What Is Compliance Outsourcing, and Is It Right for Your Business?

Compliance outsourcing is becoming a go-to strategy for many businesses trying to keep up with the growing list of regulations, such as global data privacy laws, anti-money laundering requirements, and industry-specific standards.

In fact, almost 70% of companies have turned to third-party service providers for compliance outsourcing services, according to Thomas Reuters. It’s a practical solution that prevents your in-house teams from being stretched too thin, your resources from being drained, and your company from being at risk.

What Is Compliance Outsourcing, and How Does It Work?

Simply put, compliance outsourcing is when you hire a third-party service provider to handle some or all of your compliance functions (regulatory, legal, and ethical responsibilities). The provider can be a BPO company, legal or specialist consultants, industry regulator specialists, or SaaS platforms.

This service isn’t about replacing the compliance work your in-house team is doing; instead, it supports it. You’re bringing in a group of compliance professionals who’ll take on routine work or fill in skills gaps. The best ones even provide you with:

• Early insights into new rules that could impact your industry
• Automated tools for audits, reporting, and monitoring
• Safeguards to spot compliance issues before they become real problems

Some providers follow your existing compliance “playbook,” while others bring in new expertise and technology to streamline operations, reduce manual tasks, and keep you ahead of regulators.

Compliance outsourcing also covers a wide range of areas: human resources, tax, industry standards, cybersecurity, sustainability, anti-bribery, and more.

When to Keep Compliance Functions In-House and When to Outsource

Truth be told, no company will outsource all its compliance functions to a third-party service provider. Some of these will stay in-house due to sensitivity. That’s why most opt for a co-managed setup, where your in-house team works together with your outsourced one.

How do you decide which to keep and which to entrust to the provider? The table below will help you with that.

Why Do Companies Choose to Outsource Compliance?

Outsourcing compliance functions is more than about saving money. It’s about staying smart, agile, and protected in a fast-changing regulatory environment. Here are the main reasons 34% of companies decide to outsource all or part of their compliance functions:

• It lightens the workload. Handing off compliance tasks to providers frees up your in-house team to focus on growth and core business goals.
• You can tap into expert knowledge. Providers bring specialized skills and industry experience that are costly and time-consuming to build in-house.
• You’re able to stay efficient. The external support would mean streamlined processes, fewer errors, and smoother day-to-day operations for you.
• It lowers the associated risks. With expert oversight, the chances of fines, failed audits, or reputational damage decrease significantly.
• You can expand with confidence. Whether it’s entering new markets, scaling internationally, or launching regulated products, outsourcing makes it easier to navigate local rules and data protection requirements.
• It fixes any gaps in compliance fast. If audits uncover weak spots or compliance processes fall short, providers can quickly step in to get things back on track.
• You can manage the rising costs. Instead of bearing the expense of hiring full-time compliance staff or investing in heavy infrastructure, providers offer a more flexible and cost-effective option.
• It solves your issue with talent shortages. Skilled compliance professionals are in high demand. Outsourcing gives you access to the right talent without the hiring struggle.

Which Compliance Functions Can Be Outsourced?

You can outsource the following functions to a third-party service provider:

• Financial and tax compliance
  • Preparing tax returns, cross-border filings, and payroll
  • Managing financial records and reporting
  • Meeting financial regulations like anti-money laundering, counter-terrorist financing, and securities registration
• Data protection and privacy
  • Ensuring compliance with ISO/IEC, GDPR, HIPAA, CCPA, and other laws
  • Maintaining secure systems, encrypted workflows, and data integrity
• HR and employment compliance
  • Handling contracts, classifications, and dismissals
  • Overseeing workplace policies and labor law requirements
• Risk management and monitoring
  • Testing and monitoring business processes for compliance
  • Conducting risk assessments and analyzing suspicious behavior
  • Screening for sanctions, politically exposed persons (PEPs), and restricted entities
• Audits and reporting
  • Supporting internal and external audits
  • Preparing compliance reports and filing them on time
  • Verifying internal controls and production standards
• Ethics and training
  • Running employee training on compliance regulations and policies
  • Managing whistleblower hotlines and conduct programs
• Environmental compliance
  • Preparing environmental reports and tracking emissions
  • Meeting sustainability and industry-specific standards

Pro Tip: It’s important for you to have a decision framework to help analyze which compliance function you’ll entrust to the provider and to what extent you’re willing to have them manage the said function. Or, which function can be co-managed by your in-house team and the provider.

