Financial Services Industry Outsourcing and Enforcement of Privacy Laws Page: 2 of 6
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are those which must be performed by officers or personnel of the institution (e.g.,
certification of the accuracy of annual reports, as required under the Sarbanes-Oxley Act
What Financial Institutions Outsource Customer Information? Virtually
any financial institution (e.g., any bank, thrift, credit union, securities firm, insurance
company, tax preparation service, credit bureau, accounting firm, money transmitting
business, and check cashing business) is likely to have some arrangement with outside
entities to process data, either in lieu of processing it in-house or as a back-up in
emergency situations. Banks, for example, rely on outside firms for printing checks,
issuing credit cards, processing transactions, preparing billing statements, operating call
centers and other customer service centers, and processing customer payments.
What Legal Arrangements Do Financial Institutions Make for
Outsourcing? Typically, a financial institution's outsourcing arrangement will involve
a contract. The contract may be with a wholly independent company or a separately
incorporated subsidiary or a service company in which the institution maintains a capital
investment; or, it may take the form of a joint venture with another company. The contract
generally will specify the duties and rights of each of the parties, the remedies for any
breach, the law that is to be applied to interpret the contract, and any other agreements of
What Foreign Entities Provide Services Outsourced By Financial
Institutions? Third-party foreign- or domestic- based businesses may perform
outsourced functions for financial institutions. They may be independent of the financial
institution or in some way subject to the oversight of the financial institution by way of
a capital investment, a joint venture partnership, a corporate affiliation, or other form of
arrangement.6 If the operations or services provided are performed in a foreign
jurisdiction, the third-party service provider is likely to be subject to the laws of that
jurisdiction, whether or not it is a subsidiary of a U.S. company or incorporated in the
foreign jurisdiction.7 India and other South Asian countries are emerging centers of
outsourced technology and services.
Effect and Implications of 'Deconstruction' of Banking Functions," 5 N. C. Banking Institute 135
140 (April 2001). [Hereinafter, Impact of Technology].
4 P.L. 107-204 302; 116 Stat.745, 777; 15 U.S.C. 7241.
s The customer and the institution are considered the primary parties in this context.
6 See Impact of Technology, at 142, indicating an emerging trend toward investing in technology
service providers, rather than merely contracting with them.
O 0CC Bulletin OCC 2002-16, "Bank Use of Foreign-Based Third-Party Service-Providers,"
(May 15, 2002), 2002 OCC CB LEXIS 36 (May 15, 2002).
8 A report by Chris Gentle for Deloitte Consulting Firm, predicted that "future offshore activity
will be spread around the Indian Ocean Rim, from South Africa through the Indian sub-continent
to China, Malaysia and down to Australia." Gale Group, Inc., Financial Services Distribution
(June 1, 2003), LEXIS;BANKNG Library, CURNWS file, avail. Mar. 25, 2004.
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Financial Services Industry Outsourcing and Enforcement of Privacy Laws, report, June 9, 2004; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc815780/m1/2/: accessed May 25, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.