Nobody’s perfect. If we limited our interactions to people who were, then we wouldn’t have many interactions at all. Business is different though. When you work with someone, you’re taking a risk on them. You want their background to be as clear as possible—but sometimes it isn’t. When you do uncover something in their history, you might be a bit torn about it. Past behavior might be an indicator of future behavior, but only that—an indicator. It isn’t a guarantee. You don’t want to turn down an ideal business connection over something that might be an anomaly.
Finding red flags is easy if you have the right technology. It’s determining their value that’s hard, especially when you’re dealing with the heavily regulated financial industry. While some red flags are obvious issues that can’t be ignored, others may be false flags. Technology can help you know when to look deeper and when to ignore those false flags.
Red Flags Versus False Flags in Investigations
If you’re in the business world long enough, you’re going to have a history. Even if someone always behaves ethically, they can become involved in investigations or legal actions simply based on who they worked with. When you’re seeking out information on someone as part of an extreme vetting test, there are some things you can brush off, while there are other red flags you just can’t ignore. Some of those red flags include:
- Direct involvement in prior SEC investigations for companies they’ve worked with – Many companies may be investigated by the SEC, but if your candidate comes up as a named entity in that investigation, it should be a cause for concern.
- Prior censures or actions on their licenses – Someone who holds a professional license in a financial or legal capacity is expected to adhere to codes of ethics. In some cases, ethical violations will get that individual censured while still allowing them to practice. That means they may have a valid license, but a shadowy past.
- Individual actions under the FCPA – The FCPA has provisions to keep companies from engaging in graft and bribery, and provisions for individuals. A person who has been directly fined under those provisions for individuals is high risk, as they’re considered a direct cause of the violation.
- Falsified or “bloated” credentials – Some credentials are standard and required, like a Series 7 License. Others are optional and show a higher level of expertise in a specific entity. Both types should be easy to verify through the specific issuing entity. If they can’t be verified, that should be a cause for concern.
- Material misrepresentation – Some prior law enforcement interactions might be forgotten, but others can’t. If someone claims they have no criminal history, and the record shows a speeding ticket, that’s not a material misrepresentation. It’s far more likely they either forgot about it or didn’t think it applied. However, if they have felony convictions, it’s hard to claim they “forgot” or didn’t think they were relevant to the investigation. It’s much more likely they were intentionally trying to conceal the crime.
- Being a named party in a lawsuit – Companies are sued all the time. Anyone who owns a business knows that. However, lawsuits rarely name a specific employee unless that employee was directly involved and is considered egregiously negligent. For example, say an insurance company’s policyholder sues their insurance company under bad faith provisions for claims delay. Their insurance company and the board of directors may be named because they are fiduciaries and are directly involved. The claims adjuster who managed the claim, on the other hand, won’t be named unless their own negligence rose to an egregious level.
While these are all pretty good indicators of trouble, they aren’t foolproof. After all, lawsuits settle out of court, FCPA actions are closed without findings all the time, and even a license censure can be a one-time event never to be repeated. These red flags aren’t a sign that you need to end a business relationship. They’re just a sign that you need to vet it a bit deeper.
Getting to the Bottom of Things with RRA
When you discover concerning information in an investigation, your investigation shouldn’t end there. After all, some things can be explained. You need to find out the reason for the discrepancy by giving an individual the chance to respond. But take those explanations with a grain of salt as well. It harkens back to the old adage “trust, but verify.”
This is something which can be accomplished via Remote Risk Assessment. RRA is a process that works by analyzing biometric indicators in the human voice to assess for risk. The analysis is done via calling in to a brief, automated remote interview at a call center in order to minimize human bias in the process.
Say an individual’s background check showed they were involved in an FCPA investigation. The person investigating them could have them submit a written statement, explaining their role in the events that are the subject of that investigation. This gives the investigator a jumping off point for creating the questions for an RRA interview.
Then, say the individual responded that they never were directly involved but had been following company procedure at the time. In this case, the investigator could set up an interview that would address questions like “Did you intentionally violate any law or other legal restrictions while conducting business with X?” The interviewee would then answer “yes” or “no,” and the system would measure that response to determine its level of risk deception. Essentially, it allows you to verify someone’s ethics even when they’ve made mistakes in the past.
AC Global Risk developed this technology to answer the ever-increasing need for deep vetting both in the private and public sectors. Our proprietary technology helps individuals verify everything from immigration questionnaires to pre-employment interviews. For more information on using RRA, contact us today.