The Business of Outsourcing

Possibility of Fraud

Since a large amount of sensitive data is now being processed overseas, there is danger and debate as to how well this data is being handled. As the data processing and security regulations in India range from poor to non-existent, there seem to have been reports of incidents of data theft. According to industry estimates, 80% of BPO companies fail to use any form of security management tools. Outsourcing firms do not keep consistent records nor is it common practice to carry out background checks of the employees they hire and the qualifying documents and degrees of new personnel are regularly forged. This is further complicated by the fact that little criminal data is stored in centralized databases by law enforcement officials, which makes any attempt to verify employee credentials nearly impossible.

A high profile case of fraud as a consequence of outsourcing occurred in April 2005, when employees of a call center called Mphasis in Pune, Maharashtra, illicitly obtained the account numbers of four Citibank account holders and then proceeded to transfer $300,000 to new accounts opened under falsified identities. This is a major concern for corporations in the United States since it works against them by tarnishing their image and perception among customers. In light of the recent scandals, the outsourcing industry has taken initial steps towards maintaining stringent criteria for their employees by hiring companies such as Quest Research (now FIRST Advantage), which now conducts background screening for over 250 BPOs.