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CS Professional · IFSCA - Regulations, Listing and Compliances · Overview of FinTech and Service Providers in IFSC

Arjun Capital proposes to launch a platform in GIFT IFSC where multiple financial institutions can outsource a common service, such as data processing for onboarding, to a specialised provider, while the regulated entities remain answerable to IFSCA. Which principle correctly applies to this arrangement?

The regulated institution stays fully accountable for compliance and customer obligations even after outsourcing a function. Outsourcing delegates the task, not the regulatory responsibility. It is not banned, and accountability does not pass to the vendor or to IFSCA by contract.

  1. AThe regulated entity remains responsible for compliance and cannot transfer regulatory accountability merely by outsourcingCorrect
  2. BOutsourcing transfers all regulatory accountability to the service provider
  3. COutsourcing is prohibited for all entities in the IFSC
  4. DAccountability shifts to IFSCA once the contract is signed

Explanation

Under the general regulatory approach to outsourcing, the regulated entity retains full responsibility for the outsourced function, including compliance and customer obligations. Shifting accountability to the vendor or the regulator is incorrect, and outsourcing is not banned outright.

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