Background Verification In The Banking Industry – The Why and How

Background verification in the banking industry is stringent because banking jobs involve access to financial and sensitive personal information.

Financial Screening

In the past several years, the banking industry in India has witnessed growth at a steady pace.

Rising rural penetration, vigorous regulatory oversight, growing disposable incomes, and expansion of the internet and mobile banking facilities are essential reasons for the same.

According to an IBEF report, the value of public sector bank assets increased from USD 1.52 trillion in FY17 to USD 1.56 trillion in FY18. The insurance industry, in particular, is expected to reach USD 280 billion by 2020 owing to flexible regulatory laws in India.

Speaking of NBFCs (Non-Banking Financial Company), they have also witnessed growth in their lending capacities, as high as 18% in the last five years. The reasons being lean cost structures, better risk management capabilities, better product lines, and more.

A report by NASSCOM predicts that India’s FinTech software market alone will touch USD 2.4 billion by next year, tapping at twice the current rate of growth.

However, all is not hunky-dory in the banking sector of our country.

Cases of identity thefts, accounting frauds, asset appropriation, and money laundering are synonymous with the banking industry. What might shock you is that an insider commits 50% of scams!

The sector witnessed a discrepancy rate of 10.13% in 2018. In other words, the number of people misrepresenting their credentials or lying on resumes is highest in the BFSI sector, according to this ET article.

That’s why performing a financial background check is necessary.

While background verification is becoming a norm in industries including healthcare, banks and financial institutes also conduct them at all levels of employees.

Financial background check for employment is vital in the banking industry where sensitive financial and personal data about their customers, stakeholders, and insurers are handled by the staff. The sensitive information includes customers’ financial records, passwords needed for the fund transfer and corporate protocol. It is paramount for the BFSI industry to be driven by an ethical workforce.  

Naturally, precautions should be taken to ensure the security and reputation of the banking facility. The trust deficit in this specific industry can be solved by adopting pre-emptive measures such as these financial background checks.

Here are 3 significant reasons why a pre-employment background verification is essential, especially in the banking industry:

The Why behind Financial Screening:

To ensure customer information stays protected

A banking facility has access to cash, accounts, and sensitive documents of all sorts. In a world where cyber hacks and data breaches are prevalent, they need to ensure that the customer information always stays protected.

By conducting a background verification, they can double-check the potential hires’ work history, how compliant they are with the banking industry regulations; and whether they have done the work they say they have.

Hence, background checks for financial institutions need assurance; otherwise, their reputation and customers are exposed to tremendous risk of fraud.

To follow the best practices for money transfer licenses

Regulations are strict for obtaining licensure to become a money transmitter. If a financial institution undergoes the tedious process of approval for money transfer licenses, the new hires must be appropriately vetted.

 Failure to do so can land the commercial facility in legal trouble and also make them lose their money transfer license. With pre employment screening tools such as SpringVerify, it is easy to ensure the candidate has the required professional license and clean work history.

To ensure impeccable customer experience

Customers rely heavily on banking facilities for their financial needs. That is why it is necessary to hire professionals who are knowledgeable, courteous, and problem-solvers by nature. A thorough financial institution background check helps in understanding if a candidate will meet not just the expectations of the company but also of the customers.

Multinational investment bank JP Morgan Chase & Co was fined  USD 1.25 million in 2017 by The Financial Industries Regulation Authority (FINRA) for failing to conduct background checks on 8,600 of their employees, out of a total 35,000 associate employees. Reuters reported that they were not thoroughly screened before or after joining the bank. Imagine staff with criminal convictions handling highly sensitive financial data of the customers!

The How behind Financial Screening:

Bank background check is to make sure that the candidates are honest about their past employment, educational qualification and professional credentials. Some banks conduct credit history background check to know about their financial habits and patterns.

At all times, the banks have to follow regulations set by the Fair Credit Reporting Act (FCRA) and the Equal Employment Opportunities Commission (EEOC). In the USA, banks have to follow Section 19 for criminal history checks.

Before conducting the employment background verification for the banking industry, the employer (banking or the financial institute) has to give the applicant a disclosure form informing them about the consumer report the employer would obtain, for employment.

The applicant has to sign the agreement, notifying them about their consent for the pre-employment background check.

Most BFSI companies have a background screening policy. It is written in plain English and documents the steps, process and deliverables that the applicant has to undergo and can expect.  

Over to you

Employing trustworthy and reliable professionals is paramount for the banking industry, where the companies depend on safe and responsible practices to thrive.

At the same time, whether the information obtained from the verification is positive or negative, as an employer, the bank should be respectful and responsible for handling the candidate’s data. This information can impact many people, including the candidate’s professional life and the organization’s reputation. This step in the talent management process calls for proper handling at every stage of the life cycle.

Thankfully, tech solutions in the market are continuously evolving to make this process simpler, more reliable, and less prone to errors.

SpringVerify, for instance, uses blockchain technology for conducting the background verification process with minimal effort required from both the company and the employee.


How far back do banks do background checks?

Banks most often demand a general, credit, and criminal background check verification. It often depends on the position you are applying for.

They can verify a candidate’s education, identity, and employment history.

How to run a financial background check?

It goes without saying that the banks need to ensure that they collect the accurate information of the applicants. 

The next step would be to find a background verification partner that can help you with the job. Doing it in-house can be time consuming, alongside the fact that not all information is available publicly.

What Disqualifies You From Working at a Bank?

Banks can disqualify candidates who have been convicted of a criminal offense that includes “dishonesty, breach of trust, or money laundering”.

How to Stay Compliant When Conducting a Financial Background Check?

After you receive the background check report, the bank decides whether to select the candidate or not. 

If not, they need to take adverse action steps that include providing the applicant with a pre-adverse action letter, giving the applicant a chance to rectify any mistakes, making a final decision, and more.

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