Financial Services Industry Background Checks: An Employer's Guide

Employers hiring for roles in the financial services industry must comply with the applicable laws and perform all necessary steps to protect both their company and consumers. Background checks for finance jobs may help ensure that the industry retains integrity and help employers mitigate non-compliance.

Here’s what you need to know about conducting financial services background checks.

A financial background check is the process of gathering information about an employment candidate’s history and experience before hiring them for a role within the financial services industry. These checks are a common requirement when hiring for roles in a bank, investment firm, or other financial institution.

The financial services industry typically carries out more in-depth checks than many other industries, as employees in this sector often handle finances and sensitive customer data. Financial background checks may include a combination of employment history, education verification, credit checks, reference checks, and even criminal records.

Financial services background checks can help employers make informed hiring decisions by providing added information about a candidate’s history of employment and financial responsibility, verifying licenses, and helping to identify any added risk they may pose to the company.

For many financial institutions and businesses, conducting background checks comes down to minimizing risk. They are often essential for organizations to establish and maintain compliance in this industry and may be required by local, state, or federal law. For example, the Federal Deposit Insurance Corporation (FDIC) sets regulations for certain types of businesses or positions that may include background screenings.

Employers can use the information from a background check to better protect customers’ assets, ensure that workers are qualified for their positions, and build a productive workplace along with helping reduce the risk of fraud, embezzlement, or other financial crimes in the workplace.

There is no industry standard when it comes to financial background checks, so what is included in a check can vary from one institution to the next and even between different positions within a company. In general, a financial services background check may include:

These reports can be used to confirm a candidate’s employment eligibility based on compliance regulations and business policies. Notably for this industry, criminal and financial background checks can serve to flag prior convictions that would make the candidate ineligible for a particular position, or that might be a concern to institutions that fall under certain federal regulatory agencies. Additionally, certain factors—such as a recent bankruptcy, history of financial fraud, or pending judgments—could indicate that an individual is at a higher risk of fraudulent activity. An OCC lifetime ban list check is required by the FDIC for certain positions, and employers are obliged to comply with these lifetime bans, regardless of when someone was listed.

Having all of the information provided by a financial background check for employment allows a company to make the most informed hiring decision possible. Employers should consult with their own legal counsel to ensure they understand which FDIC background check requirements they must meet, and which other federal, state, or local laws may apply.

When reviewing the results of a background check for financial services, employers are usually looking to identify certain trends, qualifications, or even warning signs in a candidate’s history. Because financial services employees will be handling sensitive client information and financial assets, employers often focus on records that can show evidence of a candidate’s experience handling finances, credit history (such as bankruptcies), and any criminal convictions related to finance.

Typically, employers are looking for signs that the potential employee has previously demonstrated responsible handling of finances or sensitive information. They also want to see that the individual has not violated important financial regulations during prior employment, including those from the FDIC, OCC, Consumer Financial Protection Bureau (CFPB), and various state or local laws. If the position requires a certain level of education, experience, or professional licensing, employers may want to verify that information as well.

Individual background checks may be requested from government entities, courts, previous employers, and additional sources depending on the report and jurisdiction. If requesting records directly, employers will need to contact the relevant agencies, order and pay for reports, and handle all individual candidate communication about the background check process.

In most cases, it can be much easier and more cost-effective to work with a professional background check provider, also known as a consumer reporting agency (CRA) to minimize manual labor and speed up the background check process. Checkr enables employers to build customized background check packages based on their company’s specific needs, no matter how many checks you run each year. Employers can streamline the background check process by requesting reports—including OCC exclusion list checks—and adjudicating results through one easy-to-use dashboard. Plus, candidates can easily track and view reports through Checkr’s candidate portal. 

Employers who work with a CRA will also need to follow federal Fair Credit Reporting Act (FCRA) regulations when running background checks to maintain compliance, and all employers may need to complete additional steps during the background screening process based on applicable local, state, or federal laws.

To maintain compliance during financial background screenings, employers can follow their organization's background check policies, ensure their processes align with federal regulations like the FCRA, and adhere to any additional local, state, or federal requirements that may apply. This includes providing disclosures and receiving consent from candidates before conducting checks, running consistent screenings for candidates applying for the same role, and following objective adjudication guidelines.

First and foremost, organizations may wish to develop and maintain a standard screening policy. A well-communicated policy gives candidates a clear view of what the background check process will entail and how it might affect their candidacy, as well as informs current employees of any ongoing background check reporting processes. Compliance-minded employers train their teams on relevant workflows and include this information in a written guide, such as an employee handbook.

To mitigate potential FCRA violations, employers must receive any potential employee’s consent to run a background check if utilizing a CRA like Checkr to conduct background checks. A notice that a background check will be performed, along with a summary of the candidate’s rights, must be provided in writing, and the candidate must consent to the background check prior to the screening. If an employer decides not to move forward with a candidate as a result of their background check report(s), they should follow the adverse action process.

