The implications of the Satyam accounting fraud scandal have not been fully appreciated. Especially not for Australian corporations. NAB, Westpac, Telstra, Optus, Medibank Private and Suncorp were all clients of the firm.

The confession by technology giant Satyam’s chairman that he had committed massive fraud on the company’s accounts does not just raise questions about the Indian company’s governance or the role of its auditors PricewaterhouseCoppers, but it raises questions about the security of Satyam’s outsourcing work. Satyam, after all, works with confidential data on behalf of governments, banks, telcos, insurance companies, universities and human resources departments across the world.

Satyam, which means “truth” in Sanskrit, has been a symbol not only of India’s economic renaissance but of the global trend to digitise and outsource corporate data, which certainly has its cost-saving efficiencies, but also its risks.

Now that the trusted guardian of so much important information has allegedly had over $US1 billion cooked from its books by its chairman and managing director, what can be said about Satyam’s security of client data?

Satyam’s clients include NAB, Telstra and Qantas. Westpac, Optus, Suncorp, Coles, Medibank Private and also do work with the Hyderabad-headquartered firm. In Australia, Satyam was readying to build a $75 million IT centre with Geelong’s Deakin University. The software development and training centre, which was expected to create 1,400 jobs for the Victorian city, may now be in jeopardy. Satyam currently employs 1,700 people in Australia out of a global workforce of 53,000. Its local spokesman was unable to provide details of other local clients or projects.

Already clients and advisors around the world are distancing themselves from the firm, which received an incredible letter from chairman Ramalinga Raju, admitting to overstating the company’s cash position and systematically fiddling with other accounts over a period of several years. Satyam’s corporate advisors Merrill Lynch terminated its relationship on Wednesday, saying that it had found material accounting irregularities with its contract.

NAB is perhaps more at risk than most, having outsourced positions to India after working with Satyam for several years. Satyam was selected by NAB from a competitive pool of contractors, but the offshoring was a controversial decision at the time and one that IT staff inside the Melbourne-based bank described as “very risky.”

Satyam nevertheless won the contract.

“When you hand over sensitive work to a third party, then you hand over control,” says Financial Services Union national secretary Leon Carter. “The only way the bank can absolutely sure that processes are done properly and that customers’ banking details are looked after properly is when the work is done by bank employees in Australia.”

“Financial services offshoring is bad for everybody. It’s bad for the workers who lose their jobs, all the research shows that customers don’t want their details sent overseas and, as we now see, it’s clearly bad for the business. We’ve argued that the Federal Government should introduce what is called ‘Right to Know’ legislation. Every banking customer in Australia is entitled to know where this work is done.”

Satyam was recently banned from dealing with the World Bank due to allegations of bribery and improper invoicing. 

NAB was unable to comment by the time of deadline.