Why you need to screen your employees

Preventing money laundering can be a challenge for many businesses. One of the tools available to help mitigate this risk is employee screening. By identifying and assessing risks within the HR function, organisations can reduce the likelihood of employees misusing their positions.

Why is employee screening important?

As part of an effective anti-money laundering (AML) framework, businesses should establish a range of safeguards. Employee screening is one such safeguard, designed to prevent employees from abusing their positions or facilitating money laundering activities.

These safeguards should be based on the organisation’s HR risk management processes, where the risk of employees intentionally or unintentionally causing harm to the business is identified and assessed.

The controls implemented should reflect the organisation’s risk profile and the specific roles and functions where screening is appropriate. This ensures a proportionate approach, as it is neither necessary nor practical to screen every employee. Senior managers, compliance professionals, employees responsible for carrying out customer due diligence (CDD), and those involved in financial transactions are among the key roles for which screening is particularly relevant.

What does an employee screening involve?

1. A key element of employee screening is evaluating the risk that an individual may misuse their position for money laundering purposes. This means that, both before and during employment, the organisation should ensure that the employee has not been convicted of offences that could increase the risk of abuse. This may involve reviewing a criminal record certificate and confirming that the individual has not previously been involved in financial crime or serious tax fraud, both of which would generally indicate a higher level of risk.

2. Another important aspect is ensuring that employees possess the necessary AML knowledge and skills to perform their roles effectively. This is where training and education become essential. Training programmes should be designed around the competencies, knowledge, and expertise required for each role. The purpose is to ensure that tasks related to the prevention of money laundering are carried out effectively and in accordance with regulatory requirements

3. Finally, employee screening should form part of the organisation’s wider control framework. Internal policies, procedures, and controls should take into account the possibility that an employee could misuse their position and include measures to mitigate this risk.

Frequency and screening as part of your control programme

The appropriate frequency of screening depends on the organisation’s risk profile. In most cases, however, an annual review of criminal record certificates for relevant employees is likely to be sufficient. This is particularly true when the process is supplemented by additional controls, such as spot checks and monitoring activities designed to detect or prevent employees from abusing their positions or responsibilities.

Who is responsible for employee screening?

HR undoubtedly plays an important role, as several screening activities take place during recruitment and throughout the employment relationship. This includes reviewing criminal record certificates and incorporating obligations into employment contracts, such as requirements to disclose breaches of regulations or internal policies.

Compliance professionals may also be responsible for carrying out planned or ad hoc reviews, including requesting employees to present updated criminal record certificates on a sample basis.

Conclusion

Employee errors – and in some cases criminal activity – can damage an organisation’s reputation and lead to significant financial consequences.

Adopting a risk-based approach and implementing robust safeguards are essential steps in building and maintaining trust among employees, customers, and other stakeholders.

Source: Guidance No. 9864 of 28 October 2020 on the Danish Act on Preventive Measures Against Money Laundering and Terrorist Financing.

Note: The article is an excerpt from our e-book "Rejsen Gennem Hvidvaskloven", written in collaboration between Kristine Sorken and Creditro. The e-book provides a practical overview of the requirements of the AML legislation, together with actionable guidance for your compliance work. You can download the full e-book here (Danish only).