Responding to recent acts of terrorism and global corporate fraud, companies
are using candidate background checks to minimise their risks and safeguard their organisations. Leah Larkin
delves into the murky world of…
Even as little as one year ago, it would have seemed outlandish to suggest
that you carried out background checks on executives to ensure they were not
terrorists or embezzlers. But events such as September 11 and the corporate
scandals at Enron, WorldCom and Tyco mean that now more than ever, companies
want to know exactly who they are hiring.
Many outsource applicant checks to firms that specialise in background
investigations, while others rely on the more traditional route of headhunting
firms to do background screening of perspective employees. But irrespective of
how these checks are carried out, it is ultimately HR’s responsibility to
shield the company from risk.
"Background checks used to be a considered a 1984-Big Brother sort of
thing. Not any longer. Companies now see the need for it," says John Gunn,
managing director of European Background in the UK. He adds: "In America,
the majority of companies do background checks. In Europe the percentage is
very small… but it’s beginning to change."
This view is shared by Alan Beazley, director of business development for
Zephon, an employee screening business (an arm of the Risk Advisory Group) in
"We’ve seen a lot more interest in the last year," he says. "There’s
a heightened awareness of security risks in whatever form."
Research carried out by leading IT recruitment consultancy Elan, found that
56 per cent of organisations among its blue chip client base are now
scrutinising prospective employees more thoroughly than they did 12 months ago.
Kate McClorey, a board director at Elan, says: "The recent spate of
corporate indiscretions have forced businesses to re-evaluate the importance of
staff integrity. The reality is that companies are just as vulnerable to
employee behaviour as threat from external attack. It is not enough to ensure
that premises and systems are protected – firms also need a guarantee that
potential employees are on the level."
The 11 September terrorists engaged in credit card fraud, fraudulent
identity and money laundering, and fraud is penetrating industry, points out
Steven Philippsohn, head of the corporate fraud litigation department of law
firm Philippsohn Crawfords Berwald. "People now realise the link between
fraud and terrorism," he says.
Where headhunters maybe once did the background checking, HR must now
increasingly take responsibility to safeguard companies. But the proliferation
of background investigation companies in the UK, which already have a strong
foothold in the US, means that they don’t necessarily have to do all the
credential checking themselves.
Such companies work in a number of ways and how they conduct the
investigations varies greatly, depending on the privacy laws of individual
countries. Investigators must obtain the applicant’s written permission before
beginning an investigation. This alone, says Steve Bailey, CEO of Recruit with
Confidence, is often enough "to scare the bad guys off". They must
then provide the candidate with a copy of the report, which they have the right
John Gunn explains that executives will be checked for director
disqualification in addition to the standard search. Checks are also made for
any conflict of interest that may arise from current or past directorships and
associated shareholdings; loan defaults; court action; and the financial
integrity of the company for which the candidate previously acted as director,
along with a media search for any press profile.
Raising the red flags
Gary Cornick, president of the Californian background screening company
PeopleWise, says its standard US investigations usually include an identity
verification, a check of criminal and civil records, verification of previous
employment, education, professional licenses and credentials, and often a
credit check. Investigators look for arrests or other criminal records, a
listing as an unindicted co-conspirator in a fraud case, personal bankruptcies,
evidence of gambling or drinking problems, disparities in an executive’s
lifestyle and salary, and any sexual harassment complaints, even if unfilled
and not prosecuted.
Standard checks of computerised public records and personal databases can be
completed in three to five days. But when red flags are raised, investigators
must resort to using the telephone and wearing out shoe leather – and therefore
the process takes longer.
In extreme cases, according to a report in the New York Times,
investigations for senior positions might even include previous girlfriends or
ex-spouses. However, those interviewed for this article place this type of
research in the ‘taboo’ category, as it violates privacy rights.
Wendy Bliss, author of Legal, Effective References: How to Give and Get
Them, says it is "inappropriate" to go beyond what is related to the
job in investigations. In the US, for example, it is against the law to
investigate age, race, disability, religion or national origin.
