Late last year, a unit of J.P. Morgan Chase agreed to pay a $1.25 million fine to the Financial Industry Regulatory Authority (FINRA) for alleged lapses in background check compliance. According to FINRA, the background checks of 95% of the unit’s non-registered associate employees were incomplete, which may have left Chase unable to determine whether the individuals were qualified to work at the firm or not. To its credit, Chase responded proactively, committing to review its identification, fingerprinting and screening systems, in order to ensure compliance at all levels.
Cases like the one cited above are becoming alarmingly more common. Because compliance spans local, state, and federal levels, and because of the frequency of new background check legislation, companies have to work very hard to maintain the due diligence required to ensure compliance and timeliness. Firms registered with FINRA, like banks and brokerages, have several regulatory compliance obligations, including those of both FINRA and the FTC (via the FCRA). In the case of FINRA, screening requirements were expanded a little over two years ago. The new regulations require much more extensive documentation of screening policies and procedures, as well as regular review to ensure that compliance is being maintained. Complete and up-to-date documentation of policies and procedural compliance is key. Failure to follow and implement new or revised legal requirements can leave companies vulnerable and in a position of costly non-compliance.