Financial Services Background Checks: A Complete Guide for Employers 2021

In financial services, trust is everything. Employees are handling company money and also have access to sensitive information such as social security numbers and bank account details. The finance industry is under a lot of pressure to both keep customers safe from fraud and protect their own companies from crimes like embezzlement and money laundering. 

A bad hire can not only cost you money, it can make you vulnerable to lawsuits and customer complaints. A major data breach can cause irreparable damage to your reputation, resulting in revenue loss for years to come. This is why it is strongly recommended that employees in financial services undergo a more rigorous background check process.

There is no one-size-fits all solution for background checks, but there are several more advanced screenings worth considering. Below, we will break down what extra steps you should take to ensure you hire trustworthy candidates.

Routine Background Checks: The Limitations

Pre-employment screenings vary from company to company, but routine background checks typically verify identity and criminal history. This helps spot obvious red flags, such as serious criminal offenses, but routine background checks may be inadequate when hiring in the financial services industry.

Even the most rigorous criminal background checks do not pick up on non-criminal lawsuits, judgments, or complaints. When employees have access to highly sensitive information, it is always a good idea to go the extra mile when checking criminal history. 

Second, routine background checks do not include things like credit checks, which can uncover things like missed payments, foreclosures, or bankruptcies. All of this information is relevant when hiring someone who will play a role in handling company finances.

Third, you often need industry-specific screenings for financial services. Education verification is a good first step, as you want to make sure your client has relevant experience. However, you should always ensure that any professional certifications or licenses are valid and up to date.

Civil Court Checks

In addition to a routine criminal background check, a civil court check is recommended when hiring in financial services. Criminal background checks report crimes against the state, while civil court checks list crimes brought before a court by the alleged victim or wronged party. When hiring employees with access to sensitive information, you always want to cover all your bases when exploring their criminal history. 

Civil court checks can reveal any number of civil complaints or lawsuits. This can include liability suits, violations of civil rights, contract disputes, and torts, but can also reveal potentially violent crimes like past restraining orders or sexual harassment complaints.

AccuSourceHR™ Workforce Solutions conducts civil court checks on the county, state, and federal levels while working with your company one-on-one to ensure compliance throughout the entire process.

Credit Checks

When it comes to hiring in financial services, a credit check is a vital part of the process. It minimizes the risk of theft, embezzlement, and fraud and also ensures that you are hiring a candidate with a history of sound financial decision-making.

A credit check can reveal a history of late or missed payments, foreclosures, bankruptcies, and collection accounts. A client with a long history of financial problems is obviously not the best hire for a position that entails handling a company’s money.

If you do decide to order a credit check, however, take extra precautions to ensure legal compliance. A credit check is considered discriminatory for positions where credit history has no bearing on the position. In recent years, many states have enacted strict limitations regarding checking an applicant’s credit history. So far, ten states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington) outright prohibit employers from accessing credit reports and 20 additional states are considering similar legislation.

The Federal Credit Reporting Act (FCRA) requires that employers send both a notice and authorization form before requesting credit reports for candidates. If you plan to reject a candidate based on their credit history, you must send that candidate a written notice beforehand that includes both a copy of their credit report and a notice from the Federal Trade Commission summarizing their FCRA rights. 

AccuSourceHR™ advises all our clients on state and federal compliance when ordering credit checks for candidates.

Education, Employment, And License Verification

Jobs in financial services often require very specific certifications, licenses, and degrees. Therefore, it is important to ensure a candidate has been completely honest about their qualifications. You do not want to find out that your newly hired accountant had a fraudulent license or that your financial advisor never actually finished their bachelor’s degree.

Reference verification, education verification, and professional license verification can all be added to a routine background check, an extra step that is often necessary in financial services.

Other Advanced Financial Services Background Checks

There are many different advanced screenings an employer can request when hiring someone for a high-up position in financial services. Again, there is no one-size-fits all option here. An employer must look at the responsibilities of the position at hand to determine which extra screenings will be most beneficial to their company.

Some options include:

• Social Media Screening: This looks into publicly available information on a client’s social media profiles, which can give you a more in-depth picture of a client’s character.
• International Screening: If you’re hiring a candidate who currently or previously lived overseas, an international screening can help verify information that may be inaccessible with a standard domestic screening.
• Identity Checks: Particularly important when hiring remote candidates, an identity check takes extra measures to verify identity.

Financial Services Background Checks: The Bottom Line

A more advanced background check process is often needed for high-level jobs where individuals have access to sensitive information. In financial services, it is highly recommended that you add some more advanced screenings to your background check process. While extra screenings may take a little longer than average, they are well worth it to protect the integrity of your company.