Verity journal

Compliance is not just about checking boxes—it is about protecting your business from costly legal consequences. In Malaysia, HR teams must balance fast-paced hiring with strict laws covering labour, data protection, immigration, and industry licensing. One oversight can lead to penalties, lawsuits, or even reputational damages. That is where background screening plays a pivotal role.

With rising enforcement of employment regulations and data privacy laws like the Personal Data Protection Act (PDPA), companies must prioritise compliance in every stage of hiring. Background checks are no longer just about identifying red flags—they are essential tools for regulatory protection.

Importance of Regulatory Compliance

From immigration laws to industry-specific licensing requirements, HR departments are at the frontline of regulatory exposure. Hiring someone without verifying their legal work status or professional credentials can result in fines, contract breaches, and public scrutiny. In sectors like healthcare, finance, and technology, the risks are even higher. 

To highlight the importance of regulatory compliance, Bank Negara Malaysia (BNM) had imposed over RM2.5 million in penalties in 2024 on financial institutions and money service providers for breaches including customer due diligence failures, foreign exchange policy violations and inadequate data reporting.

Background Checks as a Compliance Shield

Comprehensive background checks do more than prevent bad hires. They help organisations stay ahead of compliance requirements, audits, and investigations. By verifying work authorisation, criminal history, certifications, and financial standing, employers can demonstrate due diligence and minimise exposure to legal risks. Here are seven key compliance risks that background checks can help you avoid:

1. Hiring Without Valid Work Authorisation

The Risk:
Hiring individuals without valid work permits or residency documentation can lead to immigration violations, fines, and even employment bans. The Immigration Department of Malaysia regularly inspects companies for compliance, and non-compliance can damage your company’s credibility and harm your company’s reputation.

The Solution:
Background checks that include work permit and ID verification can validate an individual’s legal right to work in Malaysia. This is especially important for foreign hires or contract workers.

2. Skipping Criminal Record Checks

The Risk:
Failing to identify a candidate with a criminal history related to fraud, assault, harassment, or data breaches can create safety, reputational, and legal risks. This is particularly dangerous in industries that require high integrity, such as finance, tech, healthcare, and education.

The Solution:
Verity Intelligence offers instant criminal record checks with VERISafe, enabling companies to quickly identify and assess legal history. These checks can be tailored to different roles and sectors.

3. Failing to Verify Professional Licences

The Risk:
Employing unlicensed professionals such as doctors, engineers, or accountants violates sector-specific regulations. In some industries, this could invalidate insurance policies, trigger fines, or jeopardise client relationships.

The Solution:
Verity Intelligence performs licence verification for key regulatory bodies such as the Malaysian Medical Council (MMC), Bank Negara Malaysia (BNM), Malaysian Institute of Accountants (MIA), and others. This ensures that candidates are not only qualified but also authorised to practice legally in their profession.

4. Ignoring Data Protection Compliance (PDPA)

The Risk:
Mishandling candidate information during background checks can violate Malaysia’s PDPA. This includes collecting data without consent, storing it insecurely, or using it for unauthorised purposes. A data breach involving applicant records can lead to serious penalties and erode public trust.

The Solution:
Verity Intelligence background check services are fully PDPA-compliant, with secure data handling protocols, encryption, and clear candidate consent processes. VERISafe enables companies to screen responsibly while meeting all local privacy regulations.

5. Not Performing Financial Checks for Sensitive Roles

The Risk:
Candidates with unresolved debt, prior bankruptcies, or financial misconduct may pose a risk in roles involving cash flow, transactions, procurement, or client funds. Without financial screening, these vulnerabilities go unnoticed, increasing the risk of embezzlement or poor decision-making.

The Solution:
Financial background checks assess credit standing, bankruptcy records, and civil judgments. For roles in fintech, banking, accounting, or procurement, these checks provide an added layer of risk mitigation.

6. Inadequate Vendor/Third-Party Screening

The Risk:
Many compliance breaches don’t come from internal employees but from external vendors, contractors, or third-party service providers. Without vetting these partners, companies may unknowingly expose themselves to supply chain fraud, security breaches, or association with criminal activity.

The Solution:
Verity Intelligence enables companies to screen vendors and contractors just as thoroughly as full-time employees. This includes criminal checks, Malaysian regulatory search, and cyber vetting adverse media search, ensuring your entire ecosystem meets compliance standards.

7. Relying on Unverified Education Claims

The Risk:
Hiring candidates with fake degrees, certificates, or unaccredited training can lead to substandard work, legal liability, and even safety issues in regulated fields. In Malaysia, there have been documented cases of fraudulent degrees being used to gain high-level roles.

The Solution:
Verity Intelligence conducts education and certificate verification, confirming the legitimacy of academic qualifications and professional training.

How Verity Intelligence Helps You Stay Compliant

Verity Intelligence is more than a background screening provider—we are your compliance partner. Our platform integrates built-in checks aligned with:

• Malaysian employment law
• PDPA (Personal Data Protection Act)
• ISO/IEC 27001 information security standards
• GDPR (for multinational compliance)

Our services ensure that every screening process is secure, structured, and legally compliant. Whether you’re preparing for a government audit or onboarding your next hire, we help you stay ahead of the curve.

Conclusion

Regulatory compliance in hiring is no longer negotiable—it’s a business imperative. Background checks not only protect you from bad hires but also serve as a frontline defence against lawsuits, penalties, and reputational damage. By avoiding these seven common compliance risks, you safeguard your workforce, your clients, and your company’s future.