Combating Candidate Fraud and Credentials Fraud in Tech Hiring

Candidate fraud is an issue we’ve discussed before. Unfortunately, it’s something we must continue to talk about. Candidate fraud and credentials fraud are problems that aren’t going away. In fact, they’re on the rise. And that’s why recruiters must do what they can to prevent this kind of fraud from affecting their business and their clients.

That’s the message from an expert panel recently assembled to discuss the problem. Moderated by Michael Hammond of Hammond Neal Moore, the panel included Sean Slater, VP Client Service and Delivery with The Brixton Group, Matthew Ripaldi, CEO of Talent Group, and Karen Moore, SVP Marketing with Veremark. Together, the panel discussed the impact of candidate fraud on our industry and our clients, and ways to mitigate the threat.

What is candidate fraud and why is it increasing?

Hammond begins by defining the problem. “Candidate fraud is an applicant’s attempt to misrepresent facts about themselves during the recruiting life cycle. These misrepresentations can take two forms.” The first, Hammond says, are lies of commission. In this case, the candidate makes false statements about themselves and their background. If a candidate claims to have graduated from a college, they never attended at all, that’s a lie of commission. Lies of omission, on the other hand, are those where the candidate isn’t telling the whole truth. For example, a candidate might say they attended a college – and be telling the truth – but neglect to mention that they never graduated. More seriously, a candidate might not tell you that they have a criminal record.

Candidate fraud ranges from simple to very complex. A candidate may exaggerate details of their work experience and qualifications on their resume, or even present outright false information. At the other end of the spectrum, some candidates use surprisingly advanced methods to allow one person to interview in the place of someone else. In these cases, the candidate who interviews successfully and lands the job may not be the same person who shows up for work on their first day.

The 2022 Sterlings Report entitled ‘The Future of Identity Verification in Contingent Work’ showed that 36% of staffing industry executives reported at least one incidence of candidate identity fraud. In fully half of those cases, the nature of the fraud was that “The person who
showed up for the job was not the person who was interviewed.” Sadly, as with any fraud statistics, these numbers are almost certainly lower than the reality. A reluctance on the part of victims to admit that they’ve fallen for a scam leads to underreporting.

In a live poll of the panel’s audience, 70% of respondents said they’ve noticed an increase in candidate fraud in the past several months. There are several reasons why it’s on the rise. Notable among them is the increased use of AI sourcing tools as recruiting companies find ways to improve efficiencies and keep up with demand.

Slater illustrates this with personal experience. “I decided to run a little test. I claimed that I was a certified AWS architect. In less than 48 hours, I had 973 requests on LinkedIn to connect and interview. Obviously, I am not an AWS certified architect, but it made no difference to the AI automation.”

There’s an increase in the use of third parties in recruitment, and background screening in those companies isn’t always as robust as it should be. Additionally, economic pressures are increasing around the world. This in turn is creating a heightened demand on the part of candidates to take whatever measures seem necessary to get the job … even to the extent of committing fraud.

It’s shockingly commonplace. According to a report from Valid8, one in every three applicants exaggerate their accomplishments on their resume, and about half of all application forms contain intentional fabrications. The same report suggested that 60% of university verifications have false information. It’s not just junior candidates, either. 16% of executive resumes contained false academic claims, or material omissions. Even more alarming, almost one in four applicants – 23%, according to Validate – fail their background check after having received an offer.

The business impact is real

Candidate fraud creates significant issues for businesses. When a candidate isn’t fully qualified to perform the job they’re hired to do, companies lose productivity and revenue. There’s friction within teams, leading to employee retention issues. The effects can be even more serious. In some cases, candidate identity fraud can create significant organizational threats: unsafe workplaces, potential risks to staff and customers, and the accompanying liabilities.

These problems are quantifiable. The Valid8 report showed that the cost of missing a felony or a criminal charge during the hiring process can reach anywhere between $1 to $5 million. The report estimates the overall annual cost of resume fraud to be a staggering $600 billion.

“So, it does present a significant risk to your organization, to your client’s organization,” Ripaldi sums up. “It’s a risk that we simply cannot afford, when you consider the damage, it does to the reputation and your brand. A loss of client revenue, difficulty in hiring, and eroding a culture of honesty in the workplace.”

