While CitiGroup may appear to be protecting customers’ accounts from fraud through their latest partnership with Feedzai, a data science company that detects fraud in commerce, they’re also under the media microscope for failing to comply with industry regulations in conducting background checks on their employees. The investment bank was fined $1.25 million by the Financial Industry Regulatory Authority (FINRA) for failing to “conduct timely or adequate background checks” which led the company to employ criminals.
According to FINRA, CitiGroup failed to fingerprint at least five hundred and twenty employees before they started working at the bank. They also only complied with background check requirements by federal banking laws, neglecting to meet the requirements legislated by federal securities laws. This lack of regulatory compliance caused CitiGroup to hire three convicted criminals in the past seven years. However, CitiGroup isn’t the first investment firm to run into this kind of trouble.
When One Jumps into the Boiling Water…
In 2017, JPMorgan Chase hired ex-cons after failing to screen thousands of employees over an eight year period. According to FINRA, the bank only screened for financial, not civil or criminal offences. This led the firm to hire several convicted criminals including one employee who worked at JPMorgan Chase for eight years and another employee who worked there for ten years. Like CitiGroup, the investment bank’s securities division was forced to pay a $1.25 million fine for its wrongdoings.
What Went Wrong?
Now that we have established that these firms were in the wrong, let’s take a closer look into how this problem snowballed, costing employers $174 million and background check companies $152 million. Did employers simply tell candidates “You’re hired!” after their maybe thirty minute interview that was supposed to reflect their past behaviors, future potential, and everything in between?
As the story unfolded, it was revealed that these companies did in fact conduct background checks on job candidates, however the process of conducting the due diligence reports was not compliant with the legal requirements stated in the Fair Credit Reporting Act (FCRA). The job applicants who filed the lawsuits claimed that these financial institutions failed to receive written consent and provide a copy of the report to candidates. Under the FCRA, companies are obligated to notify applicants that employers have the right to obtain information about a candidate’s “character, general reputation, personal characteristics and mode of living.” Something that CitiGroup and JPMorgan Chase, among other companies, failed to do.
The issue of faulty background check administration extends well beyond the financial sector, as Amazon was hit with a $5 million settlement fee due to violation of disclosure and authorization requirements under the FCRA. In a class action lawsuit filed by plaintiff Gregory Williams, Amazon distributed compensation in the form of up to $150 Amazon gift cards to 454,000 job applicants to settle the dispute. Williams was offered a job as a “puller” in November 2013, but two days before he was supposed to commence employment, he lost the job due to disqualifying information that turned up on his background check about his criminal convictions. Williams claims that the report, which he was not given a copy of, must include inaccurate information because he holds no criminal record and was even cleared to obtain a permit to carry a concealed weapon. While Amazon settled the case, they did so at a high price—both financially and reputationally.
Similarly, Target was the subject of a class action lawsuit filed by the NAACP Legal Defense Fund and two individuals representing a group of job applicants who were denied employment opportunities at the American retail giant. The lawsuit claims that thousands of qualified workers were barred from job offers due to Target’s rejection of people convicted of violence, theft, fraud, and other criminal offenses. The complaint also mentioned that the retailer discriminated against black and Hispanic candidates with criminal records that had offenses that were either too minor or too old to affect their performance as employees.
Background Check Providers Take the Blame Just the Same
Not only have employers been held liable for failure to conduct accurate and legal background checks, but the culpability stems from the source as well. Background check providers have been under potent criticism for their role in providing incomplete and infeasible information on candidates.
One example is Intellicorp Records Inc. which was accused of violating sections of the FCRA by producing background checks that consisted of inaccurate, outdated, and incomplete information about job candidates. The company was also accused of failing to inform job applicants that they were conducting background checks on them. As a result, Intellicorp settled a class action lawsuit for a whopping $18.6 million covering over one hundred thousand plaintiffs.
Another example is CoreLogic National, a background check provider that allegedly ran reports without using the job candidate’s date of birth. Undoubtedly, this caused mistaken identity issues and candidates were denied jobs based on criminal records that they never had. In one particular case, a twenty-five year old man’s report included the criminal history of a fifty-six year old with the same name.
Where Do We Go From Here?
Evidently, employers should choose background check providers with caution to avoid the potential negative repercussions that can arise from substandardly performed background checks. Possibilities of misinformation and lack of information can lead to denial of employment opportunities that candidates may rightfully deserve. It’s essential that businesses work with providers who are well versed in their specific industry, so that they ensure compliance and can detect below the surface red flags. It is important for applicants to be aware of their rights under the FCRA and to ensure that the laws are being enforced to the highest standards, both by prospective employers and by background check providers.
Companies should ask questions that will increase the likelihood for sound, adherent background checks to be administered on clients and employees. For example, background check providers should ensure complete transparency with their due diligence reports by citing the original sources that they have gathered their information from. This provides an extensive overview of a subject under review in a clear and comprehensive way.
As well, background check providers should provide clients with information that is accurate and reliable. One background check provider that is taking the market lead in this realm is Intelligo. This company uses artificial intelligence to triangulate data in order to ensure accurate identification of the subject under review. Afterwards, the system’s algorithm extracts meaning from the data to provide interpretative results to clients that are optimized for hiring and investment decision making. The company’s Clarity platform is turning the background check process from an obstacle to an asset by building a seamless environment that doesn’t entail retrieving, scanning, and sending obscure documents. Further, the platform is used as a project management tool to increase collaboration between individuals within a company in order to avoid miscommunication such as that of the aforementioned firms.
With greater investment into due diligence practices and continuous monitoring of employees such as that of companies like Uber and Lyft, both employees and employers can feel an increased level of protection in the hiring and employment processes. With companies like Intelligo, the future of background checks is looking bright.