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Reducing Risk and Protecting Reputation: The Importance of Background Screening for Family Offices

By Christopher Ballou, Executive Director, Crisis24


Background screening is an essential tool that can help family offices reduce risk, protect client reputation, and ensure workplace safety and privacy. It involves conducting comprehensive checks on someone’s history, education, work experience, criminal and civil records, online social media presence and other relevant information to make informed decisions about hiring, investing, or granting access to clients' assets. The importance of conducting background screening cannot be overstated, especially for family offices and HNW individuals who manage significant assets and have elevated levels of visibility, public exposure, and value privacy.

The following are some examples where background checks can assist in your Family Office operations:

· Investment Due Diligence: Before investing in a particular venture or project, family offices should conduct comprehensive screening to identify any red flags or potential risks associated with individuals behind the investment, such as their personal financial instability, unethical business practices or negative criminal or civil court activity.

· Protecting Reputation: Hiring or even being affiliated with someone with a history of unethical or criminal behavior can damage the reputation of the organization and or client’s brand. Background screening can help identify applicants that falsify work history, educational degrees and professional licenses as well as reduce the likelihood of hiring someone that may harm the organization's reputation.

· Ensuring workplace safety and privacy: Background screening can help identify candidates who may pose a risk to the safety or privacy of other employees, family members, or the principal. This is particularly important for positions that involve working with children, the elderly, or positions with access to sensitive personal information. Carefully reviewing online social media activity gives you a window into certain facets of someone’s life and their activities to see if they would pose any potential risk.

· Improving the quality of hires: Background screening can help organizations verify a candidate's work history, accomplishments, and character. This reduces the risk of hiring someone who may not be qualified for the position or who may not have the character traits or high-level or trust.

Conducting compliant background screenings involves a range of challenges and potential pitfalls by trying to do them yourself or paying for inferior service. By improperly performing a screening or not considering the state and city of an applicant, you can expose your organization to unwanted litigation by violating specific labor laws. Some of the most familiar challenges include:

· Legal Compliance: One of the well documents challenges in conducting compliant background screenings is ensuring full legal compliance. Background checks must comply with various federal, state laws and city specific laws including the Fair Credit Reporting Act (FCRA), which regulates the use of consumer reports, and various state-level privacy and anti-discrimination laws. Compliance with these laws can be complex and require expert, professional knowledge. Failure to comply with these laws can lead to legal consequences, including fines and lawsuits.

· Data Accuracy: Data accuracy is another critical challenge when conducting background screenings. Background checks must be accurate and up to date to avoid errors and misinterpretations of information. Inaccurate or out-of-date data can lead to false positives or missing key information. It is essential to ensure that multiple reliable data sources are used, and they are regularly updated to maintain the accuracy of the information.

· Data Security: Background check companies must maintain the security and confidentiality of the data they collect and use. Protecting sensitive personal information from data breaches and other security threats requires robust security measures and protocols. Background check companies must comply with various laws and regulations related to data privacy and security, including the FCRA, state privacy laws, and the European Union's General Data Protection Regulation (GDPR) when offering employment to members of the EU.

· Adverse Action: When background check information leads to a potential adverse action, such as denying employment, certain legal requirements must be followed, including providing a pre-adverse action notice, allowing the candidate to dispute the information, and providing a final adverse action notice. Failure to follow these legal requirements can result in unwanted legal consequences. A labor attorney or human resources professional should always oversee adverse action.

· Scope of the Background Check: Deciding which types of background checks to perform can be challenging. Employers must balance their need for information with legal restrictions on the types of checks they can conduct. A good process to accomplish this is to have pre-determined levels for the checks based on access to places, information, and assets. For location scope, certain places in the US treat an applicant's credit information differently. For example, employers cannot perform credit checks as part of a background check unless specific criteria or justification is met in certain locations like California and New York City.

· Consistency: Consistency is crucial when conducting background checks. Employers must apply the same criteria and standards to all applicants to avoid discrimination claims. It is essential to have clear and objective standards for the background check process to ensure that all applicants are treated fairly and consistently. The best way to ensure consistency when performing screenings is to have a written background screening policy.

· Social Media Screening: While social media can provide valuable information about a candidate, screening social media profiles can raise legal and ethical concerns. It is essential to avoid accessing protected information, such as information related to an applicant's race, religion, or disability. Additionally, using social media screening in a fair and consistent manner is critical to avoiding discrimination claims.

Utilizing a professional background screening provider can provide numerous benefits to organizations and HNW individuals. When selecting a provider, you should ensure that it is properly licensed and has professionally trained and certified members to conduct comprehensive, compliant, and accurate background checks. Conducting compliant background screening involves navigating complex legal requirements, ensuring data accuracy and security, following adverse action procedures, making informed decisions about the scope of the background check, and using social media screening in a fair and consistent manner. It is crucial to have expert knowledge and resources to ensure that background screenings are conducted in a compliant and effective manner.

The peace of mind and protection provided by a professional background screening provider can be invaluable in today's complex and ever-changing business and social landscape.



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