Banks are responsible for safeguarding their customers' assets. Hiring practices are no exception. The federal laws prohibiting financial institutions from hiring persons convicted of criminal offenses involving dishonesty or a breach of trust or money laundering require banks to conduct pre-employment background checks. An employer's right to screen applicants and employees and to take adverse employment actions based on screening results, however, has limits.
Federal agencies are focused on the use of background information to make employment decisions. The Equal Employment Opportunity Commission ("EEOC") and the Federal Trade Commission ("FTC") have published "Background Checks: What Employers Need to Know." In this joint guidance, the EEOC reminds that employers may not use background information to make discriminatory employment decisions, for example, decisions based on race, color, national origin, sex, religion, disability, genetic information, or age. The FTC reminds employers of their obligation to comply with the Fair Credit Reporting Act ("FCRA"), the federal statute that governs the use of criminal background and credit reporting information in hiring. Banks should sharpen their focus as well.
Balancing the prohibitions against hiring with the anti-discrimination and procedural requirements designed to protect applicants and employees can feel like banks are walking a tightrope. In order to comply, banks should put in place reasoned, pre-employment background screening processes to reduce turnover, deter theft and embezzlement, and prevent litigation over hiring practices. Background check policies and procedures should be designed to treat all applicants and employees equally and to comply with the procedural requirement of the FCRA.
Treat Applicants Equally
Any background information obtained may not be used to discriminate against an applicant or employee in violation of federal or state law. Banks should:
Comply with FCRA Procedural Requirements
The FCRA requires employers who obtain background information, for example, credit or a criminal background reports, through a company in the business of compiling background information to follow a three-step process.
Step 1. Before a background check is run through an agency in the business of compiling background information:
Step 2. Before not hiring an applicant or firing an employee based on background information obtained through a reporting agency:
Step 3. Wait a reasonable amount of time, after providing the notice and summary in Step 2, to give the applicant or employee an opportunity to review the report and explain any negative information. A reasonable amount of time depends on the circumstances. Five to seven business days from the date the report and notice are received will generally be determined to be a reasonable period. After taking the adverse action, communicate to the applicant or employee:
Conquer the tightrope. Create, implement, and enforce a background check policy and procedure to ensure that employment decisions are made evenhandedly and to comply with the FCRA procedural requirements.
 For example, Section 19 of the Federal Deposit Insurance Act ("Section 19"), Financial Industry Regulatory Authority regulations, and the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 prohibit federally insured banks and mortgage companies from hiring certain persons convicted of certain criminal offenses involving dishonesty or a breach of trust or money laundering.
 An investigative report is a report based on personal interviews concerning a person's character, general reputation, personal characteristics, and lifestyle.