Financial Compliance Checks for High-Stakes Employee Roles

Every time you add someone new to your financial services organization, you’re taking a risk. But never is that risk greater than when you’re hiring for positions involving financial oversight or sensitive data.

For these high-stakes roles, employers often include financial checks as part of their pre-employment background screening. These checks can reveal bankruptcies, liens, civil judgments, or patterns of financial distress — all of which could put your organization or clients at risk.

Financial compliance checks help organizations make informed hiring decisions. Whether you’re a recruiter or an in-house HR lead, you need a full picture of your candidate’s financial background to assess and manage their risk.

Table of Contents

1. Why Financial Integrity Matters in Hiring
2. What Are Financial Compliance Checks in Employment Screening?
3. Why They Matter for High-Stakes Roles
4. Aligning Compliance With Industry Regulations
5. Best Practices: When and How To Run Financial Compliance Checks
6. Partnering With a Trusted Background Screening Provider

Why Financial Integrity Matters in Hiring

The higher the employee level, the higher the risk they can pose. C-suite executives, directors, account managers, and others may all have access to sensitive data, from bank accounts to social security numbers.

The fraud triangle shows that people will perform fraud with just three things in place: opportunity, rationalization, and financial pressure. Being in a high-level job where they work with money or accounts every day? That’s opportunity.

You can’t control rationalization, but you can control your risk to financial pressure. When conducting a risk assessment, a background check helps you know everything relevant about your candidate’s financial history, including patterns of mismanagement.

What Are Financial Compliance Checks in Employment Screening?

We’ve established how a candidate’s financial risk can hurt your business. So, how can you do your due diligence to ensure the safety of your business, staff, and clients?

Defining Financial Checks in the Context of Background Screening

When you hire a new employee, you’ll perform criminal background checks, drug testing, and more. You’ll ensure the applicant is who they say they are and make sure their work history and credentials match records.

Any financial crimes the candidate has performed will appear during the criminal check. However, that’s only a small part of their financial history. It doesn’t cover financial mismanagement or alert you to situations that could put them under financial pressure.

For people in financial roles, you’ll need to run a credit check and review their backgrounds: Are there any liens or judgments against them? Have they gone bankrupt before? Knowing these answers can help you assess the risk to your company and clients.

How They Differ From Broader Regulatory Financial Compliance

When we talk about financial compliance checks, we’re not talking about audits or regulatory checks. Instead, we’re talking about checking the financial background of your candidate during the hiring process. This is done as part of their regular background check.

These financial checks don’t investigate people or businesses after the fact. Financial checks in this article refer to the proactive review of an individual’s history to see what risks they may pose to a company. They’re done to lower the risk of issues and to prevent them as much as possible, not to find them after the fact.

Why Financial Compliance Screening Matters for High-Stakes Roles

It may seem counterintuitive to do more checks on people with higher positions. They should be people you trust the most, right? While that’s true, the trust must be earned through due diligence. Let’s look at these roles and the risks they can pose.

Roles Where Financial Integrity Is Non-Negotiable

Many roles have access to sensitive data. Any one of these individuals can cause extreme consequences through financial missteps, whether intended or not.

Every C-suite executive needs to be vetted. All executives will see financial data and be privy to payments, financial records, deals and contracts, and data on clients and employees.

Similarly, other roles in the finance department will have access to sensitive data, while department leads may create financial records showing high-dollar transactions. All these positions can pose a risk to your organization and need thorough financial compliance checks:

• • All executives
  • Controllers
  • Treasury directors
  • Chief accounting officers
  • Procurement leaders
  • Internal auditors
  • Analysts
  • Account managers
  • And more

Risks of Skipping Financial Screening in Key Hires

We understand that it can be tempting to skip this entire process. Financial screening may feel complex or unnecessary; after all, criminal checks should suffice, right? But as we’ve said, criminal checks don’t catch everything. Skipping a financial check could put you at risk for:

• • Fraud: Credit card fraud, identity theft, and account takeovers all affect your customers and could make your other clients wary of working with you.
  • Embezzlement: This is when money that should go to the business is instead pocketed by an employee. For example, a procurement lead could create fake invoices that get paid to their personal account.
  • Bribery: An executive under personal financial pressure could be tempted to make decisions that hurt the company but benefit them personally.
  • Data abuse: Using personal data or selling it to others could be tempting for someone in debt.
  • Conflicts of interest: These are not necessarily illegal. But they do need to be disclosed and monitored, and you can only do that if you know about them.
  • Regulatory violations: Government agencies require certain background checks for new hires. If you don’t run a check, you’ll run afoul of these regulations, opening you up to fines, penalties, and lawsuits.

This list is not exhaustive. Unfortunately, a poor financial history can create numerous problems for your business or organization. Don’t skip this important step.

Aligning Financial Compliance Screening With Industry Regulations

Just as with criminal checks and identity verification, federal and state regulations require financial compliance checks. These regulations cover when and how those tasks are performed.

