Background Checking

The importance of employee screening in financial services


Source: Albawaba Business
Date: 30 October 2016
With technology connecting people and businesses around the world in real time, incremental changes in one market can have a huge impact in another.The financial services industry is at the leading edge of a global trend.

Given its role in financing businesses, safeguarding our pensions and savings, and moving money around the world, it is perhaps unsurprising that financial services are often at the forefront of global movements.

The sector is set to undergo significant changes in the recruitment process over the coming years, in what could be a huge opportunity for businesses and candidates.

Here in the Middle East, there has been a degree of uncertainty in local markets, which has put pressure on the sector in filling roles with suitable candidates and mitigating the risk of a bad hire. There is now the added pressure of regulators formulating stringent guidelines in which to operate. The banking and finance industries are being scrutinised in major markets worldwide, and Middle Eastern financial hubs such as Dubai are expected to follow suit.

The UAE financial sector for example, has already begun to take steps towards the implementation of a risk management framework, despite already having solid regulatory foundations.

This will have wider implications for many international financial organisations present in the UAE. With the recruitment and screening of individuals already close to a benchmarked standard, much of the essential framework is in place. Even so, we have yet to clearly see how the local industry will respond to international changes.

The Dubai Financial Services Authority, along with representatives from many of the recognised banks in the UAE such as, HSBC, ADCB, UBS and Standard Chartered to name a few, joined us at our recent roundtable event in Dubai to discuss the major challenges facing recruiters in the industry, along with the role of employment screening firms in minimising potential liability.

Industry heads present at the roundtable stressed the importance of learning from other regulatory bodies in safeguarding against potential market breakdowns. For example, the Financial Conduct Authority in the UK made it clear that they are writing the letter of the law, but will leave the interpretation up to the individual organisations. This degree of flexibility will allow financial services organisations to implement policy and processes that deliver the right results. Each organisation should then be able to make its own decision about where to draw the line in the sand on the basic minimum standards required for any role.

International employee base

One of the major talking points from the roundtable was the hiring of employees from overseas. Employers recognise the importance of having local experts who understand the nuances of the source market. The fast growth of financial services sectors in Dubai and Abu Dhabi has created an influx of overseas labour, with many financial institutions now being swamped with applications from abroad. It can be problematic for firms to not only filter these down into a viable candidate list but also run checks on prospective candidates who may have worked and lived in multiple geographies.

Employment screening operators have capabilities built into their screening solutions that enable them to secure a wealth of information a recruiter can base a decision upon.

International jurisdictions can place restrictions on the information available through privacy laws, however, leaving local operations to supplement screening activity in a quest for certainty. In the UAE this means using local knowledge to make up for the absence of a financial services tailored record check. This can be resource draining and can generate a burdensome amount of documentation.

Central database

For many financial services firms in the UAE, a personal network is still considered an effective source for rooting out any potential recruitment problems. A functioning persona non grata database that all firms contribute to as mandatory practice would improve this situation.

The industry acknowledges that such a system will only be as good as the information fed into it. This, and the lack of a central database holding key information about potential employees, was revealed as a key concern.

Personal financial status and debt default information would also be of great assistance when making vital recruitment decisions, as would a coordinated and mandated way for banks to legally share information about employees’ records. This would help with regards to fraud and criminal activity, according to many present at the roundtable.

Institutions in the UAE feel they go over and above the local regulatory requirements, but question the value and role of the ‘confirmation of employment’ letter, which offers no insight as to a candidate’s past performance. The threat of defamation accusations means little can currently be said, leaving some feeling as if further direction from employment legislation is required.

If financial firms are to achieve best practice in the region, they would benefit from clearer guidelines and greater collaboration with the regulators. This would help to evolve the industry and expand on its status as a regional hub and international reference point.

Cultural challenges

There are also cultural barriers to employment screening here in the region. Many organisations and employees in the Middle East do not understand the concept of employment screening and are, in some cases, unconvinced of the purpose.

However, we are seeing previous resistance to screening slowly subside as regulatory requirements become more substantial and the responsibility for actions has shifted to individuals. As the approach becomes more standardised and the agenda increasingly collaborative, businesses will reduce the number of damaging hires and limit resource waste.

Many financial services organisations use a periodical re-screening process, particularly among senior risk takers, with searches conducted for criminal convictions, civil litigation, and adverse media coverage. While some higher-level managers have been known to be sceptical of re-screening – especially more established employees at executive or director level – it is slowly becoming accepted and even appreciated, considering what is at stake.

Importance of screening

In an industry as quickly evolving as financial services, remaining compliant can be an onerous task. Employment screening can be vital in raising awareness of changing regulations in the industry and ensuring the brand is not damaged – or the organisation fined – for breaches of code or indiscretions over conduct.

Depending on the size of the operation, a fine could be extremely detrimental, but reputational harm could have more fateful consequences to an industry reliant on dependability.

Screening services are also helping improve employee retention. Popular opinion would suggest firms should focus on issues related to compensation, performance feedback and benefits. However, hiring an employee that is qualified for the day-to-day responsibilities of a position, has the right motivation and is an overall cultural fit reduces turnover.

Employees are less likely to leave jobs they enjoy, teams they work well with, and companies that make them feel successful.

With financial regulators around the world careful to prevent a situation similar to the one that led to the financial crisis, legislation is slowly being introduced whereby individuals should be held as accountable as the institutions they work for.

This means employment screening firms have an even greater role to play in the industry and economy as a whole. The onus now is on financial services firms to make the long-term decisions needed to protect their industry from mistakes of the past.

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