She advocates a sparing use of credit checks which, she says, are not
appropriate for someone who is not applying for a financial position, or will
not be handling a lot of money. However, it is important to determine that a
person is not in dire financial straits, lest they be tempted to embezzle.
Another route is checking police records and in the US, these records are
public. Since April this year, the Criminal Records Bureau in the UK has been
providing reports to both individuals and, in certain circumstances, employers,
but there is a backlog of applications.
Bliss believes that criminal checks should be restricted to convictions, not
arrests. "A disproportionate number of minorities have been arrested, yet
not found guilty," she says.
In most of the world, however, criminal investigations can be difficult. The
majority of European countries have strict privacy laws (see Background checks:
a global comparison on page 28). The 1995 European Data Protection Directive,
while not interpreted nor enforced uniformly throughout Europe, generally
guards individual privacy. Police records in most European countries, for
example, can only be obtained by the subject themselves, not by a third party.
In some countries, such as France, any type of background check, including
verifying data on a CV, can only be conducted with the permission of the
According to Robin Chater, secretary general of the Federation of European
Employers, to get around these restrictions, many firms use headhunters when
hiring senior staff, as they assume they are not covered by privacy laws.
Others rely on US companies for screening – again assuming they can avoid the
In addition to verifying all the relevant data, executive search firms say
it is critical to check references. Jacqueline Clarke, managing director of
international search firm Clarke Wetter, would advise any organisation hiring a
senior level executive to insist on three specific references: a previous peer,
a previous manager or someone the applicant has managed, and a previous
"We track down these references," she says. "We check that
everything the candidate says on his résumé is fact."
Another route that can be taken is one that is already familiar to HR: the
use of psychometric testing. Personality and ability questionnaires can be used
to determine if an applicant is prone to crime. Companies can request that
candidates take these tests, which are accompanied by a personal interview.
Too often, companies assume that those in senior positions have fantastic
ability and are trustworthy because they have worked their way up the ladder,
says Lena Baillie, managing consultant at international human capital
consultancy group Longbridge International, yet nobody has ever challenged if
they should really be in this role.
‘Little white lies’
Whether the investigations are conducted in-house or by a specialised
company, the frequent findings are ‘little white lies’ that people tell to
exaggerate their credentials. While these are not earth-shattering disclosures,
they do make employers wonder. If the applicant has lied about his past, what
else might they lie about?
Typical embellishments include claiming to have earned an MBA at a specific
school which they only attended, and inflating job titles, such as reporting to
have been the global director of sales and marketing, when they only held the position
at the regional level. Another common find during employment verification are
gaps in the employment history which have been covered up by falsifying
While background checks may still be a fledging business in the UK, HR
professionals need only look across the Atlantic at the massive take-up of
these services to see how high it is on the US HR agenda. Investing time and
money in checking criminal and financial records of potential employees may not
be something UK firms are not accustomed to, but it could become as vital as
public liability or buildings insurance in safeguarding your organisation’s
Unqualified excesses: stretching credibility to the limit in the name of
– Manchester United appointed Alison
Ryan as its first director of communications only for her to resign when it
emerged she had lied on her CV. She claimed to have a first class degree from
Cambridge University when it was in fact second class. She had also been banned
from practicing law after been found guilty of professional misconduct.
– Disgraced peer and novelist Jeffrey Archer’s CV boasts of
having attended Wellington and Oxford. But he chose not to mention that it was
Wellington School in Somerset rather than the more prestigious Berkshire public
school Wellington College, and that his study at Oxford (Polytechnic) was for a
postgraduate diploma in education for which he was unqualified, as he had never
obtained a degree.
– Bogus doctor Godwin Onubogu destroyed relationships with
false diagnoses of venereal diseases. In reality, he was a barely educated lab
technician who had been jailed for a series of offences including indecent
assault, wounding and supplying prescriptions.
– Soraya Yuksel became head of a language department at Reading
University after lying about her qualifications. By creating two fictitious
teaching/research posts, she managed to swindle the university out of £200,000.
