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Home » Blog » Financial Services Background Checks: A Complete Guide for Employers [2024]

Financial Services Background Checks: A Complete Guide for Employers [2024]

Due to increased security demands and intricate financial regulations, financial institutions must be meticulous in selecting individuals qualified to manage confidential information and financial assets for both the company and its customers.

Knowing the identity and background of prospective hires is crucial.

To ensure you bring aboard trustworthy employees, it’s essential to conduct financial services background checks on all applicants and screen them against vital sanctions and watch lists.

This measure safeguards sensitive data and ensures compliance by reducing the risk of theft or other financial crimes within your organization.

This is particularly vital for employees operating within banking institutions.

If you’re in the process of hiring, explore our comprehensive guide on background checks for financial institutions, covering banks, credit unions, and more.

In this guide, you’ll discover how to execute background checks, evaluate individuals for suitability, and maintain compliance throughout the screening process.

Here are the key points to remember:

  • Financial services background checks are vital for staying compliant with regulations and safeguarding sensitive consumer and financial data.
  • Due to the access financial employees have to sensitive information, these checks are typically more thorough compared to other industries.
  • Poor hiring choices can leave financial firms vulnerable to significant losses from internal theft, fraud, and negligent hiring liabilities.
  • Employers need to be well-versed in the laws and regulations relevant to their industry when making hiring decisions.

Why Are Financial Services Background Checks Important?

Financial institutions gotta make sure the folks they hire are solid, trustworthy, and safe. They also need to be sure these new hires have the right skills and experience to handle their roles.

See, folks working in financial services regularly handle sensitive info about their employers, customers, and cash. Skipping out on doing background checks could lead to losses from things like theft or hiring someone who’s not up to the task.

Background checks in financial services aren’t just a formality—they’re crucial for keeping things legit and building trust. They’re often stricter than in other industries because of rules and regulations.

Doing these checks comes with a bunch of perks:

  • Keeps things on the regulatory up-and-up
  • Keeps customers’ info safe
  • Lowers the risk of crime
  • Makes the workplace safer
  • Boosts employee morale
  • Protects the organization’s reputation

What Do Banks Look for in a Background Check?

Since employees can get their hands on all sorts of sensitive info and the bank’s funds, most banks ask for these kinds of checks:

  • Criminal background check
  • Work history
  • Education History
  • Credit history
  • Identity verification
  • Search in the Domestic Terrorist Watchlist

Let’s dive into what you might find in a couple of these reports.

Criminal Background Check

If someone applying has a criminal record, here’s what you’ll see on the background check:

  • When the offense happened
  • What the offense was
  • How serious it was (like felony or misdemeanor)
  • What happened afterward (the outcome)
  • When that outcome was
  • Sometimes, details about the sentence

Records that have been cleared or sealed won’t show up.

Employment Verification

When checking your employment history, you’ll find out:

  • Where they worked and where it was located
  • When they started and finished working there
  • What roles they had?

Education Verification

Checking the education your applicants say they have can make sure they’re actually qualified for the job.

When you verify someone’s education, you’ll get:

  • The name, address, and location of each school they went to
  • When they were there
  • Any degrees or certificates they earned.

Credit History

In some states, employers can’t do credit checks, but financial service employers usually can.

On a credit check, you’ll see things like:

  • Late or missed payments
  • Accounts sent to collections
  • Foreclosures
  • Repossessions
  • Judgments from creditors
  • Loans that weren’t paid back

Civil Court Search

Sometimes, financial institutions ask for civil court checks before hiring.

Certain civil lawsuits and judgments might matter because employees will handle sensitive info about customers and the institution.

International Check

Folks who’ve lived and worked abroad should get international background checks.

Regular checks done within the country might not pick up important info for candidates from outside the U.S.

Office of the Comptroller of Currency (OCC) Enforcement List

The U.S. Office of the Comptroller of the Currency (OCC) is like the watchdog for U.S. banks, federal savings loan associations, and branches of foreign banks. It’s part of the Treasury Department.

