Financial institutions are responsible for safeguarding their clients’ assets, so, perhaps, it comes as no surprise that federal and state laws require most financial institutions to conduct criminal background screens of potential employees. The Federal Deposit Insurance Commission (FDIC) notes that, “[u]sed effectively, the pre-employment background screening process may reduce turnover by verifying that the potential employee has the requisite skills, certification, license or degree for the position; deter theft and embezzlement; and prevent litigation over hiring practices.” FDIC Financial Institution Letter on “Pre-Employment Background Screening Guidance on Developing an Effective Pre-Employment Background Screening Process.” Financial institutions that fail to implement effective background-screening policies risk loss of assets, imprisonment, monetary fines, and loss of public confidence.
The right to screen applicants is not unfettered, however, and carries its own legal risks. Accordingly, financial institutions should become familiar with their rights and responsibilities if an applicant’s background screen reveals a criminal conviction. Important questions will arise: Can a bank lawfully exclude a candidate based on a criminal conviction? What if the conviction occurred 20 years ago?