It’s no secret that fraud is on the rise. In 2024, in the UK alone, over £11.4 billion was lost to fraud of all types, equating to approximately 0.4% of UK GDP. This loss resulted from over 4.1 million individual cases, marking a significant 33% increase since 2023.
Employee and recruitment fraud is a significant part of this issue, especially for hiring agencies whose entire business is based on the placement of people within organisations. How can staffing firms mitigate their exposure and that of their clients to recruitment fraud?
An increasingly hostile environment
The hiring landscape has become more challenging for agencies for several reasons. The growth of remote and international hiring means that recruiters may never meet candidates face-to-face. Equally, the increasing digitalisation of society has drastically raised the risk of potentially putting forward fraudulent applicants, whether through misrepresentation, document forgery, or synthetic identities.
Much of this fraud starts online; according to the National Crime Agency, four-fifths of all frauds last year were ‘cyber-enabled’, and an increasing number leveraged AI tools, which drastically enhances the sophistication of tactics being adopted.
While it may be assumed that financial firms and individual citizens are often the target of these fraudulent attacks, the recruitment market is equally vulnerable. A report by Crowe UK and the University of Portsmouth revealed that recruitment fraud costs UK businesses approximately £23.9 billion annually. For agencies, falling victim to scams can cause significant and lasting damage, not just to the success of individual placements but to the very stability of the firms themselves. Organisations can face potential financial penalties for breaching service-level agreement terms or legal liabilities under civil or employment law if negligent hiring is proven. However, for most, the most significant damage will be to the brand’s reputation and potentially the loss of future business. Recruitment fraud not only hurts one placement — it endangers entire client relationship, with long-term revenue consequences. In today’s global, competitive market, even a single high-profile failure can drive clients to rival firms. Ensuring agencies aren’t the victim of fraud should therefore be one of the leadership organisation’s top priorities.
Varying threats
Avoiding fraudulent threats is becoming increasingly challenging. Our experience partnering with recruitment firms has highlighted instances where fake candidates have used AI to generate responses to interviews, leveraged tools to forge accurate replicas of exam qualifications, or even adopted ‘deepfake’ technology to create entirely falsified, but highly realistic, personas.
The pressure faced by agencies to fill roles does not help the situation, but ultimately, the onus is on them to prevent either themselves or their clients from being defrauded. While fast turnarounds can often mean limited time for thorough vetting, opportunities exist for fixes that can protect the integrity of the hiring industry without slowing down the process.
Tech-powered digital identity solutions that combine liveness detection, more sophisticated document reviews, and knowledge-based question techniques to identify potential discrepancies or red flags, can enable agencies to feel fully secure and comfortable in the candidates they are putting forward for background screening. This technology should offer a high-level candidate experience to keep them moving through the hiring journey seamlessly and quickly. At the same time, agencies should seek solutions that allow them to check on potential identity fraud or issues with identity information for candidates without leading to major delays or holdups. Choosing the right screening provider is crucial to helping mitigate risk while not sacrificing on speed or the candidate experience.
Technology has driven part of the problem, but it also offers a potential solution, and a multi-layered, tech-backed approach to verifying applicants and reducing fraud should be adopted by agencies across the hiring industry. By building a combination of fraud solutions with identity, criminal record and background checks, and platforms that ascertain candidate authenticity, recruiters can be poised to sidestep these potential threats and offer effective services to their clients.
Rolf Bezemer, Executive VP and General Manager International at First Advantage
