The UK's Financial Services Authority (FSA) has warned that shifting call centres and back office operations to offshore centres poses a serious risk to the watchdog's objectives of reducing financial crime and maintaining consumer protection and market confidence.
Many banks have continued to shift work to cheaper overseas centres despite the backlash against offshoring in Western countries. Recently HSBC, Bank of America and Lloyds TSB have announced plans to expand offshore operations and move more work to centres in Asia.
The FSA's report, which reviewed 10 offshore sites in India, and surveyed a further five firms that have operations in the country, warns that the main risk is the difficulty for management to achieve oversight and control from the UK.
The regulator says it was impressed by the calibre of offshore call centre workers, but high staff turnover was cited as a major concern. Non-voice processes - such as back office and administration tasks - had about a 10% turnover compared with 30% of staff who answer calls. But the FSA says firms were monitoring staff turnover and had strategies in place to combat it.
The FSA says all of the operations visited had contingency plans in the event of a serious problem, although some firms were experiencing "significant problems" organising local disaster recovery arrangements. Most companies that are using offshore centres still have the capacity to shift work back to the UK if needed.
However despite ongoing fears over the security of customer data at offshore centres - particularly after recent incidents such as the arrest of three former employees of Indian BPO firm MphasiS for allegedly stealing $300,000 from Citibank customers - the FSA says there is no evidence to suggest consumer data is at greater risk in India than in the UK.
The report says: "We observed a high level of security in operation and some firms stated that security is far more controlled than in the UK."
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