Financial and Banking Industry Background Checks

Financial Background Check

Laws Specific to Background Checks for Financial Companies

There are several laws that require a financial services background check for individuals working at banks and federally insured institutions. The Federal Deposit Insurance Act (FDIA) is a federal statute that sets the powers and responsibilities of the Federal Deposit Insurance Corporation (FDIC) and sets standards for all insured banks. FDIA Section 19 prohibits individuals from participating in the affairs of an insured depository institution if they have been convicted of certain criminal offenses or have entered into a pretrial diversion or other option, unless they receive written consent from the FDIC. This includes criminal offenses such as money laundering, financial crimes, or other crimes that involve a breach of trust or dishonesty.

The National Credit Union Administration (NCUA) is an organization that is responsible for regulating credit unions, insuring credit union deposits, and protecting members. NCUA Section 205(d) prohibits individuals from participating in the affairs of an insured credit union if they have been convicted of a criminal offense involving breach of trust or dishonesty or have entered into a pretrial diversion or another similar program unless they have received written consent from the NCUA.

To comply with these requirements, banks and credit unions must conduct criminal background checks to determine whether bank tellers and other potential employees have criminal records that impact their employability.

Investment advisors typically must obtain licenses from the Financial Industry Regulatory Authority (FINRA) before they are able to sell securities to consumers. As part of this process, a thorough background check is required. Broker Dealers and/or other organizations sponsoring a license are responsible for ordering background checks and verifying all information provided in an individual's disclosure. Some financial institutions may also require an international background check and a search of the domestic terrorist watch list.

The extent of the background check conducted may vary depending on the potential employee's role and the level of access they'll have to sensitive information. In all circumstances, a financial services background check must be conducted in a way that complies with local, state, and federal laws. This includes following the guidelines outlined in the Fair Credit Reporting Act (FCRA) and the Equal Employment Opportunity Act.

The Benefits of Conducting a Financial Services Background Check

While an investment advisor, credit union, or bank background check may be required by law, other employers in the financial services industry can determine whether or not to conduct a background check. It should be noted that there are many benefits to doing so.

For example, running a thorough background check can help you avoid hiring an employee who may be inclined to commit fraud, identity theft, or other crimes involving dishonesty or breach of trust. By running checks on a job candidate's education, licensing, and employment history, you'll have the peace of mind that comes with knowing you're hiring an individual who has the proper qualifications and qualities.

Since financial professionals handle sensitive customer data and deal with other people's money, it's common for employers to require thorough background checks. This can help you meet regulatory compliance requirements, ensure the protection of your customer's privacy, and reduce the risk of being held liable for an employee's crime.