Written by Adva Bar Yoseph
If there is something I can vouch for, after more than 15 years of working in the field of fraud prevention, it is that due diligence on employment candidates is a critical step in the hiring process. International companies hiring employees in China should conduct proper due diligence that allows the employer to uncover red flags related to the candidate and hopefully avoid hiring employees with high risk of integrity issues.
Looking at the statistics, the importance of conducting a background check is further amplified when examining the damage companies sustain when employees commit fraud. According to the ACFE 2022 “Report to the Nations”, the median loss due to internal fraud, in the Asia Pacific region, is 121,000 USD. The median loss is lower when fraud is committed by an employee (USD 50,000) or even a manager (USD 100,000) but can reach USD 500,000 when committed by an executive or the owner themselves.
Remember, the damage caused by fraud is not restricted to financial losses alone. It could also include damage to reputation, fines, reduced product quality, reduced employee motivation, and more.
In this article, I will review a few of the areas that can be covered in a candidate’s background check, as well as some potential red flags every company should be aware of.
Before Recruiting in China
Know and Abide By the Law
Before conducting any type of background check, it is important to be familiar with Chinese local laws, and ensure all activities are performed legally. This is a crucial point that cannot be stressed enough. This includes the data sources used, methods of conducting the research, methods of storing the data, etc. Consulting a lawyer on China’s data laws in order to avoid violating any local regulations is critical. In addition, it is mandatory to obtain the candidate’s full consent to conduct such research.
Determine the Level of Risk
The depth of a background check should be based on the level of risk posed by the position you are hiring for. A recent college graduate applying for a junior position with no decision-making authority, will probably present a lower risk than a candidate with 20 years of experience applying for a position as Head of Procurement. It is therefore important to determine the criteria for the different risk levels, and to define the scope and depth of the background checks, based on the position in question.
Read more about Recruitment & HR Management in China
General Guidelines for Background Checks in China
Frequently, Chinese candidates who apply for jobs with foreign employers will use a ‘western name’. When conducting the research, it is advisable to include the ‘western name’, as well as the Chinese name in Chinese characters, and the Chinese name in Latin alphabet (pinyin).
The Chinese firewall blocks access from within China to many outside websites and apps. This has led to the development of a “parallel internet world” for China, with local search engines, social media platforms, messaging apps, etc. As a result, when we conduct a research on Chinese candidates, we might mistakenly focus solely on Chinese sources. However, non-Chinese sources may also provide us with valuable information. Use both.
Conducting the Research
Many employers never ask to examine the candidate’s actual physical diploma. You would be surprised how many candidates, knowing this, exploit this issue. This happens everywhere in the world. The diploma is good not only for verifying professional qualifications but mostly for validating that the certificate itself is real.
Just so you know: There are online platforms in China providing verification of physical diplomas and digitally issued certificates.
Screenshot: Validation platform for higher education certificate
The results will include details such as the name of the diploma holder, year of graduation, school, subject of study, certification number, and the diploma holder’s photo.
Screenshot: Authenticated diploma, as displayed on the validation platform
The Chinese internet is rich with platforms and sources for the validation of professional certifications in a variety of fields. In addition, search engine queries may reveal information that is occasionally published by universities regarding scholarships that may have been awarded and programs that the candidate may have participated in.
Verifying a candidate’s employment history does not only assist in understanding their professional experience but may also help you learn about their work ethics or discover any integrity-related issues from their previous places of employment.
Reference checks are a good starting point. Many times, employers will collect references but not actually contact them, assuming that a candidate will not provide a reference who will have a negative opinion. Contacting references can be beneficial in both confirming the candidate’s employment history, and in learning about him or her as an employee. To avoid fake references, it is recommended to confirm that the information provided is real. How? For example, you can review LinkedIn profiles, or ask the candidate to communicate using a work email.
An online search may assist in validating the candidate’s employment history, and could also reveal discrepancies, such as a previous workplace that the candidate wishes to hide, or involvement in undisclosed business activities that may put them in a potential conflict of interest with the employer.
Learn more about HR Management in China: An Employer of Record in China – Build Your Local China Team
Financial and Legal Issues
Financial and legal issues could create pressure for committing fraud. Therefore, it is important to discover and assess these red flags early on. China provides several online sources where such information can be checked (these may require additional personal data such as ID number). Some of the information that can be found is related to restrictions placed on persons with unpaid debt, or documents published by the courts.
Screenshot: Platform for searching court documents
Screenshot: Search in list of persons under restrictions of use of fast trains and flights
Screenshot: Search in the list of untrustworthy persons subject to enforcement
Running a background check and assessing red flags is a critical part of the recruiting process. It may help not only to reduce the risk of hiring a candidate with past integrity issues, but also support other steps of the recruiting process, help assess candidate-organization compatibility, and set appropriate expectations.
Keep in mind that the costs and resources required to prevent fraud are lower than those required to detect and investigate it. Therefore, in addition to running pre-employment checks, it is advisable to run an updated check on employees before offering a promotion to certain positions. It is also recommended to periodically run a check for certain red flags related to employees in high-level or sensitive positions.
About Adva Bar Yoseph
Adva has over 15 years of international experience working in the field of fraud prevention, detection, and investigation. She has worked with small businesses and large corporations from a variety of industries. Adva has lived and worked in China for five years, focusing on anti-bribery, corruption, and management of conflict-of-interest risks. She is the owner of ABYINT Integrity Services, which offers fraud risk management, background checks, open-source investigations, and training services.