Fraud is a major threat to financial institutions, but unfortunately, it doesn’t always come from the outside. Theft and fraud can also occur internally. To protect your bank, you need to screen your employees. Before hiring your next employee, check out these tips.
Understand the FDIC Regulations
If your financial institution is insured by the Federal Deposit Insurance Corporation (FDIC), you need to follow certain guidelines. In particular, Section 19 of the Federal Deposit Insurance Act prohibits you from hiring anyone who has been convicted of dishonesty, breach of trust, or money laundering. Additionally, you cannot hire people who have entered pretrial diversion for those types of crimes.
Check the Lists
The FDIC maintains a list of people who are not allowed to work at federally insured institutions. On top of checking that list, you should also check the sanctions lists from the following entities:
- The Board of Governors of the Federal Reserve System
- The National Credit Union Administration
- The Office of the Comptroller of the Currency
- The Division of Supervision and Regulation of the Federal Reserve Bank
- The Office of Foreign Asset Control
Do Local and National Background Checks
You probably already do a fingerprint check on all prospective employees, through the FBI database, but to really safeguard your bank, you may need to do more. Unfortunately, the FBI fingerprint database is not complete. Consider augmenting that check with a criminal background check with your local law enforcement officials. Ideally, you should give yourself time to thoroughly vet every employee you hire.
Verify Information on Resumes
A shocking number of people lie on their resumes. To ensure you’re hiring the right person for the job, verify the information presented on job candidates’ resumes. Unfortunately, sometimes people inflate their previous experience by saying they were a manager or a supervisor at a company where they were a teller, or they may hide gaps in employment by shifting the dates they were with certain companies. In some cases, they may even misrepresent their education or professional licenses.
In addition to doing background checks on your financial institution’s employees, you should consider doing checks on all the subcontractors or vendors who work for you. Whether you’re hiring a marketing agency or a cleaning crew, those individuals may have access to your facility or your information in ways that could be compromised.
That said, you don’t necessarily need to do the same level of background check for every employee or contractor. You may want to develop different processes depending on the level of the employee and their access to sensitive data. Ultimately, you need to find ways to balance your due diligence with your risk management needs and your time.
When doing background checks on employees, you need to be fair. Employees have rights under both the Fair Credit Reporting Act and equal employment opportunity laws. If you handle all the background checks for your financial institution internally, take time to stay updated on the rules established by the Equal Employment Opportunity Commission. In most cases, you simply need to let job candidates know that you’re gathering information about them. Have them sign a disclosure form consenting to the background check and be clear about the types of criminal activity that may bar them from working for you.
Keep in mind that you cannot necessarily bar certain employees from work opportunities just because they have crimes on their record. The crimes may need to be connected to their job. For instance, if someone has a conviction for driving while under the influence of drugs or alcohol, you might not be able to disregard their application on that crime alone (unless of course, you’re hiring them to be a driver for your bank).
To ensure your employees are screened as thoroughly as possible, you may want to consider outsourcing your background checks. If you take that route, make sure the company you hire is experienced with doing background checks for financial institutions in particular. You have unique needs that vary from businesses in other industries, and you need to ensure the consultant you hire understands your specific concerns.
Doing extensive background checks on employees is just one of the many areas where you need to protect your financial institution. To truly safeguard your bank from all types of fraud, you need a multi-pronged approach, and SQN Banking Systems can help. We make fraud protection easy for our clients. To learn more about our software and services, contact us today.