Pre-employment Testing: A Defense Against Internal Fraud

The results of hiring the wrong person can cost banks millions of dollars. The FDIC and the General Accounting Office estimate that 83.3% of all bank losses are attributed to internal fraud.

One tool banks have against such loss is employment screening tests. Such tests are designed to produce a psychological profile that may indicate propensity towards dishonesty or lack of integrity. Together with proper interviewing techniques and good employee applications, such tests are powerful weapons against internal fraud.

Tests typically include questions designed to evaluate:

Attitudes about work in general, both the good and the bad.
Attitudes about right and wrong.
Ability to rationalize dishonest behavior.
How often a person thinks about dishonest acts.
How willing a person would be to commit a crime.
Whether a person has committed theft.
Propensity towards violence.
How productive, loyal and dependable a person is.

The banker's viewpoint:
by Jim Incaprera, Vice President and Team Leader, Corporate Security, First Commerce Corp., New Orleans, LA.

Question: Who are given these tests?

Answer:

Typically, all non-exempt employees
Often branch or retail-related employees
Anyone who will have access to cash or could transfer funds internally

Question: Why and how are the tests given?
Answer: The tests are given as a proactive hiring approach usually after a candidate has been selected but before a final job offer is made. The tests demonstrate that the bank attempts to hire only honest people. They may help department managers in day-to-day operations by giving them confidence in the people they supervise.

Question: What are the advantages/ disadvantages of such tests?

Answer: Advantages:

The tests are a proactive screening method.
Such tests have had proven results.
It becomes known that your bank administers such tests, deterring dishonest people from applying.
Good public relations -- customers feel safer.

Disadvantages:

You must live by the test results consistently. Some human resources individuals may see the tests as discriminative.
Chances exist for getting sued on the basis of discrimination by race, education and other factors.
Individual tests can be flawed.

I would advise that these tests be used in conjunction with other methods of studying candidates including: drug testing, credit bureau inspections and the fingerprint/ background checking system ABA has in conjunction with the FBI.

Copyright © 1994 Bank Security & Fraud Prevention. Originally appeared in Bank Security & Fraud Prevention, Vol. 1, No. 2, 10/94