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  • Why Companies In Asia Conduct Background Screening

    Aug 04, 2016
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    Many companies in Asia still adhere to age-old practice of character reference checks with references provided by the candidates though the companies realise this is becoming a pointless exercise. Increasingly, companies have started to appreciate the value of a thorough background screening.

    The biggest reasons companies opt in to conduct a thorough background screening on candidates and existing employees are:

    1. Safety or Security

    Employers have to provide a safe workplace and employing individuals with criminal related background who might have tendencies to,         say, act violently, might pose a potential harm to the rest of the workforce. In the US, employers have a legal obligation to exercise due diligence in hiring. If a dangerous hire or misfit who can possibly cause harm was hired, the employer can be sued for negligence.

    Situation can be more serious if the victims are partners or vendors or clients. This will affect the reputation of the company. Protecting the brand reputation is important. Aberdeen Group studies reveal 89% of screened applicants are retained in the first year versus just 58% not screened. Companies who adopt background screening as part of their Talent Acquisition strategy tend to hire top-ranked candidates and this further enhances the brand.

    If an individual is hired for a finance-related role like cash management, a background check will reveal if the individual has a fraudulent history or theft. A 2014 Global Fraud Study by Association of Certified Fraud Examiners revealed the following fraud-related costs:

    • A typical organization loses 5% of revenues each year to fraud.
    • Median loss caused by the frauds was $145,000. 22% of the cases involved losses of at least $1 million.
    • The higher the perpetrator’s level of authority, the greater the fraud losses tend to be.

    Approximately 77% of the frauds were committed by individuals working in one of seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance. A PricewaterhouseCoopers Global Economic Crime Survey 2014 reports that frauds committed by internal perpetrators account for 71% of frauds, depending on the industry. 

    The US Chambers of Commerce estimates that theft by employees costs American companies $20 billion to $40 billion a year. The Chamber also reports that an employee is 15 times more likely than a non-employee to steal from the employer. 

    Some case examples in Asia related to “security” related discrepancies:

    • 28-year old Canberra man was charged with identity fraud when he presented police with a false NSW drivers licence.
    • Resorts World Sentosa (RWS) fired more than 30 casino employees in 2010 due to possible brushes with law in the past. They had failed the Casino Regulatory Authority checks. The issue here was that RWS first employed them without due background checks and the employees had even completed their three-month training stints before the discovery was made.
    • School staff convicted for high profile sex crimes in Asia include Hilton Munro and Neil Bantleman. Education ministry in Thailand even issued a warning to all educational institutions to be aware of unqualified English teachers having child sex abuse records in their home countries and yet finding jobs as educators in Thailand.
    • Christopher Paul Neil, a child molester wanted by the Interpol, worked in Korea as an English instructor in a foreign school. At least a global sanction check could have been conducted on Neil before hiring. There had been other cases in Korea as well and this has prompted calls for implementation of a system to verify and regulate native speaker teachers.?

    2. Integrity

    Statistics show that more than 20% of CVs or resumes seem to have some form of discrepancies. Some Candidates pad up or exaggerate their CVs in terms of positions held, salaries earned, tenure with the company, reasons for leaving and even fabricate employment with a company they never really worked for. A much talked about case example below:

    • Australian department store chain Myer hired Andrew Flanagan as general manager for strategy and development through recruitment firm Quest Personnel and made a press release of his appointment. Andrew was claimed to have been the former managing director and vice-president of Asia Pacific for Spanish retailer Inditex, which owns international fast fashion chain Zara. Inditex Australia set the record straight by denying that Andrew was ever employed by them. Another Melbourne-based retailer had also offered Andrew a job around the time he was hired by Myer. Myer terminated Andrew’s position immediately. A thorough background check could have avoided this reputational damage.

    Another area where there’s integrity issue is educational qualifications. Some prominent examples where damage to brand equity potentially could have led to decline in shareholder earnings:

    • RadioShack CEO Dave Edmondson resigned in 2006 after acknowledging that he lied about academic degrees listed on his resume and on the company’s website.
    • Scott Thompson, chief executive of Yahoo Inc, had embellished his educational qualifications and had to step down after an activist shareholder flagged a discrepancy in his resume.
    • Anoop Shankar, a former epidemiologist and assistant professor at the National University of Singapore (NUS) landed a prestigious position at US later fell into sensational fraud investigation. He did not have the doctorate degree and did not graduate from All India Institute of Medical Sciences in New Delhi as earlier claimed.
    • Nisha Padmanabhan, an employee of Infocomm Development Authority of Singapore (IDA), a statutory board, who was hired as an Applicant Consultant in 2014 was accused of possessing a fake Masters’ degree from a degree mill. 
    • Babis Lagos, a community college worker in Australia, doctored his CV by inserting a Certificate IV in Horticulture which later he could not explain how it got featured in his CV.
    • Fu Jin, a former medical professor at Xiamen University, forged her doctoral degree from Columbia University in US. She was recruited under Minjiang Scholars Program, an overseas talent recruiting program in Fujian province.
    • Singer Rhoma Irama was caught using a fraudulent professor title on his Indonesian presidential campaign posters in 2014 which he claimed was bestowed upon him by professors from American University of Hawaii. The university itself had been declared illegal and unaccredited by the state of Hawaii since 2005.

    Asia’s obsession for academic titles can be reflected by these educational scandals. Unfortunately, this trend seems to be still ongoing. It doesn’t help that degrees can be purchased very easily in some of the Asian countries. Manila has a well-known forgery district where a high school diploma can be purchased for as low as $8. There are similar sources in India and Malaysia too.

    The major consequence of hiring the wrong fit is reduced productivity. The lack of required education, skills or experience can lead to placement of incompetent candidates in roles where they are not effective. This has prompted Talent Acquisition leaders to check if the educational and/or professional qualifications are valid and if they had been issued by legal and accredited institutes.

    These unfortunate cases just form a sample amongst tons occurring in Asia. This has increased the awareness of the values of a thorough background screening in Asia. A mix of the appropriate checks based on the risks associated with the roles and accountability levels will definitely alleviate these avoidable occurrences.

    Note:

    This article is written by Kannan Chettiar, Managing Director of Avvanz. Avvanz has 3 business pillars – Avvanz Hire (Recruitment Process Outsourcing and Comprehensive New Employee On-boarding), Avvanz Screen (including Psychometric Assessment and Background Screening) and Avvanz Develop (e-Training, Instructor-led Training and Blended Training). 

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