“Online banking fraud has topped the rate of cybercrime in Pakistan,
” Shahid Hussain, IT expert. - Express Tribune

Banks, especially in today’s time where paper money is slowly becoming obsolete, play a pivotal role in the economy. Therefore, the people working in these institutions, have an extremely crucial role as they are handling sensitive and confidential data day in and day out. Employers need to be extremely sure of the loyalty, accountability, educational & professional expertise of the individuals they employ. One of the safest ways of doing this is through background verification for hiring in financial institutions. 

Index What is a Financial Background Check Importance of Background Checks for Financial Institutions Types of Background Checks for Financial Institutions Regulatory Compliance in the BFSI Benefits of using a Professional Background Verification Service F.A.Qs

 

What is a Financial Background Check?

A financial background check gathers information about potential employees regarding their work history and experience before hiring them for a role within the financial services industry. Due to the sensitive customer data, the financial industry carries out more in-depth screening than other industries. These checks may include employment history, education verification, credit checks, reference checks, and even criminal records.

Importance of Background Checks for Financial Institutions

Banking and finance are the cornerstone sectors of the economy, as they intuitively have an insight into an individual’s property, money, and investments. However, cases of identity theft, accounting fraud, asset appropriation, and money laundering are unfortunately synonymous with the BFSI sector. In other words, the number of people misinterpreting their credentials or lying on resumes is highest in this sector. That’s why performing background verification is mandatory. Here are some substantial reasons why pre-employment background verification is crucial, especially in the financial sector: 

• To make sure customer information stays protected:
  Banking entities have access to sensitive information such as bank account information, login credentials, etc. These financial institutes must ensure that their information stays protected, hence a background check helps them vet the most suitable employee.
  
  
• To safeguard the company’s assets:
  It is crucial to ensure that new hires in a financial institute have no criminal background as any such history can impact the institute’s very sensitive assets. 
  
  
• To ensure an impeccable customer experience:
  Customers depend heavily on banking entities for their financial needs. That is why it is essential to recruit knowledgeable, gracious & problem-solving professionals.  A thorough pre-employment screening helps in understanding if an employee will meet not just the expectations of the company but also of the customers.
  
  
• To avoid fiduciary liability and risk:
  Regulations governing fiduciary liability are complex and are modified regularly. Employees in financial institutions must be well versed in the existing legislation that applies to their business as the risk associated with failure to adhere to these regulations is tremendous. Thus, conducting pre-employment background checks and continued background checks can help reduce the risk of fiduciary law being violated.

Employing righteous and veracious professionals is ascendant for the banking sector, where companies depend on safe and responsible practices to thrive. Increasingly, the appropriate scanning of various documents submitted by prospective employees gives the recruiting organizations all the required and vital information about the employee to be hired, making it a standard procedure before offering employment. 

 

Types of Background Checks for Financial Institutions:

Different types of background checks can be conducted regarding financial industry roles, and each has its own unique set of benefits. To make an informed decision about which kind is best for your company, it is important to understand the different types conducted by Check Xperts in Pakistan. The financially regulated background checks typically include: 

• Criminal Background Check:
  Criminal history checks are crucial in the financial sector to prevent fraud, embezzlement, and other financial crimes. These checks help ensure that individuals with a history of dishonesty or criminal financial dealings are not placed in positions of trust, where they could potentially harm the business, its reputation or its clients. 
• Credit History Verification Check:
  Credit history checks are important to gauge the financial responsibility of an individual. In financial roles, this check can indicate how responsibly an individual manages debt and finance, which is important when they are managing or advising on others’ financial matters. 
• Global Sanctions Check:
  These are critical in the financial sector to ensure compliance with international laws and regulations, including anti-money laundering (AML) and countering financing of terrorism (CFT). These checks help identify individuals who may be on international watchlists, thereby preventing associations that could expose the institution to legal penalties or reputational damage.
• Professional License Verification Check:
  These checks include the diverse pre-employment checks where the candidate's education, work history, and identity are verified. These checks allow organizations to appoint experienced and educated individuals who have command over their respective fields. 
  
