What Background Checks Do Banks Use?

By Michael Klazema on 3/18/2019

Banks and financial institutions owe it to their customers, members, stockholders, and insurers to vet their employees thoroughly. Most bank jobs involve access to both money and sensitive personal information. These factors make working at a bank attractive for someone who might be looking to steal money, commit identity theft, or both. Because of these threats, banks tend to be very vigilant in conducting background checks on all new hires.

When it comes to discussing the types of background checks that banks use, the first considerations should be the FDIC and Section 19.

The FDIC, or Federal Deposit Insurance Corporation, is the organization that insures most banks in the United States. Section 19 is a measure of the Federal Deposit Insurance Act that limits who the FDIC can hire. Section 19 bars FDIC banks from hiring “any person who has been convicted of any criminal offense involving dishonesty, breach of trust, or money laundering.” Candidates or employees who have “entered into a pretrial diversion or similar program in connection with such an offense” must also be disqualified or terminated.

Banks will use criminal history checks to look for convictions that apply to Section 19. While crimes like identity theft, embezzlement, or fraud are top-line red flags for financial institutions, they are not the only convictions that a bank is looking for on a background check. Most banks are also looking for past issues with violence or sex-related crimes as a means of ensuring a safe workplace for employees.

Bank background checks will typically go beyond criminal history. Verification checks are common to make sure that candidates are being honest on their resumes about educationprofessional credentials, and past employment. Some banks also use credit history checks to learn more about their candidates’ financial habits—though credit checks for jobs are not legal in all parts of the country.

In designing their background checks, all banks must observe the same compliance guidelines as other employers, including following the Fair Credit Reporting Act (FCRA). Banks should also aim to follow Equal Employment Opportunity Commission (EEOC) guidance wherever possible. However, because banks are bound to follow Section 19, their hiring policies and handling of criminal history may sometimes have a disparate impact on minorities.

In 2018, a judge ruled for Wells Fargo in an EEOC lawsuit that alleged the company’s hiring practices were discriminatory. Despite the presence of disparate impact, Wells Fargo’s responsibility to follow Section 19 ultimately took precedent.

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