Prevention is key

For recruiting and staffing companies, background screening is sometimes not an option at all; for some clients, it’s a matter of regulatory compliance. But official identity verification still isn’t the norm in most cases. In fact, according to the 2022 Sterlings Report, fewer than 25% of companies in the staffing industry perform these routinely. Instead, most checks consist of gathering name, Social Security Number and date of birth to complete a criminal record check and education verification, rather than a complete identity verification.

Ripaldi points out that if you’re only employing these complete checks where clients require it, others can slip through the cracks. This could disproportionately affect smaller clients – startups, for example – where their screening requirements are less demanding.

Moore has a number of recommendations for companies to mitigate the risks of candidate and credentials fraud for their own business, and that of their clients. First and foremost, Moore says, consider partnering with a third-party background screening company, and look for a firm certified by the PBSA (Professional Background Screening Association). “This is a group of companies that adhere to the highest levels of diligence, accuracy and compliance with regulation,” she says. If you choose to conduct background checks independently, however, Moore has six tips.

  1. Use only source data. Database checks aren’t enough, as there’s no assurance that the information is up to date, or even validated. To be sure, you must go directly to the original source of the information.
  2. Develop position-based screening packages. The screening criteria should be tailored specifically to what the person will be doing in the job, with special attention to any regulatory requirements.
  3. Conduct a SSN check prior to other checks. This check is fundamental to confirm identity, and if there is an issue at this stage, there’s no reason to proceed further.
  4. Implement multi-point candidate validation. Don’t conduct a simple name check, particularly when recruiting internationally, where some surnames can be very common. With a single data point, there’s no assurance that the candidate is the same person.
  5. Incorporate conflict checks into the process. When looking at other data points for a candidate’s identity, if there’s a conflict with what appears on LinkedIn, for example, that conflict should raise flags.
  6. Go beyond database checks. If all the data points for a given candidate are in alignment, checking for other information online can round out your understanding of the candidate. “If you have any question about a candidate, do things like references, and social media checks,” Moore says. “If you saw somebody in an interview, and then you do a social media check and you see that the person doesn’t look or act like the person that you interviewed, it gives you reason for pause.”

Moore notes that this last point underscores the importance of working with a certified third party. Social media checks can raise questions of bias and discrimination, if they’re not handled correctly. A certified background screening company ensures that they are.

There’s no question that background checks are time and labor intensive. And since a formal background check can only be performed after an offer is made, it’s important for firms to do what they can to identify issues as early as possible. Ripaldi and Slater note that implementing a visual check as early as possible in the process is a helpful first step. While they acknowledge that asking a candidate to produce a piece of photo identification on a video interview isn’t a great way to begin a conversation, it can prevent issues that otherwise might not surface until the final stages of the hiring process.

There are several emerging technologies in the background screening industry. Fingerprinting is required for some jobs and industries already, and it could prove useful in others, but fingerprints are only stored in databases for specific reasons. Facial recognition technology is improving, and shows promise for the future of background screening, but it’s not advanced enough yet to be reliable. Finally, remote virtual verification – validating a passport using a photograph of it, for example – is also emerging as a helpful tool.

The most promising technology, according to Moore, is blockchain. A ‘digital wallet’ for a candidate’s verified credentials can be stored on the blockchain. This eliminates the need for third party database checks, protects against ID theft, and virtually eliminates the possibility that a candidate can fraudulently alter their credentials.

Risk and speed: a fine balance

The panel’s discussion closed by acknowledging that firms in the staffing industry must always find a balance between risk and speed.

“Sometimes you may have to hold off on a submittal, to do an extra check to make sure that that candidate is who they say they are, and they can do what they say they can do,” Ripaldi says. “That may slow down the submittal and you may risk a placement. But rushing through it without doing all of the proper checks is only going to put you at risk.”

Moore points out that for this reason, it’s important to set expectations early in the process with both clients and candidates, letting them know what to expect and why the steps are important. Slater agrees, noting that while firms shouldn’t cut corners, background checking processes should be as frictionless as possible.

The panel’s discussion – including a lively Q&A session at the end – was recorded. TechServe Alliance members can click here to view the whole recording. Not a member? See all the benefits you receive as a member here.

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