Tightening controls on employees in finance industries

The spate of corporate scandals brought to the fore in 2017 has raised public awareness and concerns over bribery, corruption and fraud in the country. Coupled with heightened security, increasing number of investigations and, integration of evolving legislation, organisations are faced with legal obligations and accountability in every corner of their business.

The spate of corporate scandals brought to the fore in 2017 has raised public awareness and concerns over bribery, corruption and fraud in the country. Coupled with heightened security, increasing number of investigations and, integration of evolving legislation, organisations are faced with legal obligations and accountability in every corner of their business.

2018 research from PwC1 found that South African organisations report the highest rate of economic crime in the world – and that asset misappropriation (employee theft or fraud) is still the most dominant form of economic crime reported by these organisations.

According to Michelle Baron-Williamson, CEO of Managed Integrity Evaluation (MIE), "Pressure is mounting on organisations to not only conduct themselves ethically in every part of their business, but to check that all their employees do as well. We provide screening services to clients across industries; where we have seen steady adoption of background screening services by clients in professional services such as financial advisors, legal and audit, and finance industries including banking and insurance."

Baron-Williamson indicates that in the company’s experience working with clients in these industries; "Motivation for this adoption is because organisations are looking to clamp down on their HR processes and manage their employee related risk. Crucial to this process is to ensure that every candidate is suitably qualified and has been appropriately vetted for all key positions."

There are several pieces of legislation governing these industries; each carrying provisions of obligated responsibilities and guidelines on how an organisations must conduct its business and interact with its client etc. – to be compliant. Such stipulations also directly influence expectations of how employees conduct themselves and engage on behalf of the organisation. The aim is to bring more fairness to Financial Services industries, protection for everyone and equal access for consumers. Some of the overlapping pieces of legislation include, the recently enacted Financial Sector Regulation Act (FSR Act) and Twin-Peaks legislation, the Financial Advisory and Intermediary Services Act (37 of 2002) and, the Know Your Customers (KYC) obligations of the Financial Intelligence Centre Act (FICA), to name a few.

The table below is taken from MIE’s research2 and demonstrates the risk percentages calculated based on the volumes of requested checks for each of these industries.

Additionally, while figures aren’t currently available to demonstrate the percentage risks associated with qualifications for each of these industries, specifically, overall misrepresentation and fraud of qualifications remains high at 14.3%2.


Industry ->

Professional Services

Financial

Legal & Audit

Insurance

Volume

Risk %

Volume

Risk %

Volume

Risk %

Volume

Risk %

Criminal record

62 151

12.17

49 632

6.38

8 208

3.90

18 975

8.84

Credit

25 766

20.44

62 482

17.08

8 750

12.96

22 869

19.61

"The true value in the findings of any background checks, however, is in how they are assessed pertaining to the client’s business and the scope of the job position within the organisation," says Baron-Williamson.

For instance, the categories of confirmed criminal checks can vary in severity, from violent crimes to theft offenses, narcotics, crimes against the state, white collar and other crimes. MIE believes that once a candidate is found to have a criminal record, or a pending criminal record, this should be taken into consideration, and that an offence should also always be compared to the position for which the candidate is applying for.

"We certainly don’t condone criminal activity, though a record could be over 10-years old and for a minor offence - which might qualify for an expungement - and therefore may have no bearing on the candidate’s earnest ability to perform in the position they are applying for," says Baron-Williamson.

Additionally, in finance related industries or job positions requiring a certain level of skills and honesty in the handling of cash or finances; qualifications, work experience and credit records potentially provide more insights into the candidate’s motives and aptitude to perform in the job role.

"While it is regrettable, it cannot be ignored that criminal motives for perpetrating economic and financial crimes for personal gain are prevalent in the workplace. Where motives are also becoming more sophisticated, making them harder to identify. Partnering with a reputable service company able to conduct quality comprehensive pre-employment checks and provide unbiased analysis is therefore a great measure that can aid in reducing an organisation’s exposure – adding value to the employee risk management strategy," concludes Baron-Williamson.

 

 

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