A set of Consultation Papers was issued in September 2014 (P018-2014 and P019-2014) by the Monetary Authority of Singapore (MAS). It sets out the proposed Notice on Outsourcing and the revised Guidelines on Outsourcing and will affect all financial institutions (licensed by MAS) who outsource or contract out any of their business process to any party (related parties and third parties included).
From our assessment, financial institutions have seen the most cost and work efficiency benefits arising from outsourced services which tend to be labour or time intensive such as those relating to back-room operations (e.g. IT, Human Resources, Logistics or Finance). Some financial institutions like insurance and reinsurance companies have also leveraged on overseas technical expertise to cover business functions such as underwriting, actuary, technical accounting or claims.
2 key proposals under this set of Consultation Papers will (if implemented) have significant practical consequences with notable time and costs needed for compliance i.e.,
- requirement of legal advice covering disclosure of customer information provided by a overseas based service provider where the outsourcing is performed. This requirement is applicable on a ‘one-time’ and ‘ongoing’ basis; and
- where the service provider is an overseas regulated financial institution, a written confirmation from the supervisory authority that it will not access customer data, only access information with prior notification to MAS with an undertaking to safeguard the confidentiality of such information.