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Shield your staffing squad: How to fortify your firm from identity fraud?

Identity theft? Not on our watch! Scam-proof your staffing firm by tweaking your company’s privacy policies this way.

Remote work may be the silver lining of the pandemic however, it has also brought about an increased risk of identity fraud and is a notable threat to the staffing industry.

While background checks are ubiquitous, they often fail to verify whether personal information truly matches the candidates. 

According to recent surveys conducted by SIA, out of 188 staffing firms, 40% claimed that one of their clients found out how an employee had lied about their identity during the past years. 

Also, 30% of employers shed light on cases where the person who completed the pre-employment assessment differed from the one who started work.

Such data only further underscores the risk businesses face as workers find shortcuts to flexibility and virtual work opportunities. Not to mention the moonlighters who often take on additional jobs without informing their primary employer, leading to conflict of interests and breach of policies. 

So, now the point is, what can you do to ensure your business is safe from fraudsters?

This guide has all the answers! So dive straight into it.

Introduction: Navigating the treacherous terrain of identity fraud

Before we consider how identity fraud impacts the staffing firm, here is the basic overview of what the term entails:

▶️ Identity fraud is when an individual steals someone else’s personal information, such as their name, social security number, or credit card details, and uses it for their gain.

The stolen information can be used to make fraudulent purchases, open new lines of credit, apply for loans, and even commit crimes under the victim’s name.

Identity fraud can happen in various ways, such as phishing scams, hacking into databases that store personal information, stealing mail or trash containing personal details, and even posing as a legitimate business to obtain sensitive information. ◀️

 With that clear, the first question is- 

Why is identity fraud at its all-time high in the past few years? 

Some key factors that have contributed to the rise in identity fraud related to staffing firms in recent years include the following:

The rapid growth of digital technology 

The staffing industry has increasingly relied on technology to streamline processes and improve efficiency. This has led to more and more usage of electronic payroll systems, online job applications, and other digital tools that store sensitive information. 

Unfortunately, such proliferation of digital platforms and internet usage has made it easier for individuals to access, alter, and fabricate personal and professional documents, making it challenging for staffing firms to verify the authenticity of credentials provided by candidates.

Increased competition in the job market 

With the job market becoming more competitive, some individuals may feel pressured to embellish or falsify their credentials to make their profiles/CVs stand out.

Data breaches

Cyberattacks targeting staffing firms and other businesses have become more frequent and sophisticated. These attacks can lead to massive data breaches, exposing sensitive personal and professional information that criminals can use to commit identity fraud.

Inadequate security measures 

Some staffing firms may have yet to implement robust security protocols to protect their clients’ and candidates’ information. This could include weak passwords, outdated security software, or a lack of training for staff members on recognizing and preventing identity theft, making them more vulnerable to data breaches and identity theft.

Remote work and hiring

The shift towards remote work and hiring, particularly during and after the COVID-19 pandemic, has made it more difficult for staffing firms to conduct thorough in-person identity verification and background checks.

The complexity of verification

The global nature of the job market has added a layer of complexity to verifying candidates’ credentials, as it can be challenging for staffing firms to navigate different educational systems, accreditation bodies, and employment regulations.

Use of social media and professional networks

Individuals may exploit social media platforms and professional networks to create fake profiles and bolster their credentials, making it harder for staffing firms to distinguish between genuine and fraudulent candidates.

Insufficient legal deterrents

In some jurisdictions, the penalties for committing identity fraud may not be severe enough to deter individuals effectively from engaging in these activities.

And to top it all, maybe there is not much increase in identity fraud cases, but increased “awareness” among people, leading to more FIRs being registered. 

Well, whatever the case, we can’t deny the negative impact of identity theft in the staffing industry. 

Now some may ask, doesn’t fraud happen to everyone? So, why do we, recruiters, need to pay special attention to it? Let’s discuss this! 

The importance of protecting your staffing firm and its reputation from identity fraud

Short answer: You are hiring for your client, so you must be extra cautious. And if you fail, you are not only harming your agency’s reputation; you are also bringing your client’s company down. (You probably won’t like it if you want to stay in business for long!)

Slightly longer answer:   

Here are five reasons why protecting your staffing firm from fraudsters should be your top concern: 

1) Protect your reputation

Your staffing firm’s reputation is everything. If your clients or employees lose trust in your firm due to identity fraud, it can sever your ties and ultimately lead to a loss of business.

