Following newly implemented legislation, financial services companies will now be responsible for any damage caused to individual clients, rather than the outsourced service providers.
The Cayman Islands Monetary Authority (CIMA) has published some new guidelines for the financial services industry regarding outsourcing, in its aim to protect the industry from potential loss or damage in the event of outsourcing failure. As per the new laws, such firms providing financial services will be held responsible for any damage caused to individual clients as opposed to the outsourcing service provider,
The regulator has clarified that financial service firms must assess their sourcing partner to identify conflicts of interests and ensure they put preventative measures in place to manage such conflicts. There has been a deadline set for the banks to review their outsourcing policies and make any amendments by August 2016.
The guidelines apply to all regulated entities excluding investment funds and private trust companies. The guidelines detail setting up a committee to oversee the conduct of service providers and putting in place feasible contingency plans in the event of outsourcing failures.
The Cayman Islands is a British overseas territory in the Caribbean and one of the world’s largest financial centres, having more registered businesses than citizens. To enjoy tax benefits that the country offers, companies need to be physically present in the island. Typical functions that are being outsourced to the Caribbean jurisdictions include activities, such as IT operations, accounting, HR, compliance and audit tasks.