Certain financial institutions and positions fall under the FDIC umbrella and are subject to additional background check regulations. For example, Section 19 excludes individuals from working in the financial services industry if they have been convicted of certain crimes. To determine if a candidate has been convicted of those crimes, a criminal background check is typically required. The OCC also maintains a list of excluded individuals who are subject to lifetime bans from the financial services industry. 

There are multiple laws and regulations that apply to financial services background checks, so it’s important to understand which apply to your organization and your potential employees. Here are some laws and guidelines to consider.

Summary: The FCRA regulates employers who use a CRA to request sensitive information such as employee background check reports. A candidate must be given written notice prior to the background check and provide their authorization before any screenings are conducted. If a candidate is denied employment based on the information in a background check, employers must follow the adverse action process. See law.

Summary: Unless prior written consent is provided by the FDIC, Section 19 of the FDIA prohibits certain individuals from working for an FDIC-insured financial institution. Banned individuals include those who have been convicted of (or taken a pretrial plea deal involving) criminal offenses related to money laundering, breach of trust, or dishonesty. See law.

Summary: The GLBA is a federal law that requires financial institutions to safeguard consumers’ sensitive data. Maintaining compliance with this law means that institutions may need to perform comprehensive background checks on all employees who will be in possession of that consumer data. See law.

Summary: The Dodd-Frank Act is a federal law that provides a multitude of protections to consumers and imposes new regulatory oversight on the financial services industry. If an employer runs a credit check on a potential or current employee, and uses those results to make a hiring or placement decision, the employer is required to notify the employee and disclose information such as the actual credit score received, how the score was considered, which model was used, and which CRA provided the score, among others. See law.

Want to learn more? Here are some of the most frequently asked questions about financial services background checks.

Healthcare industry employers may wish to run OIG background checks when hiring employees or contractors or vetting volunteers. Because the OIG exclusion list is updated regularly, the OIG also recommends conducting OIG checks of employees, contractors, and volunteers on a monthly basis.  

Certain criminal convictions can disqualify an individual from working at a bank in some positions, as defined by the FDIC and employer policies. These violations might relate to securities fraud, money laundering, embezzlement, theft, or other offenses that might pose a risk to institutions that handle finances and sensitive customer information.

Additionally, a list of individuals banned from working in financial services is maintained by the OCC, and financial employers are obliged to comply with OCC bans. Employer policies may also include company-specific reasons that a candidate could be disqualified from bank employment. Ultimately, individual employers are responsible for making hiring decisions and maintaining compliance with relevant regulations that recommend disqualification.

The length of time a financial services background check takes depends on the exact reports requested and the responsiveness of all entities involved, including the requested agencies and the candidates themselves. This timeline can be affected by delays in obtaining an applicant’s authorization or necessary information to run the check, regulatory waiting requirements, or human error.

Working with a CRA, like Checkr, to complete background checks for finance jobs can help speed up the process. Checkr makes it easier to customize reports for different positions, submit requests, verify information, and review results—plus, 92% of customers say their background check turnaround time is faster with Checkr and 89% of Checkr criminal background checks are completed in under an hour. 

If working with a CRA, employers are generally only able to view up to the last seven years for non-conviction background check records, as per FCRA guidelines. This includes arrests, tax liens, civil judgments, and most information found on a credit report. However, there is no limit to the lookback period for criminal convictions in most states, and FCRA limits may not apply for positions with salaries of $75,000 or more.

How far back a background check goes may also depend on any fair chance hiring laws specific to the employer or candidate’s jurisdiction.

The cost of a financial services or bank background check will depend on the exact reports desired and where the candidate is located. It’s important to also factor in the time costs for your team to request and conduct these checks, as well as gather and review the reports.

Instead, it may be much more cost-effective to work with a background check provider to conduct this process. Screening partners, like Checkr, can not only create customizable background check packages but also offer volume discounts and streamline the entire process. This can save your company money on the reports themselves, as well as various administrative costs for requesting those reports.

If it is relevant to the role in question, and as long as the employer complies with any applicable laws and regulations, social media background checks may be incorporated into financial services background checks. These checks may further serve to mitigate risk among new hires, but it’s important to research and follow all state and local laws as well as provide necessary notice to candidates to maintain compliance. Many companies avoid these checks for various reasons, including the potential for discrimination lawsuits and the potential of bias in the hiring process.

Drug testing may be included in some employment background checks, but in general it isn’t legally required for financial services employers. Local and state drug testing laws may impact if an employer conducts drug tests and what substances are included. While some institutions may decide to implement pre-employment drug testing, not all do. 

Comprehensive pre-employment background checks are an important part of the hiring process for most employers, but can be especially imperative when hiring for positions within the financial services industry. Conducting these various checks, however, can be an arduous task, which makes working with a background check partner like Checkr the right move for many organizations. 

Checkr offers financial services background screening options to employers, providing an efficient process and peace of mind at any scale. And with customizable packages, organizations of any size can build the exact background check plan they need at the right price. Get started with Checkr.

About the author

Stephanie Colestock is a professional writer who covers a variety of small business and financial topics. For Checkr.com, her work is aimed at helping both employers and job candidates navigate the hiring and employment process in the most informed and effective way.