2) Prevent financial losses

Fraudulent activities may cause financial losses for your staffing firm and its employees through unauthorized purchases, stolen funds, and more. However, proper security measures and policies can help avoid these financial losses.

3) Avoid legal liabilities 

Failure to protect against identity fraud can result in legal consequences and compliance issues. Staffing firms are responsible for protecting sensitive information, and failure to do so can lead to significant legal liabilities.

4) Ensure employee trust 

Employees trust their recruitment agency with sensitive personal and financial information. By implementing measures to prevent identity fraud, you can show them their security is your top priority.

5) Increase productivity

Employees who are victims of identity fraud can face significant personal and financial stress, leading to decreased productivity in the workplace. Protecting against identity fraud can ensure employees can focus on their work without the added stress of dealing with fraudulent activity.

Aren’t these enough reasons for you to take identity fraud seriously? 

Know thy enemy: Unmasking the identity fraudsters

Now, you don’t need to be a cybercrime detection expert to identify if identity fraud has occurred in your company. (It does show itself!)

You just need to be proactive enough to notice any strange behavior from your employees/candidates, double-check the authentication and teach yourself the way fraudsters think. (Of course, for training purposes!)

So, let’s start with a clean slate: 

What are the common types of identity fraud in staffing firms?

Below are the types of identity frauds staffing firms must be aware of:

Job candidates with fake credentials 

Fraudsters may create or alter documents, such as academic degrees, certifications, and employment histories, to deceive staffing firms into believing they are qualified for a particular job. 

This type of fraud can include diploma mills, resume padding, and fraudulent references.

Impersonation of employees 

Online scammers may adopt the identity of a legitimate employee within the staffing firm or one of its clients. 

They can use this stolen identity to gain unauthorized access to company resources, commit financial fraud, or engage in other malicious activities, causing significant damage to the organization and its reputation.

Data breaches

Criminals can target staffing firms to gain unauthorized access to sensitive data, including the personal and financial information of clients and candidates. 

These data breaches can lead to widespread identity theft, financial fraud, and other serious consequences. 

Staffing firms must implement robust security measures to prevent data breaches and protect their clients’ and candidates’ information.

Unauthorized access to company resources 

Fraudsters may use phishing or social engineering techniques to trick employees into providing their login credentials, enabling unauthorized access to centralized company resources such as databases, HR systems, or financial accounts.

This can lead to data theft, financial fraud, or other malicious activities, disrupting the organization’s operations and causing severe reputational damage.

Social engineering 

It is a tactic to deceive employees into giving away sensitive information or transferring funds. This can involve pretexting, where attackers use a false identity to gain trust, or baiting, where employees are lured into taking action that benefits the fraudster. 

It’s important to note that identity fraud can take many forms, and new tactics are constantly emerging. So, it would be best to be vigilant and regularly update your security policies to avoid potential threats.

How do fraudsters target the staffing industry? 

Now that you know the types of identity fraud, you must know how fraudsters commit those crimes. Here are some ways:

  • Fake job seekers: Fraudsters pose as job seekers and submit fake resumes or applications to gain access to sensitive information or install malware on staffing agency systems.
  • Impersonating clients or employers: Attackers use social engineering tactics to impersonate clients or employers and request sensitive information or funds transfers.
  • Payment process attacks: Fraudsters use fake invoices to obtain login credentials for online payment systems or to divert funds to their accounts.
  • Phishing: Sending fraudulent emails or messages requesting sensitive information by pretending to be someone else, like a bank or credit card company.
  • Vishing: Voice phishing, where fraudsters use phone calls to obtain sensitive information.
  • Keystroke logging: Tracking keyboard inputs to steal usernames, passwords, and PINs that can be used to access sensitive data.
  • Dumpster diving: Searching through trash for personal documents to commit identity theft.
  • Man-in-the-browser: Installing malicious programs on employees’ computers to intercept real-time web transactions and steal money or information.
  • Skimming: Using a small device to scan and store data from magnetic strips on credit or debit cards or using a handheld device to skim cards when out of sight.

To protect yourself and your company from these scams, avoid clicking links or downloading attachments from unfamiliar sources and keep your computer security software up to date. 

