Are Financial Service Firms Making Risky Hiring Choices?

Background checks are a fixture of the modern hiring process, but their purpose goes beyond alerting employers to potential dangers due to a criminal past. While many people think of background checks as a way to uncover a history of violent crime or misconduct, they are also handy for more in-depth considerations. In the financial services sector especially, looking into a job applicant’s background is about more than protecting the public or other employees. It is also about safeguarding the assets of the company and its clients.

A recent meta-analysis of employee vetting performed for financial businesses reveals that many companies may encounter applicants with “red flags” in their background more often than they expect. Using an AI tool to categorize and explore the reports, researchers classified potential exceptions into three categories: professional concerns, reputation, and behavior. Researchers considered the latter two categories as “high risk” categories, where issues unearthed in background checks could indicate a more serious concern.

Looking at more than 3 000 background checks, the report found that roughly 23% of the individuals raised flags for potentially poor reputations, such as being under international sanctions or appearing in “adverse” media depictions. Nearly another 17% of flagged cases drew concern because of behavioral issues a traditional background check would identify. These red flags include appearances on sex offender registries, felony charges, and so on.

Some may find it surprising to recognize that nearly 40% of the examined records raised moderate to serious concerns. With a clear view of the types of applicants financial service firms may encounter, the need for a robust suite of advanced background check products are obvious. What other solutions can employers rely upon beyond the basic criminal history report? Businesses choose a diverse array of options during the pre-employment phase and even after hiring.

A comprehensive criminal history check, such as the US OneSEARCH, is always the best place to begin. How far back do these background checks go? In most cases, employers will examine seven years’ worth of records. With a limited point of view, it’s important to include other services to enhance confidence in your decisions.

Verify the truth of other information provided to your business by applicants when you choose products such as an employment verification report to confirm resume entries. Verifying education is a good step in finance, too, as some applicants will attempt to lie about attendance at prestigious universities. If an individual claims possession of certain licenses or certifications, you can verify those facts, too.

Risk management doesn’t end after the onboarding process. Ongoing criminal monitoring is an essential tool in the financial sector as workers often have ongoing responsibilities related to asset management and cash handling. Businesses should know as soon as possible when the criminal status of an employee changes.

When it comes to safeguarding businesses and individual clients' investments, there’s no such thing as “too much” diligence in vetting employees. With a well-tooled approach that considers all the facts both before and after hiring, firms can reduce the risk of internal threats and build better, safer teams.

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Michael Klazema

About Michael Klazema The author

Michael Klazema is the lead author and editor for Dallas-based with a focus on human resource and employment screening developments

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