUMBAI: The New York State Department of Financial Services' (DFS) accusation against Standard Chartered may bring fresh scrutiny on the outsourcing of sensitive functions by global financial institutions, especially to India.
DFS said the bank's failures included "outsourcing of the entire OFAC compliance process for the New York branch to Chennai, India, with no evidence of any oversight or communication between the Chennai and New York offices." OFAC is the US Office of Foreign Assets Control.
Scope International, the bank's back office outsourcing centre, is based in Chennai and employs over 8,500 people who provide support for the bank's global operations, including HR support, finance and accounting, IT services and helpdesk support.
The accusation could negatively affect India's outsourcing industry, worth about $100 billion and growing at 14 per cent per year.
"Perception-wise, people will stop sending larger-quantum and more sensitive work to India," said Rishi Sahai, director at Indian consultancy Cogence Advisors. "Any work related to regulatory compliance and internal audit, they will close their arms around it and keep it closer to where they are."