If you suspect any fraud, you must immediately contact your bank and cybercrime experts to report the incident and take appropriate action.

And most importantly, train your employees to do the same!

Building a fraud-proof fortress: Essential security measures

Protect your business from identity theft

Here are some best practices you must adopt to ensure your staffing firm’s safety from identity fraudsters: 

Armoring up with data encryption

Staffing firms should use data encryption strategies to protect sensitive information, such as employee data and client lists. They can use encryption software to scramble the data, making it unreadable to anyone without the encryption key. 

💡 Tip: Ensure that your encryption keys are secure and only accessible to authorized candidates.

The art of secure password management

Staffing firms should train employees on proper password management techniques. This includes using strong, unique passwords for all their accounts and never reusing passwords across different sites. 

💡 Tip: Encourage your employees to use a password manager that provides centralized space to securely store and track, and manage passwords. 

Leveraging two-factor authentication

Recruitment agencies should enable two-factor authentication (2FA) on all their accounts to add an extra layer of security. 

This requires a second form of authentication, such as a fingerprint or an OTP code sent to your phone, making it challenging for attackers to access your accounts, even if they have your password. 

💡 Tip: Regularly review and update your 2FA settings to ensure maximum security.

Hosting regular employee training sessions

You should train your employees to spot and avoid fraudulent activity, such as phishing attacks and social engineering tactics. This training should cover email and phone scams, pretexting, and baiting. 

By educating your employees on these threats, staffing firms can prevent them from falling victim to identity fraud.

Here are some tactics you can use to train your employees:

  • Conduct training sessions: Schedule regular training sessions to educate employees about the latest identity fraud techniques and how to spot them. You can bring in outside experts or use online resources to provide training.
  • Use case studies: Use case studies to illustrate real-world examples of identity fraud. Employees can learn from these examples and use the knowledge to identify similar situations.
  • Provide written materials: Create written materials such as brochures, flyers, or handouts to reinforce the training. These materials can be distributed to employees to read at their leisure.
  • Role-play exercises: Conduct role-play exercises to help employees practice identifying and responding to identity fraud. This can be a fun and interactive way to reinforce training concepts.
  • Regularly update training materials: Ensure training materials are updated regularly to reflect the latest identity fraud techniques. This will help keep employees informed and up-to-date.
  • Provide incentives: Provide bonuses for employees who successfully identify and report identity fraud. This can include bonuses, gift cards, or other rewards.
  • Make it part of the company culture: Embed identity fraud awareness into the company culture by promoting awareness and encouraging employees to report suspicious activity.

Using these methods, you can help ensure your employees are knowledgeable and equipped to spot and avoid identity fraud.

Implementing strict policies and procedures 

Staffing firms should establish strict policies and procedures around data access and payment processes.

This includes limiting access to sensitive information to only authorized employees, regularly reviewing and updating access permissions, and verifying the identity of job seekers, clients, and employers before providing access to sensitive information or transferring funds.

Apart from these five key practices, here are some more pointers you must consider: 

  • Implement rigorous background checks and verification processes for candidates, including education, employment history, and references. Consider using third-party verification services or blockchain technology to enhance the reliability of the verification process.
  • Implement robust security measures, including firewalls, intrusion detection systems, and regular security audits, to protect sensitive data from unauthorized access.
  • Employ multi-factor authentication (MFA) to secure access to company resources and minimize the risk of unauthorized access due to stolen credentials.
  • Monitor employee access to sensitive data and review access logs to identify suspicious activity.
  • Establish a clear incident response plan to address identity fraud or data breaches quickly and efficiently, minimizing potential damage.
  • Use a reputable 2FA provider with a proven record of providing secure and reliable authentication services.
  • Implement context-aware authentication, which considers the user’s location, device, and other contextual information to determine whether an authentication attempt is legitimate.
  • Consider using biometric authentication, such as facial recognition or fingerprint scanning.

