A reference check is looked at as an essential step in the hiring process by a number of employers. It is usually conducted before hiring them and largely covers past work experience for those already employed or character references for freshers. This process gives employers the benefit of an objective and subjective judgement which helps them avoid bad hires.

Given that there are 3000-5000 companies in India that issue fake certificates and around 2,000 educational institutes that grant counterfeit degrees, one is forced to ask how effective are these checks and if reference checks are really enough? In India, references are generally taken from the candidate which taints the veracity of this check. Also past employers, supervisors rarely talk negatively about the candidate in question. Hence, the question- why rely only on reference checks?

Companies who conduct in-house background verification using their own resources are limited in their means of extracting accurate information. Therefore, outsourcing to companies who specialize in this field and who go beyond standard reference checks is more realistic. Click here to read about the checks conducted. The cost of checking per candidate is nothing as compared to the potential damage a wrong employee can do. Moreover, getting a holistic check with all the relevant details verified is a job that requires nuance and know-how- best left to the professionals. Let’s take the example of the BFSI sector.

Importance of Background Check in BFSI Sector

BFSI is an industry term for companies that provide a range of banking, financial and insurance products or services. Employees working in this industry have access to customers’ financial records, company protocol, and other highly sensitive data. Several highly publicised cases of scandals and frauds involving some established banks have come to light recently, which has greatly eroded the public confidence in them. The perpetrators in most of these cases were employees of the banks themselves.

Here are some reasons that explain why background verification is critical in the BFSI industry:

Protecting Customer Information

In a world of breaches and hacks, it is imperative for banks to conduct thorough verification of their potential candidates. The reputation of the company is built upon the security of its customers’ information. These days, bank robberies are not committed by men with guns and masks but, by men with white-collars and degrees. Hiring a right candidate ensures that there is no threat to its customers’ sensitive information. As an employer, you have the right to run periodic background checks on your existing employees to ensure that they are still suitable for your organization.

Protecting the Bank’s Reputation

Background verification is considered as a crucial measure to ensure the integrity of an organization, as some prospective employees may not be fit for your organization’s reputation and its customers’ highly sensitive data. Some candidates may not be suitable for a particular position due to their educational or criminal background. Background verification ensures that the documents provided by their candidates are not fabricated.

Former Yahoo CEO, Scott Thompson, landed in the headlines for allegedly misrepresenting his college degrees which impacted Yahoo’s reputation. Hiring someone with false credentials can directly put your company’s reputation at stake.

Securing Company’s Assets

It’s essential to ensure that new hires have no criminal background, and other problematic behaviors before hiring them. The employees’ financial status helps verify the reliability of an employee. Conducting a credit check ensures a company’s finances, and sensitive documents are safe. Some companies even run a credit check on their potential hires. This helps to verify their stability over a long period. In financial institutions, this sort of assurance is of utmost importance.

The Verdict

Going beyond the norm of reference checks and conducting regular comprehensive background checks is the most critical step in the BFSI sector, as it safeguards a company’s reputation and it’s customers’ highly sensitive data.  If your organization is not conducting referral verification, then it needs to start adapting to the changing hiring process to create a better and safe workplace.