  

Regulatory Compliance in the BFSI

Financial institutions are heavily regulated, so in many countries, background checks (eg. credit checks) are a legal requirement for pre-employment. Companies may face legal consequences if there is a concern and the regulatory bodies find out that due diligence was not carried out. There are three important regulatory compliance in the BFSI (Banking Finance Service & Insurance) language: 

• FRCA Compliance:
  The Fair Credit Reporting Act (FRCA) is a federal law, modified by the Fair and Accurate Credit Transactions Act (FACT). It regulates how consumer reporting agencies use personal information. This federal law is an important one to stay in compliance with, legally and ethically. Background-checking companies and credit bureaus are both considered to be consumer reporting agencies (CRAs) that are covered by the FCRA. The FCRA gives several rights to consumers, including the following:
  • The right to informed consent before a pre-employment background check is performed.
  • The right to review background check information and correct any mistakes.
  • The right to be informed when information from a pre-employment background check about them is used to make decisions that adversely affect them.
  • The right to appeal adverse decisions made based on the data in their pre-employment background checks when they believe the information used to make the decision is inaccurate.

Violating FCRA regulations can result in substantial consequences. Under the law, employers that obtain background checks through third parties must strictly adhere to specific steps during the initial hiring and onboarding process. When employers are forced to undergo FCRA litigation, they lose money through legal fees, time losses, reputational damage, settlements, and interruptions in their business operations. 

• AML Compliance:
  The acronym AML refers to Anti-Money Laundering and its compliance entails a careful adherence to rules and regulations aimed at combating illicit financial activities. Money laundering refers to the “cleaning” of money obtained illegally using legitimate financial institutions. As an example, someone involved in criminal activity might clean stolen money by depositing small amounts into multiple bank accounts, transferring this money to other accounts, and then withdrawing the money, thus distancing the funds from their illicit origins.

According to the UN Office on Drugs and Crime, between $800 billion and $2 trillion US dollars are laundered annually worldwide. Businesses can be subject to heavy fines and sanctions or even lose a license for failures in AML compliance. Therefore, AML compliance is essential in protecting financial systems used to facilitate payments. 

• KYC Compliance:
  The acronym KYC refers to ‘Know Your Customer”, an umbrella term used for identity verification of customers before developing any business relationship with them. KYC compliance is a regulatory obligation of financial and non-financial organizations. This allows them to build customer identification processes and verify their customers regularly according to the regulatory guidelines. KYC compliance helps businesses prevent penalties, fight fraud, and mitigate financial crimes (money laundering, terrorist financing). 

Most countries have their regulatory authorities for designing and implementing KYC and AML regulations. But all the regulations have a few things in common, which are the minimum requirements of KYC/AML compliance. Global and local businesses need to comply with those regulations to prevent non-compliance penalties. Thus, verification plays a significant role in adherence to these compliances. 

Benefits of using a Professional Background Verification Service:

When it comes to the finance sector, one can’t make a mistake, taking into account the sensitive data that is being handled. Hence, a professional background check is not an option but mandatory. A professional background check service operates by utilizing a variety of verification methods to ensure the accuracy and reliability of the information obtained. It follows strict compliance protocols which are FRCA approved to manage risks effectively.

These companies have legal access to extensive database searches, reference checks, and verification of education and employment records, providing comprehensive and trustworthy background information. Moreover, they adhere to stringent legal requirements and industry standards, upholding the integrity and reliability of the data gathered.

Furthermore, through meticulous quality control measures, they ensure that the information is not only accurate but also protected from unauthorized access or misuse. This dedication to data protection and quality assurance sets professional background check services apart in maintaining the highest standards of thoroughness and compliance in their verification processes.

Therefore, consulting a professional background verification company that is well aware of the protocols of a responsibly conducted background check is mandatory when hiring in the finance sector. Check Xperts is one of the most reliable and professional background service companies in Pakistan, that is FRCA-approved, providing tailored solutions for all your background service needs. 

 

F.A.Qs

1. Why are background checks so important for financial institutions?
   Background checks ensure the hiring of trustworthy and diligent professionals who handle sensitive financial information, thereby protecting the institution and its clients. CheckXperts is one of the most reliable and professional background service companies in Pakistan, providing tailored solutions for financial institutions. 
   
   
2. What types of background checks are most important for financial institutions?
   Criminal checks, Global sanctions, Credit history verification & Professional Licence verification are the most important for financial institutions that are conducted as per standard procedure by Check Xperts in Pakistan. 
   
   
3. What regulations do financial institutions need to consider when conducting background checks?
   Financial institutions need to adhere to FRCA, AML & KYC compliance requirements when conducting background checks. These compliances ensure that the financial institutions are following the necessary legal requirements.
   
   
4. What are the benefits of using a professional background verification service? 
   A professional background check service like CheckXperts in Pakistan operates by utilizing a variety of verification methods to ensure the accuracy and reliability of the information obtained. It follows strict compliance protocols which are FRCA approved to manage risks effectively.