September 19th, 2018 | Nathan Anderson, Sterling Talent Solutions

Importance of Workforce Monitoring and Re-screening in the Financial Services Industry

Employers understand the importance of conducting due diligence on their candidates by completing background checks. But it is just as important to monitor and re-screen employees after hire. Employees represent your company and brand to clients, prospects and the public at large, while also handling important internal resources. Trusting that employees are honorable and honest is at the heart of this relationship and background screening helps achieve peace of mind. A bad hire who is still employed at a company can lead to loss of productivity, workplace safety issues and co-worker dissatisfaction. This, in turn, affects a company’s bottom line since the average cost of replacing an employee is between 16% and 20% of the annual salary.

What is Workforce Monitoring and Re-Screening?

Re-screening is the process of performing background checks on current employees at periodic intervals, while monitoring is proactive, ongoing checks for potential issues.  There is a misconception that background screening is a one-and-done process for businesses. A current employee can engage in illegal behavior, impacting both the individual involved and the company brand.

The Sterling Talent Solutions Background Screening Trends & Best Practices Report 2017-2018 found that 89% of companies conduct employment background checks with eight out of ten respondents saying that background checks uncover issues/information that wouldn’t have been found otherwise. The latest National Association of Professional Background Screeners (NAPBS) report, “How Human Resource Professionals View the Use and Effectiveness of Background Screening Methods” supports our insights and goes further into the reasons why companies conduct background screening. The report found the following:

  • 86% of employers cite public safety as the top reason to conduct background checks
  • 52% perform background checks to improve the quality of hires
  • 39% due to law/regulation requirements
  • 38% to protect the company reputation
  • 35% to prevent and/or reduce theft, embezzlement and other criminal activity

Reasons for Monitoring and Re-screening

Businesses invest time and money to ensure they know who they are hiring. Depending on the position, employees can access financial records, organizational property and proprietary business information. Employees represent your company with clients, vendors and the general public. Organizations have performed their due diligence before they hire, but what about ongoing employee screening? Employers who rely on self-reporting policies may encounter problems when it’s too late. In addition to periodic rescreening, below are just four reasons for conducting event driven post-hire background checks:

  • Change in employment status: It is important for employers to have a policy to rescreen employees whenever their employment status changes. This could include transfer to another department, change in responsibilities or even from a leave of absence.
  • When an employee is being considered for promotion: With a promotion an employee could be taking on additional scope or responsibilities. Rescreening could be an insightful tool if only a partial background check was performed in the past. Additional checks such as employment and education verification will confirm if the employee has met the criteria for the new position.
  • As part of an employee investigation: There are always potential risks when an employee’s behavior changes since the time of hire. Negligent retention could make an organization directly liable for retaining an employee when it should have known about an employee’s potentially dangerous behaviors but kept that person employed.
  • Employees should be rescreened after a merger or acquisition: Companies need to be aware of the risks that could exist in in its newly acquired staff, since background screening policies vary per industry and company. It is hard to overstate the importance of knowing about new employees and relevant information about their professional lives.

To protect themselves from potential compliance issues, companies should apply a consistent employment background screening program throughout the employee population.  The most popular background checks to be repeated are criminal record checks and drug and health screening.

Importance of Workforce Monitoring and Re-Screening for the Financial Services Industry

Workforce monitoring and re-screening is crucial for many industries, including financial services. Even exemplary employees, with no issues in the past, can encounter traumatic life events that dramatically impact work performance or lead to criminal activity.

Regularly screening employees (pre and post-hire) can mitigate the risk of exposing a financial institution’s funds or customer information to fraud or theft, limiting exposure to loss, lawsuits and negative publicity. From a regulatory perspective, having rigorous due diligence practices in place will satisfy exam teams and may result in a quicker exam process with fewer findings. Some organizations rely on post-hire employee self-reporting, but this could leave gaps in accuracy and completeness of the information a company receive.

Continuous monitoring is a more proactive approach that allows financial services organizations to quickly identify criminal or financial issues faster than periodic re-screening. In addition to background monitoring, financial service businesses should continually review information from various sources to obtain the most detailed profile of the employee including outside business activity certifications, credit reports, criminal background checks and arrest records, lien and judgment data and information from educational institutions.

Within Financial Services, FINRA registered representatives have additional requirements to be concerned about. In addition to the initial disclosures that need to be included on the rep’s Form U4, any new disclosures need to be reported to FINRA within 30 days. Ongoing monitoring and regular re-screening can mitigate the risk that a rep fails to self-disclose in a timely manner.

Partner with a Third-Party Screening Provider

Having adequate pre-employment screening procedures for employees, while a good start, is not enough to avoid potential risks for an organization or its clients. Sterling Talent Solutions helps the world’s top banks, brokerage houses, private equity firms, insurance companies and other financial services firms efficiently and effectively monitor and re-screen employees. Find out more information about the importance of continuous monitoring and re-screening to mitigate risk in Employee, Client and Third Party Due Diligence: The Cost of Ineffective Monitoring Procedures.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.