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Everything you need to know about pre-employment background checks

It's not easy to get a job in finance and it's even harder if you've got a 'past.' When it comes to pre-employment background checks, financial services firms are more stringent than other private-sector industries. As a potential hire you’re likely to undergo screenings for a criminal record, credit scores, education and work history verifications, even drug tests. Some red flags are career killers; others can be subject to interpretation and leniency. But you'll need to be honest and to handle the situation carefully.

“From a regulation standpoint, financial institutions have to run a criminal background check at a minimum,” says Nick Fishman, co-founder of EmployeeScreenIQ and President at Fishman Group Consultants. “These checks are concerned with crimes related to dishonesty or moral turpitude, which is a pretty wide umbrella.”

Each financial institution may have its own unique requirements. Some require you to take a drug test, an area that has gotten greyer since so many states have legalized marijuana for medicinal purposes and, in some, recreational use. Many will also verify academic credentials, past employers and run a credit check.

“Checking a candidate’s credit score isn’t necessary in all industries, but for financial services it’s pretty vital,” Fishman says.

Some younger candidates, or those who haven’t been screened in the past, can doubt that an employer is going to conduct a background check. Or perhaps they think that a background check won’t reveal something they don’t want the hiring firm to know.

“If they’ve lied on their resumé, they should know that an employer is going to do this background check, so it’s always better to be honest,” Fishman points out. “The best course of action is always to divulge a potential red flag up front, because the last thing you want when considering hiring someone is a surprise. It’s always best to be open and honest, especially when they are going to receive that information eventually anyway.”

Criminal background checks

The depth of criminal background checks depends on where you’re hoping to work. Small financial firms can be more subjective, federally-insured banks less so. Federally-insured banks are prohibited from hiring anyone with a history of theft, embezzlement, money laundering or dishonesty, under Section 19 of the Federal Deposit Insurance Act (FDIA).

Chris Dyer, president and CEO of PeopleG2, a California-based firm that specializes in pre-employment background screening, says certain exceptions can be made, but it’s a difficult process.

“The Federal Deposit Insurance Commission (FDIC) can provide a waiver exception for certain minor offenses that occurred more than 10 years ago.” Dyer recalls the case of a man who was granted a waiver after being busted for shoplifting decades earlier.

Firms that sell and trade securities are excluded from hiring applicants who have any felony, criminal convictions or have been convicted of misdemeanors involving acts of dishonesty. But that’s not to say misdemeanors or crimes that occurred outside of the period in question won’t necessarily trip you up. It depends on the firm and how you position it, says Dyer.

“With petty drug arrests and DUIs, it really depends on the institution.The bigger the institution, the more black and white they are likely to be. Smaller firms are typically more subjective.”

If you’re not forthright about a conviction, your chances of employment plummet, says Adam Zoia, CEO of Glocap, a Wall Street search firm. “When it comes to criminal matters the best approach for a candidate is to pre-disclose and explain,” he says. “Although there is no guarantee that a prospective employer will proceed, being upfront about that youthful DUI increases the odds in your favour.”

Credit checks

Most financial firms do credit checks for people involved in revenue-generating activities or handling money. When it comes to support positions, it can go either way.

Ross Baltic, managing partner at Mercury Partners, a New York boutique-search firm, says all of his clients go thorough credit checks as well as criminal background checks. “But don’t worry if you forgot to pay a bill on time - you should be fine. The real problems are bankruptcy and deep debt,” says Baltic.

“If this person is in deep debt and has some serious financial problems, banks will wonder if they are then more likely to steal money,” says Dyer. “Especially if the wage being paid won’t cover the debt.”

Drug tests

Some firms do pre-employment drug tests, some don’t. A word of warning for consultants: clients can ask you to take a drug test before working on a project, even if you’ve been with the firm for years. It happens.

Work and education verification

Again, it depends on the firm, but many hire third-parties to verify every detail on a resumé, including dates of employment and GPAs. “Over the years we've seen many candidates get tripped up because of either inaccurate employment dates, or more commonly, leaving a very short-term job off their resumé,” said Zoia.

The best advice is to not embellish dates of employment on your resume. While it may seem harmless, it can come back to bite you, come the offer stage.

Beecher Tuttle and Dan Butcher also contributed to this article.

Photo by Yeshi Kangrang on Unsplash

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AUTHORSarah Thompson Insider Comment
  • Ma
    Maria Jacob
    18 August 2022

    Great article Sarah Thompson! Background checks have become an important part of hiring new employees. Background Check Livescan are typically performed to look up the applicant's criminal history.

  • Ob
    9 October 2019

    Starting in May 2020, all employment-based drug tests in NYC will no longer include THC usage.

  • Jo
    Joseph Engenito
    21 April 2016

    Regarding background checks, you state:
    "Firms that sell and trade securities are excluded from hiring applicants who have any felony criminal convictions or have been convicted of misdemeanors involving acts of dishonesty."
    New York State law says that a person may not be denied a job or a license due to a criminal conviction unless it is relevant to the position. That is, the conviction indicates that the person is unable to perform the job or is unwilling to perform the job or taking the job would create an increased risk to the job holder or someone else. Laws denying a person a job for any position at a company for any conviction have been declared to be unconstitutional. Thus a Wall Street firm, an insurance company that denied a person a job due to a criminal conviction, regardless of what the conviction was for and regardless of what positon the person has in the company, are violating New York State and Federal law. An applicant who believes he has been illegally denied a job can file a complaint with the New York State Division of Human Rights (212 870-8400) or the New York City Commission on Human Rights (if employed in New York City) (212 306-7500). They can contact the Legal Action Center at 212 243-1313 or They can hire an attorney to represent them and sue for damages. An attorney who specializes in cases like this might also be able to take action at the federal level.
    I am not an attorney so I recommend anyone who believes he has been discriminated against should consult a knowledgeable person. Companies that think that they might be engaging in illegal discrimination might want to consult a knowledgeable person to prevent getting into trouble.

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