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Effective background checks could well have prevented recent high-profile fraud cases involving senior financial staff, but how disciplined are UK companies at applying them?

The first, most common, form of background check available to a potential employer is the previous employer’s reference. These are often amongst the best sources for getting an accurate appraisal on your prospective hire in terms of performance, skill level, management ability and importantly, reason for leaving.

This form of check has, however, been devalued somewhat in recent times. Many firms have now been forced, due to liability issues, to direct all reference requests to their central human resources departments with the end result being a very standardised employment date, role and salary confirmation with an accompanying blurb that will be found on all references irrespective of the employee’s performance.

Gaps in employment

If a reference is produced by your new hire, it is imperative that the referee’s credentials are corroborated. Far too often, even at very senior levels, a referee can turn out to be a colleague that was at the same level and could be more aptly described as ‘drinking buddy’ rather than ‘direct line manger’.

Along with a minimum of two employment references, the prospective employer is also entitled to insist upon having personal references made available to cover any gaps in employment. Such gaps are usually classified as any period in excess of four weeks.

Companies should insist on being shown the original of the individual’s passport as a standard ‘proof of identity’ check. Carried out at any point during the interview process or at offer stage, this can often alert the company to any major issue early on.

There are also several reports available to potential employers that are becoming more commonplace. They provide the company with more detailed information about the candidate’s financial and criminal backgrounds.

Criminal convictions

National and international credit checks are available to the potential employer, dependent on the potential employee’s main country of residence. A credit check will reveal hidden bankruptcies, loan defaults or other financial discrepancies whilst also helping protect against potential identity fraud.

The report is filed online and the completed check can take anything between 24 hours and ten days, depending on complexity and how far back into the individual’s past the prospective employer wishes to check.

The company is also able to file a check with the Criminal Records Bureau, called an Enhanced Disclosure. This report will highlight any criminal convictions and will take between two to four weeks to be completed. It can be well worth the wait when you consider the implications.

All background checks mentioned above are relatively in-expensive. Any potential employer would be well-advised to make satisfactory results a pre-condition of any job offer.

Disparity

Despite the options available, and potential implications of failing to properly assess a would-be employee, there remains a high level of disparity when it comes to the degree to which companies use background checks across the board. 

For example, one of our major clients – a tier one investment bank – insists on five years of written references, two personal references for any gaps over four weeks and an international credit check to go back ten years for any staff entering at middle management grade or above.

Contrast this with an example of a major global insurance company that is satisfied with just two written references, neither of which are properly followed up, and it becomes clear that there is rarely commonality between professions or even companies.

If a company is using the services of a search agency or recruitment firm to procure staff, then the responsibility for background checking and proof of identity should fall with the search company. We always advise our clients to see the service as mandatory.

Background checks are crucial

Doing a background check is always important to some extent. However, the degree to which a potential employer should go in terms of background checks is obviously dictated by the level of seniority, and the area of sensitivity in which the potential employee will be working.

When both of these areas can be marked ‘high’, thorough background checks are crucial. The rather extreme case of finance director Sharon Bridgwater, who stole over £2 million from a former employer, was a recent point in case.

James Parsons is managing director at Arrows Group, a specialist recruitment company within the financial services and new media sectors. 

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Related links

• Arrows Group