Not all threats to a company’s security come from bad actors outside the organization. Unfortunately, individuals who already have access to company systems and networks may be a lurking threat, waiting for the right opportunity to initiate their attack.
In fact, according to some estimates, upwards of 37.45% of cybersecurity incidents stem from internal actors. Luckily, organizations aren’t helpless against internal attacks. Implementing Know Your Employee (KYE) practices in the hiring process and for existing employees can help companies feel confident in their personnel and strengthen the security posture of their organization.
What is Know Your Employee (KYE)?
Know Your Employee refers to the practice businesses take to verify employee identities and qualifications and evaluate their background.
KYE is similar to the Know Your Customer (KYC) process that a business uses to verify customer identities. However, KYE focuses on internal personnel, helping companies understand who they’ve hired and the potential risks of their employment.
Knowing your employees goes deeper than learning their names and the skills they possess. Formal KYE processes are much more comprehensive, consisting of background checks, credential checks, identity verification, and other aspects.
Overall, the goal of KYE activities is to ensure that employees are who they claim to be, helping to mitigate internal fraud risks. KYE can create a more trusting and reliable workforce, with positive ripple effects throughout the organization through enhanced productivity, efficiency, and customer outcomes.
What Does KYE Consist of?
Each organization can create their own KYE policies and procedures, as we’ll discuss in further detail below. However, these are some of the aspects commonly included:
- Identity verification: Companies may use authentication methods to verify new hires’ identities, requiring them to submit multiple forms of identification during the onboarding process.
- Background checks: Organizations can conduct background checks on new hires to ensure they are trustworthy, including a review of their educational background, criminal record, and other relevant information.
- Credential verification: Employers can verify the authenticity of an employee’s credentials, such as their degrees, licenses, or certifications to ensure compliance with industry standards and avoid hiring fraudulent employees.
The Benefits of Know Your Employee
Know Your Employee practices aren’t just another set of administrative tasks to help companies tick a box. KYE can provide tangible benefits for organizations, including the following:
1. Enhanced Security
Namely, KYE practices can help to prevent the risk of fraud initiated by employees. Once hired, internal bad actors could exploit the sensitive information, company assets, or financial resources they have access to as part of their roles. Thus, it’s important to engage in KYE activities that help to identify individuals with a history of financial crimes or similar infractions before they are entrusted with valuable data or assets.
2. Better Company Reputation
No company wants to be known as the organization that knowingly hires liars and fraudsters. Employees are often seen as a reflection of the organization’s values. So, the people you hire can directly impact the public perception of your company.
Employees that engage in unethical behavior or illegal actions can leave a bad mark on your company with potential customers, making them more likely to choose an alternative if given the option. Conversely, using KYE practices to hire trustworthy employees can improve your reputation with customers, helping them see the company as responsible and reliable.
3. Greater Employee Trust
KYE activities can also help employees feel more comfortable and trusted by their employers. After KYE checks are complete, employees can feel confident that the company sees them as trustworthy and reliable individuals.
Again, KYE isn’t just for looking into employees’ criminal history. It also helps employers verify applicants’ skills and credentials, ensuring they are properly suited for the job. Thus, KYE helps to verify employees’ abilities, proving their value in the workplace.
KYE Best Practices
When implementing KYE into your organization to reap the benefits we discussed above, you need to ensure your practices comply with fair hiring practices and other labor and data privacy laws. The following are recommended tips and best practices to get started:
Establish Clear Policies
All KYE practices should be based on clear policies written by the company. This helps to ensure fairness and consistency across all employees, regardless of who oversees the process.
Such policies should include an outline of the various types of checks and authentication steps that will be administered to new hires. Companies should establish procedures on how to handle any issues or discrepancies that arise during the process, such as termination of employment or a reassignment of duties.
Your policies should include documentation standards for the KYE process, helping to ensure transparency and create a clear audit trail for accountability.
Be Transparent
Make sure all employees and potential hires are aware of your KYE policy and procedures. Though background checks and identity verification can be an uncomfortable process, even for honest individuals, being open about why you engage in these practices and how it benefits the organization can help minimize any apprehension.
Engage in Continuous Monitoring
It’s important to engage in solid KYE practices during the initial hiring process. However, you may want to consider ongoing background checks and regular monitoring of current employees during their tenure.
Individuals may begin engaging in criminal activities or suspicious behaviors after they’ve been hired. Especially if they learn they have access to sensitive information they could benefit from exploiting, those who have never engaged in fraudulent behavior may be tempted by the opportunity.
Companies are not obligated to perform ongoing KYE checks for all employees. However, they may consider doing so for those in high-risk or sensitive positions, similar to what is discussed above with a risk-based approach.
Ensure Compliance
All organizations should ensure their KYE activities comply with labor laws, data protection legislation, and anti-discrimination regulations. KYE practices should be applied consistently across employees to avoid discriminatory hiring practices.
While no overarching “Know Your Employee” law exists to provide guidelines on this process, certain industry regulations might require employers to perform background checks on employees to ensure a safe and compliant workplace.
This includes the financial services industry, healthcare, education, and government agencies. Thus, organizations in these industries need to ensure their KYE practices adhere to any relevant guidelines.