It’s no surprise that extra vigilance is required when hiring for roles that deal with consumers’ assets, especially as finance roles often involve access to a lot of money and sensitive information. In this case, firms must ensure that their services are provided honestly and fairly by employing trained and competent staff. Otherwise, if things go wrong due to a bad hire, the blame may likely fall on you. A major bank in Hong Kong learned this lesson the hard way when specified provisions under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) were not complied with by some of their employees, resulting in the Hong Kong Monetary Authority taking disciplinary actions against the bank. This included a public reprimand, a large fine, and an order for the bank to present and undergo sufficient remedial action.
If there are numerous weaknesses present in your firm, your employee can hold the defense that he/she was simply following the bank’s standard practices; however, the majority of financial regulatory bodies often attribute overall or major failures as an institution’s fault and responsibility. This may include accountability for failing to establish and maintain effective procedures. For instance, not screening candidates increases the likelihood of making a bad hire, such as employing someone that is unchartered, unlicensed, has criminal convictions, or who was fired for making severe/negligent blunders in their past position(s). This puts your firm at risk of breaching globally employed rules such as conducting appropriate customer due diligence (CDD) or mitigating the risk of money laundering/terrorist financing (ML/TF). Failure to screen your candidates can also negatively impact ML/TF, as without checking their background, it is difficult to determine whether he/she may belong to a high-risk group (e.g., a politically exposed person or a convicted criminal). In fact, negligently hiring convicted criminals in the finance sector happens more often than you think.
Consider the case of Leung Chi-yuen, an accountant from Hong Kong. He was negligently hired by a firm despite being simultaneously wanted for another crime where he had stolen HK$4 million from his previous employer. As his current employer failed to conduct a background check on him, Chi-yuen was successfully hired again and went on to steal an additional HK$30 million from his current firm. In another example, Ariel Biasong Salamanes, an accountant from Singapore stole SG$4 million over the course of four years from his employer. These incidents are often the product of what happens when a company does not have sufficient background screening measures in place. In fact, some of the most common perpetrators of fraud are often business insiders just like the two accountants mentioned above; this is why it is imperative for more financial firms in Asia to implement background checks.
The typical screening procedure for those in the finance industry includes conducting several background checks on candidates and existing employees. Job applicants typically gain access to the data, systems, and processes in your company after they are hired; therefore, you need to have adequate safeguards in place to deter risks arising from a “bad” employee that might potentially have malicious intent. Adopting thorough screening is one way to help employers better identify and predict the potential for candidates or employees to commit fraud/damage to the company (also known as an insider threat). Verizon determined that 86% of insider attacks were financially motivated last year; in fact, several global firms that have analyzed insider occurrences have found that the top motivator is financial gain. Findings from one global report also found that there was a 47% increase in the number of global insider threat-related occurrences within the last three years. However, it is not just the frequency of attacks that are growing, but also the amount of financial loss endured by companies that experience it. The average annual cost of insider threats in Asia-Pacific last year totaled to a staggering US$7.89 million, with the average cost of a data breach on remote work amounting to US$137,000 per attack (IBM, 2020).
Given the high costs at stake, employers in the finance industry should at the very least conduct identity, employment, local language media search, compliance, criminal, and/or financial regulatory checks to view if their candidate was fired or subject to enforcement actions by financial regulators due to his/her fraudulent actions or misconduct in previous roles. For firms that have not screened their existing employees, continuous monitoring practices may be adopted as it periodically checks staff and provides a risk mitigation system for future hires.
Given the highly regulated industry and regional variances in codes of practice, hiring candidates in finance roles is often challenging. A tailored hiring process should be implemented by employers for the purpose of acquiring and onboarding top talent before competitors do. The real challenge arises when an employer must deal with multinational candidates; multiple, detailed, and country-specific background checks are often required to comply with industry regulations. Considering that in-house HR staff may not always have sufficient bandwidth, knowledge, or the language ability to grasp and stay up-to-date with the regulations/changes to employment-related laws in different countries, background screening can be highly complex when conducted internally in a firm. With today’s workers often having overseas experience, it is more crucial than ever before to work with an expert and globally experienced screening organization to remain compliant.
Although obtaining reference checks is a strict hiring requirement in many Asian regions, our team at Cisive has found that many firms endure difficulties with this requirement due to constraints posed by previous employers. For instance, some of your candidates’ past employers may unintentionally withhold or delay reference information, especially as providing references to another firm may be considered as a low priority once their employee no longer works for them. We help tackle this issue by accelerating the turnaround time of background checks via our high-tech-enabled, personalized, and streamlined solutions. Our comprehensive checks ensure that no subjectivity or bias about a candidate’s protected attribute(s) is involved and provide consistently polished and accurate background results.
Keen to implement background checks for your firm? Contact us to get started.
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