Understanding what background check is extremely important for your company to ensure the security of negotiations. After all, this practice involves checking the background of an individual or legal entity that may become a client of your company. 

Through searches carried out on public and private data sources, the background check aims to find information about the person or company with whom it is intended to close a deal to verify their suitability and reputation.

To make this concept a little more clear, imagine this situation: a technology company opens a competition to have a new advertising agency. Some third parties apply and report their prices. 

And now, should the company select the one that offered the best proposal, or are there other important steps that come before the contract is signed?

Certainly, it is essential, first, to know this potential partner and ensure that it is a safe and reliable business. And that's exactly where the background check comes in. 

With this feature, it is possible to verify everything from the background of the owners of the company to the commercial and financial information of the company in question.

But is performing a background check difficult? Are there real benefits to doing this type of service? 

We prepared this blog article for you to understand what background check is, its importance and for what reasons you should start practicing this practice today!

What is the background check?

Background check consists of a process of checking the background of a potential business partner in public and/or private data sources.

He is responsible for seeking as much information as possible about a person or a company, in order to base the decision-making on a potential contract for service provision, supply of inputs, among others.

Because of this, understanding what background check is a way to protect your company from partnerships that could cause financial and reputational problems, scams, fraud, among several other types of related disorders.

Background check for individuals

n the same way that we exemplified at the beginning of the article the opening of a competition for a new advertising agency, in this case, imagine a selection process for a Marketing Director. 

This strategic and relevant position deserves a reliable professional. For this reason, the Human Resources team can perform a background check based on personal data, such as the candidate's social security number or CNH number, drawing from their professional history, possible judicial and tax liabilities, and even criminal. 

The analysis in question may include different types of background checks, such as identity checks and social networks. 

This report can also be seen as the ideal complement to the curriculum presented by the candidate, as it provides relevant information that can help the company in making the decision to hire or not.

Background check for legal entities

The example we mentioned at the beginning of this article, on the other hand, falls into the background check category for legal entities. 

To guarantee a successful business partnership, it is important to know the financial health of the company to be hired, its tax status, possible bankruptcy filings, certificates, data and information from the partners.

With this, it is possible to get to know your new partners better and minimize risks for your company.

At first, it may seem that there is a lot of information to be collected, or that not all of it is valid for your business, isn't it? No problem! 

If you choose to adopt this process in your company, evaluate what data you consider relevant in the execution of that business to help with your decision.

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What are the types of background checks?

As we just mentioned during the explanation of what background check is, background checks can be applied to individuals or legal entities. 

However, it is essential that you know that, in this scenario, there are several types of background checks that can be performed. Among the most relevant are:

  • Hiring background check;
  • Financial background check;
  • Credit background check;
  • Criminal background check;
  • Social media background check;
  • Background integrity check;
  • Identity background check.

Hiring background check

The hiring background check consists of verifying information and histories of a professional who is applying for a job opening.

Generally aimed at more strategic positions, the objective is to verify if there are criminal records, traffic records, civil lawsuits, or other situations that could jeopardize the candidate's reputation.

Here, it is worth mentioning that the background check can be performed at any stage of the professional's life in the company, and not just before hiring.

Financial background check

The financial background check can be used at two different times: 

  • the onboarding of individuals who apply for credit from financial services companies; 
  • for the verification of the monetary capacity of business partners in B2B transactions. 

Both are directly related to the Know Your Customer (KYC) /Know Your Business (KYB) concept.

For example, in the case of a commercial transaction between companies, this analysis is a way to verify if the supplier has a record of financial fraud or if it is involved in illicit monetary operations that jeopardize its reputation.

Credit background check

Applicable to both individuals and legal entities, the credit background check aims to verify how the individual or company analyzed dealt with debit and credit issues in their accounts.

Thinking about a B2B scenario, it is a way of, for example, verifying whether a potential customer is able to honor financial commitments, such as installment payments of purchases and financing purchased

Criminal background check

Criminal background checks are used for negotiations involving large sums of money. 

In this type of analysis, the sources consulted are the Civil Police, the Federal Police, the National Arrest Warrant Bank (BNMP) and the Courts of Justice.

Depending on the situation, it may be necessary to consult international lists of sanctions and restrictions resulting from the confirmation of financial and civil crimes, among others.

Social media background check

The purpose of the social media background check is to assess how a candidate for a job, or employee already hired, behaves outside the corporate environment.

For this purpose, platforms such as LinkedIn, Facebook, Twitter, and Instagram are checked to analyze the behavior of that person based on the posts.

Background integrity check

Without exceeding privacy and ethical limits, the integrity background check aims to confirm information provided by an individual, such as their previous positions and salaries in a dispute over a job opening.

In the case of legal entities, this type of background check can be used to verify that the clients that the company claims to have served actually enjoyed its products and/or services and what was the result of that experience.

Identity background check

Generally used in migratory situations, the idea behind background identity checks is to confirm a person's details, such as their ID and social security numbers, address, and other related personal data.

The same principle can be applied to consulting suppliers with CNPJ.  

What is the background check for?

As you may have noticed based on the explanation of what background check is, this process serves to mitigate the risks of commercial partnerships and the hiring of employees, through the analysis of background and information from individuals and legal entities.

But even though the concept is clear, many managers still have doubts about the difference between background check and due diligence, and the relationship between background check and compliance. Therefore, we think it is quite prudent to explain these two points.

Difference between background check and due diligence

Background check and due diligence have similar purposes, which is to protect the company from possible risks resulting from the formation of partnerships, through the analysis of information and data from potential business partners.

A difference between these two concepts relates to the criteria that will be evaluated for this purpose.

For example, the background check addresses analysis of social networks, integrity, and identity. Due diligence, on the other hand, covers compliance, environmental and labor risks, among others, and is aimed exclusively at legal entities.

Relationship between background check and compliance

The relationship between background check and compliance is due to the need and importance for companies to comply with the regulations in force for their field of activity.

For example, by carrying out an accurate survey of the actions and practices of business partners, the company guarantees that it will not link its name to companies with a questionable reputation or linked to illicit practices.

What are the advantages of the background check?

ow that it has become clear what background check is and the types that exist, it remains to be seen what advantages your company may have when joining this practice, do you agree?

Among the benefits that stand out the most are:

  • improvement of risk management;
  • increased protection for your current team;
  • assurance of reputational compliance;
  • reduction of financial losses.

How to do a background check?

The step by step on how to perform a background check depends on the company's field of activity and what is intended to be evaluated. But, in general terms, the implementation of this process includes:

  • remain compliance: verifying the laws and regulations that the company must follow, in order to ensure that the background check processes are aligned with these guidelines.
  • search for information sources: identifying which sources offer the information that is intended to be analyzed, and these sources can be both public and private.
  • define the data that will be verified: choosing which ones are actually pertinent to be analyzed, considering those that will make a difference to the process and may influence decision-making. 

How can NAAT.TECH help with your company's background check?

Background checks have become a priority in many institutions - and there's no reason not to be targeted by yours!

Investments in initiatives that increase safety and reduce risks bring several benefits to all those involved.

No matter how small the change you make in your business, start this journey and see the results it brings to your company.

And, as we said, NAAT.TECH can help you with that process!

Contact one of our specialists, and we will be happy to understand your needs and help you with whatever it takes so that your company has security in every negotiation.