In case of emergency: Responding to identity fraud attacks

In case your staffing firm has already fallen prey to identity fraud, here are several steps you can take to recover and mitigate the damage:

  • Notify the authorities: You must report the identity fraud to the relevant authorities, such as the police, the FBI, or the FTC. This will help ensure that the fraudster is caught and prosecuted and provide a record of the incident for any potential legal action.
  • Notify affected parties: You must notify any affected parties, such as clients or candidates whose information may have been compromised. This can be done through email or other forms of communication and should include instructions on protecting themselves from identity theft.
  • Review internal security protocols: The staffing firm should review its internal security protocols to identify any vulnerabilities that may have contributed to identity fraud. It involves implementing additional security measures, such as multi-factor authentication or data encryption.
  • Work with legal counsel: You should work with legal counsel to determine potential liability and develop a plan of action, including filing a lawsuit against the fraudster, pursuing insurance claims, or negotiating settlements with affected parties.
  • Monitor for further fraud: You must continue to monitor their systems and account for any signs of further fraud or unauthorized access that may involve implementing ongoing monitoring and fraud detection tools or services.
  • Provide resources for affected parties: The staffing firm should provide resources and support for affected parties, such as credit monitoring services or identity theft insurance.

Overall, recovering from identity fraud can be complex and time-consuming, but taking prompt action and working with the right experts can help mitigate the damage and prevent future incidents.

Before we wrap up, here are some underrated facts you must know about identity fraud: 

Temporary employees are at higher risk 

Temporary employees and contractors are often hired on short notice and may not undergo the same rigorous background checks and identity verification processes as permanent employees. 

This makes them more vulnerable to identity theft, as their personal information may not be thoroughly vetted before they are hired.

The human factor

While many companies focus on implementing technological solutions to prevent identity theft, the human factor is often overlooked. 

You must remember that your employees may inadvertently expose sensitive information through email or other communication channels or fall victim to phishing scams that trick them into providing login credentials or other personal information. Therefore, training them is a must.

The long-term effects of identity theft

Identity theft can have long-term effects on individuals, including damage to credit scores and difficulty obtaining credit or loans. Staffing firms may be liable for any damages resulting from identity theft, which could impact their client’s ability to obtain financing or other essential services.

The role of third-party vendors

Many staffing firms rely on third-party vendors to provide payroll and other services. These vendors may have access to sensitive data, and staffing firms need to ensure that these vendors have robust security measures to protect this data.

To conclude, here are some bonus tips for you that you should take as preventive measures against identity fraud. Hope this helps!

  • Create a written company-specific fraud-prevention policy and train your employees on it.
  • Have good internal controls and investigation procedures for your hiring process.
  • Only use official agency email addresses and websites to communicate with applicants.
  • Have a section of your web page solely dedicated to warning potential applicants about HR fraud and explaining your application process.
  • Have a confidential tip hotline or email address for applicants to alert them to possible fraud.
  • Set up a Google alert with your staffing firm’s name and words typically used in a job description and regularly monitor the results.

Frequently asked questions (FAQs)

Q1- Are identity theft and identity fraud the same?

No, identity theft and fraud are not the same, although they are closely related. 

Identity theft involves stealing someone’s personal information, such as their Social Security number, to commit fraud or other illegal activities. 

On the other hand, identity fraud means using stolen data to commit illegal activities, such as opening a credit account in their name or using their bank account to make unauthorized transactions.

Q2-How can I choose the best 2FA vendor for my staffing firm?

Choosing the best 2FA vendor for your staffing firm involves evaluating several factors to ensure the vendor’s services align with your firm’s needs and goals. Below are the steps to help you with the same:

  • Determine your firm’s 2FA requirements: Identify the specific 2FA requirements of your staffing firm, such as the number of users, types of authentication factors needed, and compatibility with your existing systems.
  • Research potential vendors: Research potential 2FA vendors to identify ones that meet your firm’s requirements. Look for the vendor’s record history of providing secure and reliable 2FA services.
  • Evaluate the vendor’s security measures: Verify if the vendor’s security measures meet your firm’s data protection and privacy standards. This may include evaluating the vendor’s encryption protocols, authentication methods, and access controls.
  • Review the Service Level Agreements (SLAs): Review the vendor’s SLAs to ensure their services meet your firm’s uptime and availability requirements. Also, ensure that they provide adequate backup and disaster recovery procedures.
  • Check for integration with your existing systems: Ensure the vendor’s 2FA solution can integrate with your existing systems, such as your applicant tracking system (ATS) or HR management software.

Evaluate the vendor’s customer support: Verify if the vendor offers reliable and responsive customer support, including technical support, training resources, and account management.

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