April 6, 2015
While the financial services industry is often criticized or even sued for its compliance breaches, it deserves applause for its diligence when it comes to background screening. In September 2014, the Financial Industry Regulatory Authority (FINRA) announced a proposed rule that would streamline background checks for all member firms.
The proposed rule requires that member firms conduct investigations into the character, business reputation, qualifications, and experience of their applicants prior to submitting registration requests to FINRA. Not only do FINRA's new requirements improve the consistency of background screening throughout the financial sector, but they really covered their bases by also documenting that when a third-party service provider is used, member firms must ensure compliance with the Fair Credit Reporting Act (FCRA) and any other relevant municipal or state legislation.
While criminal record checks have become a must-have and not a luxury for most companies, the financial services industry has taken their background screening one step further. They don't just take an applicant's criminal past into consideration, but most also take measures to verify that they are truly qualified for the position. In addition to using multiple methods for searching criminal records, a typical background check for a position in the financial industry might include a 5, 7 or 10 year employment verification and confirmation of any claimed diplomas, degrees, or credentials. Furthermore, if the position involves the direct handling of assets, the background investigation is also likely to cover the applicant's credit history and past financial responsibility.
The financial industry as a whole has proven to be a leader when it comes to background checks and many other industries have followed suit. It's not just banks and investment firms that fall under the financial sector umbrella. Other types of companies include consumer lending, insurance, real estate credit, securities, and commodities brokerage. Those who are employed by these types of companies are trusted with considerable assets and thorough background screening is absolutely essential to secure peace of mind for both the institution and its clients.
It is important to keep in mind that background checks are not infallible. Though they are effective at reducing occupational fraud, preventing workplace violence, and improving the quality of your workforce, they do not guarantee to keep you 100% safe. There will always be first time offenders who have shown no past signs of criminal activity and even the most thorough background checks may not uncover everything about your applicant. However, background checks are one of the most useful tools for mitigating these risks.
Despite being a leader when it comes to background screening practices, the financial industry has seen its fair share of liars and cheats. Who can forget Bernie Madoff and the many other high-profile fraudsters who have made headlines in the past decade? And sometimes it's the employer who falls victim to fraud. A financial advisor in Florida was recently accused of stealing $1 million in office supplies from his employer and re-selling them.
In the end, background checks are one of the most effective deterrents and prevention tools available to employers. Organizations such as FINRA are aware of this and have acted accordingly. The entire financial industry should be commended for their leadership when it comes to background screening and other industries should certainly take note of their successes.