– After being sacked from his job as an ambulance man in the UK
for lying about his credentials, Don Walker-Johnson was re-employed as an
ambulance technician, working directly with patients.
The figures never lie
– Senior executives commit 72 per
cent of all corporate fraud in which the sums at risk are more than £1m, but
only one in six face criminal investigation or prosecution
– CV lies rose by more than 20 per cent in the last quarter of
– One in seven screened job applicants is found to have lied,
or to have concealed or omitted significant information
– More than two-thirds of companies have experienced fraud by
their employees during the past two years
– Around two-thirds of employees who perpetrated fraud against their
companies have red flags in their employment history that would have been
revealed by screening
Source: The Risk Advisory Group,
an independent investigation consultancy
How to spot a bare-faced liar
According to psychologists and
evolutionists, lying has survival value. It is part of being human; we
re-invent our past and once repeated often enough will come to believe the
invention. So how can you spot people lying during recruitment?
References are only useful to spot barefaced lies such as ‘I
have this qualification’. Lie detecting devices are an obvious method, but are
controversial and deeply invasive. They measure physical responses such as
sweating or increased pulse rate, which may not be down to the subject lying
and could well be induced by the process.
Integrity tests are used for high-profile security work and in
industries where theft is an issue. Opinion is divided, as reasonably
intelligent applicants could spot what is going on and manipulate their answers.
Good personality tests such as the Sixteen Personality Factor
Questionnaire (16PFQ) can be useful. Generally, they present a hypothesis about
an individual by looking at their method of tackling an issue, and will measure
The 16PFQ provides measures of how far someone follows external
or internal rules of conduct; in other words, how far they will break the rules
or justify their actions by their own standards. It also measures ability and
strategies in coping with pressure, something any employer should know about
This information may not pick out the barefaced cheat – by
definition, they are pretty hard to identify – but a good test may highlight a
potential threat that can be dealt with in a follow-up interview.
Ian Florence, director of ASE
Consulting, 020 8996 3337, www.ase.co.uk
Background checks: a global comparison
"There is now more concern about background, but is very difficult to
run a background check in France," says Jean Louis Mutte, a partner with
Global People Matters, an HR consultancy based in Lille. Former employers will
only release the job title and dates worked for the company. It helps to know
someone in the firm or have connections with professional associations, says
Mutte, as "it takes a lot of effort." Candidates are asked to produce
their own police report and judiciary file. Headhunters and employers usually
carry out the screening and little is handed to background investigation
Hong Kong, New Zealand and
A Personal Data Protection Act guards privacy in these countries.
Employers can request basic employment data from previous employers in writing;
they may not conduct a check on police records. According to Eddie Ng, chairman
of the International Committee of the Hong Kong Institute of HR Management,
when hiring at senior level, most companies in the above locations, as well as
throughout most of Asia, rely on either headhunters or staff referrals. They
expect the search firm to do background screening. "Generally people are
honest," he says. "If they provide false data, they can be fired."
Companies generally rely on executive search firms for background screening.
Some previous places of employment provide only basic data. "They’re not
as informative as in western countries," says Ghassan Yazigi, a partner in
charge of the Middle East region for executive search firm Heidrick &
Struggles. In these cases you must go around and check references through a
different route, he says, such as the candidate supplying the names of people
they have worked with. Unique to investigations in the Middle East is that
there is no legal problem with supplying a bad reference in writing.
"You’d never get this kind of reference from a western country," he
Background checks are not widely used in South Africa, says Allan Feldman,
chief operating officer for the Institute of People Management. Most companies
conduct an in-house check of academic credentials. But it is a legal
requirement in South Africa that any reference check is sanctioned by the applicant.
Japanese companies frequently use background investigation companies. As the
police department does not release records, they sometimes use former police
department colleagues who still work there to access police records
unofficially. The normal route for hiring senior executives is through
headhunters, who are expected to check references and conduct background
screening. "Traditionally, Japanese companies are very interested in
background checks," says Ichiro Furukawa, head of HR for Electronic Arts
in Tokyo. His company conducts its own screening for most applicants.