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The
Background-Check Challenge July 18, 2005
Outsourcers protect themselves from identity theft by finding
out all they can about employees, but gathering information can
be challenging
By Karen D. Schwartz, Managing Offshore
InformationWeek
When the
British tabloid the Sun blared the headline "Your Life For
Sale" a couple of weeks ago, the most shocking detail likely
was a photo of a reporter and an alleged Indian fence purporting
to depict the exchange of $5,000 for stolen credit-card data.
This was yet another blow to the offshoring community. It follows
closely on the heels of perhaps the most infamous identity-theft
case in India, one that resulted in nearly $500,000 in bank losses
and a whopping 17 arrests. While the world waits to see how the
Indian police and courts handle these landmark investigations,
both outsourcing customers and providers are examining what changes,
if any, should be made to hiring practices in global delivery
centers.
In April, call-center workers at a Pune, India, subsidiary of
Mphasis, an IT services and business-process outsourcing firm,
talked four Citibank customers into revealing their personal identification
numbers, and then the call-center workers transferred nearly $500,000
into their personal accounts. Police arrested six Mphasis workers,
plus 11 outside accomplices, and recently said the investigation
is continuing, with even more arrests possible. Citibank replenished
the customers' accounts, but Mphasis has yet to erase the concern
that the problem won't be repeated here or overseas.
The industry itself is reacting, too. "The Indian BPO industry
is in its infancy, and when one tends to hire 400 to 500 people
every month, we often fail to scrutinize the employees closely,"
conceded Mphasis chairman Jerry Rao at a National Association
of Software and Service Companies summit in June. Rao endorses
s proposal by Nasscom, a trade group representing the IT software
and services industry in India, for a national employment registry
where potential employees' backgrounds are registered and updated.
The goal is to develop a system in which employees voluntarily
allow information about their educational backgrounds and employment
histories to be entered into a database, Nasscom VP Sunil Mehta
says. When employees are considering changing jobs, they can simply
authorize the registry to release the information to a potential
employer.
In addition to speeding up the process of background checks, Mehta
says the new system, which an impartial third party will administer,
would make background checks easier to accomplish, less expensive,
and more accurate. Although largely believed to be a positive
step toward averting a repeat of the Mphasis case, some think
it simply won't be enough.
"Extensive reference checking is employed throughout the
world, as well as motor-vehicle abstracts, media searches, and
in-depth interviewing, but much more is needed," says Bill
Greenblatt, president of Sterling Testing Systems Inc., a provider
of outsourced pre-employment background screening and checking.
Very large IT services and business-process-outsourcing companies
have become more rigorous in their background-checking procedures.
Tata Consultancy Services Ltd., a large Indian IT-services company,
is one of them. To mitigate rising concerns, TCS recently began
insisting that every new associate supply a passport when applying
for a job.
"So to increase customer confidence in our verification process,
we insist that they produce a passport, which involves precertification
by the local police and a criminal records check," says R.K.
Raghavan, TCS's consulting adviser for security. The new procedures
are especially important in India, which lacks a national identification
card or a driver's license, Raghavan says.
In many cases, simple reference checks aren't enough. Hiring offshore
workers in today's world means researching their backgrounds as
thoroughly as possible, and that takes an understanding of the
laws, customs, and language of the country, as well as knowledge
of how to obtain verification and validation of certifications
and information.
Because of these difficulties, many business-process outsourcers
and other types of companies hire a company that specializes in
background checks. They have the knowledge and expertise in various
countries and tend to know human-resources departments, large
employers, and their processes. The sophisticated methods they
employ make background checks a reasonable hedge against problems
of all sorts.
In general, a reputable background-checking company will do everything
Greenblatt mentions. Depending on the country, other types of
background checking may include criminal conviction information,
civil claims and suits, credit history, work history, educational
background, and driving records.
In many cases, the type of work the employee will be doing will
dictate how thorough the background check should be. Management
consultant Hill & Associates, for example, offers three levels
of service. Tier 1 might be administrative or support staff who
won't have access to sensitive information. These employees are
screened at the most basic level, which generally consists of
criminal record, education, and previous employment. For middle
managers, the company might add bankruptcy and conflicts of interest.
For senior managers and executives, the company also might want
information on past business conflicts, credit checks, and other
information.
"For Tier 3 employees, we'll do a little industry intelligence
by talking to people within that person's industry and circles
to find out if there are any skeletons in the closet," says
Charles Champagne, director of marketing and strategic development
at Hill & Associates.
Depending on the difficulty of obtaining information in a particular
country and the degree of thoroughness an employer requests, background
checks can cost between $30 and $1,000 per employee. That compares
with $100 or less for similar background check in the United States,
largely because of the difficulty in obtaining information in
many countries.
"Information is much more difficult to obtain offshore,"
Champagne says. "You can't just tap into databases for every
kind of check; you have to have somebody go to the courthouse
or university or police station."
The amount of time a background check takes grows exponentially
when done outside the United States. While a background check
within the United States takes three to five business days, it's
not uncommon for one in other countries to take about 10 days.
In addition to the difficulty of obtaining information, the time
lag also may be attributed to the location of records, different
holiday schedules, and weather closures.
The lack of a standard identifier like the U.S. Social Security
number also complicates matters overseas. India has a PAN number--basically
a tax identification number--but only issues such a number to
workers, making them useless for checking recent graduates or
people with spotty work records. China has an identifier of sorts,
"but it doesn't get you much," Champagne says. Hong
Kong has ID card numbers, but they're held in strict confidence.
And some countries dictate to an employer how long they can store
an employee's background check, how it is transferred to the United
States, and how it's used.
And because background checking is more of an art than a science,
no company can guarantee that results will be 100% accurate. The
reputable ones have instituted extensive quality-insurance programs
to provide the most thorough and accurate information possible.
"We can't guarantee that there isn't a skeleton in the closet,
but we document very clearly where we found the information and
the source," Champagne says. "We've mitigated the risk,
not eliminated it."
The laws governing privacy and information access vary from country
to country. India makes it relatively easy to obtain information,
while Japan has strict privacy regulations. Hong Kong has a fairly
strict information-protection act, and European countries adhere
to Safe Harbor regulations, which prohibit the transfer of personal
data to non-European Union nations that don't meet the European
standard for privacy protection.
Employment law also varies among countries and can impact background
checks. China has strict laws pertaining to background checks,
hiring, firing, and competition, while in Europe, almost everyone
is unionized, making firing very difficult without cause. Because
of this, "you had better not make a mistake," Greenblatt
says. And some countries have work councils that decide the level
of background checking that can be performed, how that information
is viewed, and what weight can be applied to it in making a hiring
decision.
Because of the significant legal differences among countries,
whoever is performing the background checks for a specific country
should have expertise in that country's laws, Greenblatt says.
"It's very important for any multinational to know exactly
what to do from a legal perspective," he says. "The
last thing you want to do is violate local ordinances, which can
result in a line manager or executive being arrested."
Source: Information Week;
http://www.informationweek.com/story/showArticle.jhtml?articleID=165702657&tid=16008
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