What Are the Key Benefits of Compliance Outsourcing?

In general, leveraging a compliance outsourcing service enables you to have the people, processes, and tools you need to move the associated tasks forward without the added financial burden.

• You gain access to expert knowledge. Specialized compliance service providers live and breathe regulations. They know the latest laws, best practices, and global frameworks, providing you with up-to-date news and strategies tailored to your needs.
• You gain access to secure infrastructure. Many providers offer advanced systems with encryption and automated workflows, ensuring your sensitive data stays protected.
• You ensure cost savings. Hiring, training, and equipping a full in-house compliance team is expensive. Outsourcing offers you a more affordable way to get the same (or better) expertise without the overhead.
• It offers you flexibility and scalability. Outsourcing lets you scale resources or teams up or down as needed, even if it’s only to have extra help with the compliance work for a few months.
• You can focus on growth. With providers handling the paperwork and monitoring, your in-house team can concentrate on what matters most: growing the business.
• You can have better risk management. Providers bring objective oversight and proven systems to spot issues early, lowering the risk of fines, legal problems, or reputational damage.
• It improves your audit readiness. Providers have established methods and documentation that make audits smoother and less stressful.

What Are the Risks of Outsourcing Compliance Services, and How Can Businesses Manage Them?

Whenever you outsource, potential risks automatically become part of the equation. You can’t avoid these. The best you can do is understand what these risks are and what you can do to keep their effects under control.

What Legal and Regulatory Factors Should Be Considered?

Before availing of outsourcing compliance services, understand that the legal responsibilities and accountability ultimately remain in your hands. That’s why, as Vishal Chawla, a principal at Deloitte & Touche LLP, has said, you must “clearly lay out the objectives” your company wants to achieve with outsourcing. Otherwise, you’ll be prone to risks and challenges.

To prevent that, you must be aware of the legal and regulatory factors (aka obligations) to consider. The table below visually organizes the information that StartSmart Counsel shared on their blog (Thank you, StartSmart Counsel!).

How Do You Choose the Right Compliance Outsourcing Partner?

There’s no one-size-fits-all answer when it comes to selecting a third-party service provider. Every business has unique needs, so the goal is to find someone who feels like an extension of your team.

• They have proven experience. A solid track record with companies like yours shows they know how to handle complex workflows and scale when needed.
• They align with your goals. The right partner takes time to understand your business, risk processes, and expectations, then works with you to set clear deliverables.
• They demonstrate industry expertise. Look for providers who know your sector’s specific rules and standards inside out.
• They offer scalable support. Regulations change, and so will your needs. A good partner can adapt quickly and grow with you.
• They have global and local know-how. If you operate across borders, choose someone with international experience and knowledge of local laws.
• They have secure systems and practices. Data protection is non-negotiable. Check for certifications like ISO 27001 or SOC 2 to ensure your information is protected.
• They share your values. Strong partnerships are built on culture and trust. Work with a provider whose company values align with yours.
• They show transparency. Clear contracts, defined SLAs, and open communication are signs of a trustworthy partner.

Compliance Management Becomes Easier with Outsourcing

Keeping up to date with compliance regulations can be challenging to do solely in-house. Fortunately, you have the option to turn to third-party service providers for help. Together, your company’s compliance management becomes easier, allowing you to control costs and resources to an acceptable level. More importantly, you can concentrate on core business activities.

Should you need it, Logix BPO will happily assist you with these compliance functions: financial and tax, data protection and privacy, and HR and employment.