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After HSBC, StanChart's India outsourcing under US scanner

Outsourcing of key oversight jobs by global banks to India has come under the scanner for the second time in less than a month for exposing the US financial system to terrorists and money laundering risks.

PTI | AUGUST 07, 2012, 12:08 PM IST

On the heels of a probe by the US Senate's PermanentCommittee on Investigations pointing out major lapses in the work of HSBC'sIndia staff, another UK-based banking giant Standard Chartered's outsourcing ofkey banking jobs to Indian shores have come under the scanner in the US.

A probe by the New York State's key banking regulator, theDepartment of Financial Services (DFS), has found deficient money launderingcontrols in outsourcing of work by StanChart to India, thus exposing the USfinancial system to terror financing and other risks.

The findings in these two separate probes have come at atime when the voices against outsourcing of jobs to India and other locationsare gaining momentum in the US, ahead of the Presidential elections inNovember.

In an order last night, the DFS accused StanChart of hidingsecret transactions involving USD 250 billion with Iran -- leaving the USfinancial system vulnerable to terrorists, weapons dealers, drug kingpins andcorrupt regimes.

The DFS probe found that SCB had assured the New York statein May 2010 that it would take immediate steps to comply with the US Office ofForeign Assets Control (OFAC) sanctions.

However, another regulatory examination in 2011 foundcontinuing and significant Anti Money Laundering failures.

Among these, the bank was outsourcing its "entire OFACcompliance process for the New York branch to Chennai, India, with no evidenceof any oversight or communication between the Chennai and the New Yorkoffices."

The OFAC is the designated US government agency forpreparing list of entities with whom US citizens and entities are barred fromdoing any business.

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