The OCC can take action against banks, financial institutions, and their employees, including top brass like directors and officers.

Checking with the OCC means looking at their list of enforcement actions to see if someone’s been banned from working in finance.

Bank Background Check Requirements: What Disqualifies You From Working at a Bank?

Typically, if a background check turns up any financial crimes, the applicant is usually ruled out for a job at a bank or financial institution.

Most banks in the U.S. are backed by the Federal Deposit Insurance Corporation (FDIC), which sets rules on who they can hire. These rules are in Section 19 of the Federal Deposit Insurance Act.

Under Section 19, banks can’t hire someone convicted of a crime involving dishonesty, breach of trust, or money laundering. Plus, if someone’s gone through a diversion program for a crime in those categories, they’re off the table too.

By running a financial background check, employers can make sure applicants meet the FDIC’s standards for bank jobs.

How to Run a Financial Background Check

While background checks are beneficial for all companies, it’s crucial that banks and financial institutions get the most accurate info on every potential employee.

By teaming up with a third-party background screening company like iprospectcheck, you can quickly get all the details you need.

If you want to gather background check info on your own, you can, but it’s a time-consuming process. Checking court records, county criminal records, and nationwide databases takes effort, and some records aren’t easily available to the public.

Partnering with an experienced background check company saves you time, money, and ensures you stay compliant through the whole pre-employment screening.

At iprospectcheck, we get the strict rules and complicated regulations the financial industry has to follow. From the Patriot Act to the Sarbanes-Oxley Act and Federal Deposit Insurance

Corporation requirements, along with the United States Financial Crimes Enforcement Network “Know Your Customer” due diligence requirements, we’ve got you covered.

How to Stay Compliant When Conducting a Financial Background Check

When you team up with a third-party background check company, they’ll help you stay compliant with the Fair Credit Reporting Act (FCRA), as well as state and local regulations for background checks.

Once you get the background check report, it’s up to you as the employer to decide whether to keep going with the hiring process.

If you choose not to hire someone based on what’s in their background check, you’ve got to follow some steps called Adverse Action:

  • First, you need to send the applicant a pre-adverse action letter, explaining why you’re not moving forward with them.
  • Then, you’ve got to wait a “reasonable amount of time” (usually about five business days) so the applicant can correct any mistakes in their background check.
  • After that, you make your final decision about hiring them.
  • If you ultimately decide not to hire them, you’ve got to send them an official adverse action letter.
  • With each of these notifications, you’ve got to include a copy of the background report and a document called “Summary of your rights under the FCRA.”

Because a financial services background check is so important, it’s a good idea to work with a third-party background check company like iprospectcheck. They’ll make sure you get the info you need to make a wise hiring choice while following the rules.

Financial Services Background Check Laws

Every employer, even those in financial services, has to follow the laws about background checks set by local, state, and federal governments when they’re hiring.

Here are a few of the big ones you should be aware of.

Federal Background Check Laws

1. The Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) sets the rules for what info consumer reporting agencies (CRAs) can gather and share with employers, and how you can use that info from background checks.

For jobs paying less than $75,000 a year, CRAs can’t report certain stuff if it’s over seven years old, like arrests without convictions, bankruptcies, liens, civil lawsuits, and civil judgments. But if the job pays more than $75,000, these rules don’t apply.

The FCRA’s time limits don’t apply to conviction records, work history, education history, and other important background info—they can be reported no matter how long ago they happened.

If you get info from a background check that makes you wanna say no to an applicant, you gotta follow the FCRA’s adverse action process before you officially decide not to hire them.

2. Title VII of the Civil Rights Act of 1964

Title VII of the 1964 Civil Rights Act (Title VII) says you can’t discriminate against employees or job seekers because of certain traits. The Equal Employment Opportunity Commission (EEOC) makes sure this law is followed.

According to Title VII, before deciding not to hire someone based on their convictions, employers should look at how those convictions relate to the job they’re applying for.

