The office of the Federal Deposit Insurance Corporation (FDIC) was created by the Banking Act of...
In the financial services industry, where trust, compliance, and accuracy are paramount, staying ahead of background screening trends is more important than ever. Evolving regulations, technological advancements, and shifting workforce dynamics are transforming how institutions approach employment background screening.
For HR leaders, these changes bring both challenges and opportunities: how do you adapt to new rules, embrace innovative tools, and ensure your hiring processes remain fair and effective?
Discover five key trends shaping background screening processes in financial institutions, what they mean for your hiring decisions, and how you can prepare your organization for success.
5 Key Screening and Employment Trends in Financial Services
The industry is experiencing a shift in how financial services background screening is conducted. From regulatory updates to technological innovations, these background screening trends are reshaping how HR leaders make hiring decisions. As the demand for efficiency and fairness grows, understanding these developments will help you align your processes with both compliance requirements and business priorities.
Increased Focus on Fair Hiring
Fair hiring practices are now a key focus in the financial services industry. With updated regulations like the Fair Hiring in Banking Act (FHBA), you’re expected to balance compliance with fairness. The Federal Deposit Insurance Corporation (FDIC) recently updated its rules to provide clear guidelines for handling expunged, sealed, or dismissed criminal records, ensuring candidates are not unfairly disqualified for past offenses that have been legally removed.
To adapt, you should review your background screening processes to align with these changes. Training your hiring teams on the nuances of fair hiring regulations will ensure consistent and equitable decisions while fostering trust among candidates.
New Need for Documentation
A critical regulatory shift is the FDIC’s requirement for a “reasonable, documented inquiry” into an applicant’s criminal history. While this ensures a thorough approach to background checks, the lack of a standard definition for “reasonable” places the burden on you to define and implement best practices.
To stay compliant, you should create standardized templates and workflows for documenting criminal background checks. Train your hiring teams to follow these procedures consistently, reducing the risk of errors or non-compliance. Documentation not only protects your organization but also demonstrates transparency and diligence to regulators.
Lenience Towards Certain Offenses
New rules under the FHBA reflect a growing trend toward lenience for certain offenses, particularly older and minor infractions. Offenses committed more than seven years ago, or when a candidate was 21 or younger, are now often excluded from consideration if specific conditions are met. Additionally, exemptions for minor offenses like shoplifting or fare evasion allow you to focus on candidates’ potential rather than penalizing them for low-risk past behaviors.
For drug-related offenses, the FDIC’s updated policies expand exclusions for simple possession or possession with intent to distribute, provided these occurred more than one year ago. These changes enable you to consider a broader range of candidates while maintaining compliance with regulatory requirements. Reviewing and updating your hiring policies to incorporate these exemptions will help you tap into underutilized talent pools and address ongoing talent shortages in financial services.
Use of Blockchain for Employment Verification
Blockchain technology is revolutionizing employment background screening in financial services. With its ability to create secure, tamper-proof records, blockchain simplifies employment verification while enhancing accuracy and efficiency. For roles requiring high levels of scrutiny or remote work scenarios, blockchain can eliminate bottlenecks in the verification process.
Adopting blockchain-driven systems allows you to increase confidence in your hiring decisions and improve the overall candidate experience. This technology also integrates well with other AI-driven tools, helping you streamline your background screening processes and ensure data security.
Rise of Continuous Background Screening
As risks evolve and regulations tighten, more financial institutions are implementing ongoing background screening for current employees. This trend reflects the need to proactively address compliance risks, fraud, and security concerns throughout the employment lifecycle — not just at the pre-employment stage. Regular checks for updates to criminal history, changes in licensure status, or other critical factors help you maintain a compliant and secure workforce.
For HR professionals, this shift emphasizes the importance of integrating background screening into broader workforce management strategies. You can work with screening providers to establish automated, AI-driven processes that monitor employee records discreetly and efficiently, ensuring compliance without disrupting the employee experience.
Strategic Implications for HR Leaders
Adapting to these trends isn’t just about compliance — it’s about leveraging them strategically to overcome common challenges in financial services. Whether you’re addressing talent shortages or mitigating compliance risks, these developments provide an opportunity to create a competitive advantage in your hiring and workforce management practices.
Adapting to Talent Shortages
The financial services industry continues to face talent shortages, particularly for specialized roles. By adjusting your background screening processes to include rehabilitated candidates or those with minor offenses, you can tap into a broader talent pool. Simplifying the candidate experience with clear, fair policies also positions your organization as a desirable employer.
Mitigating Compliance Risks
Regulatory changes increase the pressure on you to ensure compliance while maintaining efficiency in your hiring processes. Leveraging tools like AI-driven background screening and blockchain technology for secure verifications can help you streamline operations while reducing legal and reputational risks.
How to Prepare for Changing Background Screening and Employment Trends in Financial Services
With these changes in mind, it’s crucial to take actionable steps to future-proof your organization. By refining your policies, investing in technology, and aligning your practices with diversity and inclusion goals, you can ensure that your background screening processes not only meet today’s standards but also set you up for long-term success. Here’s how to get started.
Review and Update Background Screening Policies
Regularly audit your policies to align with regulatory changes like the FDIC’s documented inquiry requirement and new treatment of drug-related offenses. Ensure these updates are clearly communicated across your hiring teams.
Invest in Technology for Enhanced Screening
AI-driven screening tools and blockchain-based employment verification systems can help you modernize your processes. These technologies reduce errors, streamline operations, and improve the candidate experience.
Train Hiring Teams on New Regulations
Educate your hiring teams on how to handle changes to criminal background check regulations, including expunged and sealed records. Provide practical guidance on maintaining compliance while upholding fairness.
Align Screening Practices with DEI Goals
Develop inclusive screening practices that support diversity, equity, and inclusion. This includes auditing your processes to identify potential biases and ensuring equitable treatment of rehabilitated candidates.
Partner with Trusted Background Screening Providers
Work with background screening providers experienced in financial services. They can offer insights into emerging trends and ensure your practices remain compliant and effective.
Position Your Financial Institution for Background Screening Success
Background screening trends in financial services are evolving rapidly, and it’s up to you to adapt. By understanding the key changes and taking proactive steps to refine your hiring processes, you can stay compliant, attract top talent, and position your organization for long-term success.
Want to learn more about compliance with background screening trends in financial services? Discover how Cisive can help.
