With identity fraud continuing to be a threat in the hiring process, HR leaders need to have robust compliance procedures to avoid the costly and potentially dangerous mistakes of mis-hiring. But with fraudsters finding innovative ways to cheat the system, coping and dealing with these ever-present risks is becoming increasingly difficult. In this article we highlight the key challenges that HR practitioners need to be aware of and some of the ways in which they can help protect their organisation from potential fraudsters.

Sophisticated fraud on the rise

Identity fraud is one of the most common forms of deception, enabling individuals to assume the identity of another person and create a false persona. The use of sophisticated digital technology often powered by artificial intelligence has made this more difficult to spot during the hiring process. However, background screening and identity checks have also developed thanks to technological advancements, helping organisations to catch out the perpetrators. The rapid growth and evolution of remote digital verifications in recent times will be a great aid for companies in 2024 and beyond.

The rise of the gig economy has helped to alleviate skills shortages, allowing companies to widen their talent pools to better meet their workforce demands. However, high levels of staff attrition and onboarding have not only created additional pressure on already overwhelmed talent acquisitions teams, but have also created greater potential for risk, which needs to be mitigated. The inexorable rise in remote working, which looks set to increase in the coming years, has augmented that risk, making it more difficult for hiring managers to check and ascertain the identities of individuals, without the appropriate tools.

And with large organisations in the UK legally required to publish an annual slavery and human trafficking report, verifying an individual’s identity is crucially important. For example, is the person that you’re paying actually the individual who is responsible for delivering the work? While many fraudulent job applications, and the people falsifying their identities, are being intercepted, numbers of fraudsters are unlikely to drop. Companies will therefore need to bolster their screening and vetting procedures and teams if they are to keep on top of and manage the sheer volume of applications received.

Implementing identity verification gives employers a high degree of confidence that they’re hiring the person they think they’re hiring. This provides a vital foundation of trust and safety when building an authentic workforce.

Avoiding the security and financial costs of candidate fraud

Another oft neglected risk is “moonlighting,” whereby workers take advantage of their remote set-up to effectively carry out work for several employers at once. While there may not always be a direct conflict of interest, in many instances this type of fraud can undermine trust, and cost an employer time and money where workers fail to execute to their full potential because they are busy splitting their time between multiple jobs. Perhaps more worryingly, it can also result in data protection breaches from the use of company laptops. In some regions there are checks that can directly help organisations pick up on this type of activity, which has become especially prevalent in places like India in recent years. This is yet another type of fraud that can prove extremely costly during difficult economic times.

There are many layers to fraudulent hiring activity whereby workers can steal identities and provide false information about their previous employment and qualifications. If tight controls aren’t in place, there is also a very real security threat, for example making organisations more susceptible to cyberattacks and even to blackmail from criminal organisations. A significant rise in so-called “reference houses”’ is another worrying development. These unscrupulous “organisations,” as their name suggests, provide workers with fake references to cover up their past in exchange for money.

And with labour markets cooling and an increase in the supply of talent, individuals will be looking to embellish their CVs and work experience as the competition for talent heats up. Carrying out background screening, such as right to work, criminal record checks, and reference checks, should be a priority for organisations in 2024. Online and social media checks can also be conducted to glean more information about an individual’s behavioural characteristics, albeit this must be done lawfully. These controls will not only reduce the risk of false information, but also improve the quality of hires.

 Leveraging technology to help create safer future workforces

While the threat of fraud has historically been a constant thorn for organisations, the sheer advancement of technology, AI, digitisation, and deep fakes, plus the rise in remote working, have taken things to a new level. HR leaders will need to ensure that their corporations are equipped to deal with these risks, which can have such far-reaching consequences. Adapting and prioritising screening and vetting procedures so that they are fit for purpose for their company and sector will be crucial. It will also make existing employees and teams feel more safe and secure.

Technology is a gamechanger and will ease the administrative burden, minimise human error, while also helping to identify risk factors and red flags. But organisations must regularly monitor, review and improve current compliance systems, whether in-house or through a third-party provider, to fight the fraudsters. If they don’t, they could pay a big price.