3. Federal Deposit Insurance Act

The Federal Deposit Insurance Act (FDIA) puts limits on financial services employers when it comes to hiring folks with certain convictions:

  • Convictions for breaking trust or fiduciary duty
  • Money laundering

Now, there’s a 10-year limit on hiring people with these kinds of convictions without getting written approval from the FDIC first:

  • Taking gifts to get loans
  • Mishandling money as a bank employee
  • Stealing FDIC-insured funds
  • Making fake bank entries
  • Using loans or deals to cheat the government
  • Forging documents to mess with the FDIC
  • Lying to sway decisions from a federal agency
  • Hiding assets from the FDIC while acting as a conservator
  • Committing bank fraud
  • Messing with the government’s inspection of a financial institution
  • Spilling secret bank info as a bank employee
  • Leaking info from a bank inspection report
  • Hiding money from illegal stuff
  • Dealing with property gotten from illegal stuff

But there’s a new rule, final on Aug. 23, 2020, that loosened some of these limits.

Now, financial services employers don’t need to ask for approval before hiring folks with these convictions in these cases:

  • Any convictions that got wiped or sealed
  • One or two small convictions
  • No five-year wait after one small conviction, and just a three-year wait after a second small one
  • The bar’s been raised from $500 to $1,000 for minor thefts.

4. Amendment to Sect. 19 of the Federal Deposit Insurance Act

President Joseph R. Biden gave the thumbs-up to H.R. 7776, also known as the National Defense Authorization Act for FY 2023.

This law has some important tweaks to Sect. 19 of the FDIA about background checks for folks applying to work at banks.

It also makes similar changes for credit unions.

The updated Sect. 19 makes it clearer which offenses employers need the FDIC’s OK for before hiring someone.

It puts into law certain parts of the final rule under the FDIA, like not counting sealed or wiped criminal records and how employers can ask for waivers.

The amendment helps employers figure out what counts as a crime of dishonesty. It says it’s when someone takes stuff that isn’t theirs, either directly or by being sneaky. It includes crimes that have a dishonesty angle under local, state, or federal law, but not small stuff like misdemeanors or drug offenses.

As long as a conviction doesn’t come with a rule saying the person can’t work in finance for 10 years, there’s no need for waivers in these cases:

  • Seven years have passed since the offense, or five years since they finished their time in jail

The person was under 21 when the crime happened, and it’s been 30 months

  • The changes also let the FDIC make more rules to add to the list of small offenses that don’t need waivers. Here’s what they’ll look at:
  • The offense could get three years max, not counting probation or parole time
  • Bad checks adding up to $2,000 or less
  • Other minor offenses the FDIC might add after at least a year has passed since the conviction

With these updates to Sect. 19, employers should take a look at their background check policies and tweak them as needed.

Iprospectcheck is Your Trusted Financial Services Background Check Provider of Choice

If you’re a financial institution aiming to hire new staff, it’s crucial to run a financial services background check on each applicant.

Teaming up with iprospectcheck means you get comprehensive background check services with a focus on security, ensuring you get the most precise, current info available.


How Long Do Financial Services Background Checks Take?

How long it takes to do a financial services background check depends on how you go about it.

If you try to do it all yourself—reaching out to different agencies, past employers, schools, and other sources—it could take weeks to get everything together for a report.

But teaming up with a seasoned background check provider like iprospectcheck can really speed things up. We make sure all the info we give you follows the rules laid out in FCRA, FDIC, and other laws.

With our fancy tech and thorough research, we often get you a detailed, accurate, and current report in just a few hours.

How Far Back Does a Bank Background Check Go?

The Fair Credit Reporting Act sets the rules on how far back a background check can look. Typically, the guideline in the background screening industry is seven years. This means that any arrests without convictions older than seven years shouldn’t show up in a report.

However, when it comes to convictions, there’s no time limit under FCRA guidelines. They can be reported no matter how long ago they happened.

There’s one exception to this, though—the “Salary Cap” exemption. If the applicant’s expected annual salary for the job is over $75,000, then the FCRA restrictions don’t apply.

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