Meeting Industry-Specific Due Diligence Requirements

Financial checks are critical in several industries. Obviously, the financial services sector, including banking, investment, private equity, and related activities, will need to run checks. However, other industries that involve a large amount of public trust, like government or healthcare, also have strict regulations.

Here are a few due diligence requirements for financial compliance checks:

• • Sarbanes–Oxley Act (SOX): Also called Sarbox, this details financial reporting requirements for corporations. It doesn’t dictate specific checks, but section 404 requires internal controls, which could include background checks for employees.
  • Gramm-Leach-Bliley Act (GLBA): This covers how financial institutions can handle data. 
  • The Financial Industry Regulatory Authority (FINRA): FINRA is a member organization that self-regulates the financial industry. Ensuring your candidates haven’t been disciplined or sanctioned can help you hire trustworthy people.
  • FDIC compliance: The FDIC requires banks and financial institutions to run thorough background checks, including fingerprinting.
  • State laws: The laws above are all federal, but individual states have additional regulatory requirements.

Avoiding Liability Through Proactive Screening

As you can see, there are many regulations to follow and many checks to complete. What happens if you skip them?

Let’s say you’re hiring a CFO. You run a criminal background check on your favorite candidate, but don’t bother with a credit check once the criminal check is clear. He’s hired.

The first year goes well, but then, you discover that he’s embezzled money from numerous client accounts. He’d had so much medical debt that he’d had a lien on his home, and he embezzled in order to pay off the lien. His credit check would have found the lien, but you’d skipped it.

Your company is now at risk of lawsuits from every affected client, who can claim that you were negligent in hiring. You’ll also be hit with fines and penalties from regulatory agencies.

Best Practices: When & How To Run Financial Compliance Checks

Here are a few guidelines to maintain compliance with financial checks. Remember, this is not legal advice. It is a starting point for you to work from. Connect with a company lawyer to ensure you address all the legal and compliance issues.

Know Which Roles Justify Financial Screening

When should you run a financial compliance check? When is a credit check appropriate, and what is legally justifiable?

Often, the role and its responsibilities will dictate the background check needed more than the industry will. You must show that this step is relevant to the candidate’s role. Do more thorough checks for roles where the candidate would:

• • Be handling private information, such as client social security numbers.
  • Have access to account numbers and financial data of individuals.
  • Be writing checks or sending wire transfers.
  • Perform duties at an FDIC-backed company, such as banks and credit unions.

Note that some states limit what kinds of credit checks you can do and for which roles. Check your state’s laws to ensure regulatory compliance.

Stay Compliant With FCRA & EEOC Guidelines

Ensure you’re compliant in every single step of the background check process, even before you start gathering data. The Fair Credit Reporting Act (FCRA) dictates how you collect and dispose of data for credit checks. Complying with the FCRA should be one of your highest priorities.

Keep Equal Employment Opportunity Commission (EEOC) regulations in mind, too. These regulations are designed to avoid discrimination in hiring.

• • Before you begin the hiring process: Set up a background check policy for your background checks. Select which roles will require which checks.
  • Before you get the data: Get consent from the candidate. Explain to them the legal requirements and reasoning for needing this information.
  • As you research and compile the data: Only access data that is relevant to the candidate’s potential role. Follow FCRA guidelines for handling the data.
  • If you see red flags: Address any red flags, but be careful how you do so. Keep EEOC guidelines in mind and follow a legal adverse action process.
  • After you’ve completed the research and taken the next steps: Properly dispose of the data, following FCRA and state regulations.

Work With a Trusted Background Check Provider

Because there are so many federal, state, and industry regulations, it can be overwhelming to even know where to begin.

Get peace of mind by partnering with a reliable and trustworthy business to handle the checks for you. These providers are skilled and experienced in navigating the regulations to ensure you receive legal and accurate results. It can also help you work through the adverse action process to ensure you are not at risk of discrimination claims.

Even better? Some providers offer ongoing monitoring to catch new compliance risks as they arise.

Partnering With a Trusted Background Screening Provider

Spot red flags early and keep your team and clients safe. By hiring a background check provider, you can offload the manual work and reduce administrative errors as you run background checks as part of your compliance efforts. Receiving a thorough financial compliance report on key hires will let you make informed decisions for each position.

At Cisive, we work hard to ensure we are complying with all federal and state regulations, all while providing top-notch customer service. With the industry’s strongest accuracy at 99.9994% and extensive experience in the financial services industry, you can trust our expertise.

Cisive Is Your Partner in Smooth, Reliable Background Checks

Ensuring financial compliance background checks on key employees is a proactive risk management necessity that helps you build trust with clients, investors, and regulators. These checks help ensure you’re hiring people who won’t be under pressure to perform fraud, embezzlement, or other financial crimes or missteps. Trust Cisive to help you get accurate information quickly.

A financial check is one of the most important things financial institutions can do to protect your assets, your reputation, and your team. Reach out to our team to see a demo and learn how Cisive can help you today!