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Background Checking Goes Global

April 25, 2006
Related Topics: Latest News
American companies hiring workers overseas are increasing demand for companies providing background checks on foreign applicants vying for international or domestic jobs.

    But international screenings take longer than those for U.S.-based applicants, and one industry veteran says Asian countries don’t always give desired access during checks for arrests, convictions and driving violations.

    The demand to screen job candidates to eliminate them as potential security, legal and financial risks started in earnest after the 9/11 terrorist attacks, and it has burgeoned in markets where U.S. companies are setting up new operations, such as Asia.

    These days, pre-employment screenings are critical for global companies to protect themselves. Such companies want to limit their exposure to crime and fraud by making sure they’re hiring a worker or manager with the education and experience advertised on their résumé, as well as someone without a criminal record.

    In India, education credentials are verified by the applicant’s classroom "seat number." Dave Wirta manages international pre-employment screening done by St. Petersburg, Florida-based First Advantage Corp. Wirta says his company has found that in Asia, education and employment claims can be tracked fairly easily, but access to public records on driving violations, arrests and convictions often is limited.

    First Advantage and New York City-based Kroll Inc. are two of the biggest providers of pre-employment background checks overseas. Both companies have been acquiring background check firms in recent years to beef up what has become a hotly demanded service, especially among publicly traded companies needing to achieve regulatory compliance in the post-Enron, post-Sarbanes-Oxley era.

    Wirta says three big companies currently have formal bid requests for international pre-employment screening services: American Express, BP and Alcoa. The industries wanting help with pre-employment checks are typically in financial services and technology, Wirta says. "We screen primarily white-collar employees," he adds.

Lower-Level Screenings
   American employers of blue-collar workers overseas also conduct background checks on prospective employees. International Display Works, a Roseville, California-based manufacturer of liquid crystal displays and modules, hires screening firms in China to help in the vetting of its job applicants there.

    International Display keeps only its executive staff in Roseville. It employs more than 3,700 at its factories in China, where it has 30 or so on-site managers of varying levels, says Brad Ferrell, vice president of business development. Screening of applicants in China is crucial to protect the company, he says. Last year International Display bought a Beijing manufacturing plant, adding 500 workers, and since then has hired another 500 to handle growth.

    "It is important," Ferrell says of verifying applicant credentials, "especially when you employ managers operating units that are overseas. You have to make sure the employees you have are honest and hardworking."

    But he says assembly line workers are also screened to stay compliant with business standards.

    Conrad Chang, a Sydney, Australia-based workforce market analyst for International Data Corp., says he has seen worker background checks at Asia-Pacific companies increase in recent years. Formerly, those checked by a company were only high-level executives applying for a job. That has broadened, he says, to include lower management positions and those seeking jobs handling confidential information.

    A routine practice in Asia-Pacific countries, he says, is for potential employers to use their network of contacts to check on job candidates. Making that task easier is the fact that identification cards issued to all citizens of Singapore, Hong Kong and Malaysia, for instance, are available to check the personal data of the holder.

    Employees of call centers in Asia-Pacific countries are routinely given background checks before they’re hired to keep data and sensitive information processed by employees from being compromised or stolen, Chang says.

    Financial institutions see the screenings as a way to ensure that their customers’ information, even though outsourced to a third party, remains secure.
"All it takes is for one breached security by an outside vendor for a company to lose millions of dollars from lost contracts, lawsuits and a tarnished reputation," Chang says.

    Such security breaches occasionally reported by the press are grim reminders to companies that one of their weakest information links--employees--needs to be checked as a first line of defense to keep such problems at bay. In Asia-Pacific countries, background checks are routinely done on aspiring employees in government, nuclear power operations, oil refineries, airports and child care centers, Chang says.

    Many Asia-Pacific employers want their background checks to not only weed out undesirable applicants, such as those with criminal records of fraud, theft or worse, but to find out whether the candidate fits the company’s culture. Such finely tuned checks are widely accepted, Chang says, except in Australia and New Zealand, which have ironclad privacy laws.

Business Is Growing
   Depending on the detail and availability of information, pre-employment checks typically cost $20 to $150, says First Advantage’s Alistair Watson. An international screening--one checking on academic degrees, work experience, military records and any criminal history--can take seven to 10 days. A U.S. citizen’s screening is typically turned around in a day and a half to three days. Information refuting applicant claims is turned up on about 7 percent of the screenings First Advantage does, Wirta says. It’s then up to the company to decide whether to hire the candidate in spite of the fudging, he says.

    Of First Advantage’s 3,700 employees, 700 are in overseas locations doing pre-employee screening chores in India, China, Hong Kong, Japan, Singapore and Australia. China is a big focus for First Advantage now, as companies like Wal-Mart and Starbucks are busily expanding operations there.

    First Advantage has about 200 client companies either based in the U.S. or overseas, Wirta says. There are "hundreds" of background screening competitors in the U.S., he notes, but he figures that fewer than 10 compete for overseas work.

    Kroll has 275 employees outside the U.S. providing screening chores covering 31 languages. Branches are in the U.K., South Africa, Poland and India. It has 14,000 U.S.-based clients and 3,000 client companies overseas.

    Bob Schlossnagle, Kroll’s chief of international background screening services, says an estimated 275 companies provide screening services in the international market, and some are small firms hired by bigger providers. He estimates that 20 percent of the company’s background checks are done overseas.

    "We anticipate it growing," Schlossnagle says. "We’re talking to major clients in the financial industry, accounting and government."

    First Advantage’s Wirta is similarly bullish. This year, the company’s international screening business is expected to double from last year. And with its new acquisitions of screening companies, he expects similar growth in the years ahead.

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