Identity crisis

Identity fraud is fast emerging as one of the most damaging crimes of the technological age. Last month its potential consequences became all too clear when a reporter for The Sun newspaper was able to buy the bank details of thousands of UK customers from a call centre worker in India. City of London Police are now investigating the case after claims that this was not an isolated case and that the same IT worker boasted of being able to sell up to 200,000 sets of details each month. The ease with which so much personal information can be obtained fraudulently will be of huge concern to the business community and can only serve to fuel the increasing risk of identity fraud. For recruiters in particular, the impact is likely to be twofold: on the one hand they need to find loyal staff who can be trusted with sensitive information, and at the same time they need to validate the identity of candidates and their qualifications. Figures from the Home Office show that identity theft is becoming a major problem for both individuals and employers with an estimated 100,000 people affected each year at a cost to the UK of £1.3bn. Additional research from consulting firm KPMG shows that fraud within businesses increased by 100 per cent in 2004. The level of fraud has risen to such an extent that the Financial Services Authority (FSA) believes organised crime groups now deliberately place staff within firms to commit fraud – which means recruiters need to be extra vigilant. Sin city Paul Carratu, UK president of the Association of Certified Fraud Examiners (ACFE), says that very few businesses are not touched by fraud. “It’s not always bank details, but database and information fraud is a huge problem and it’s becoming more common,” he explains. As well as taking confidential information with them, Carratu says that some ex-employees even maintain a mole within the company to update them on new information or provide them with confidential records. In the recruitment sector this raises a number of issues. “Staff can often set up their own business using information from a previous employer’s database and client details can also be compromised,” warns Carratu. “This isn’t something that’s limited to any one industry and it happens across all sectors – everything from the building trade to medical organisations. We’ve even seen instances where hospital data has become available.” Aside from the commercial damage caused by this type of fraud, stolen personal details can be used to establish false identities, which can then be used for any number of illegal activities. In the financial sector, where the economic impact of identity fraud is likely to be greatest, the FSA has urged recruiters to carry out comprehensive vetting of all candidates. It has also placed on them a legal duty to check information on staff being placed in certain financial service roles. Alexandra Kelly, a director at financial staff screening company Powerchex, says fraudsters can be individuals working alone or part of a larger criminal gang and that using the details of people who have died is one of the most common methods. “It’s definitely a growing problem, and unfortunately those perpetrating it are a long way ahead of those trying to prevent it. Organised crime groups are involved and have an increasing degree of sophistication,” she explains. According to Kelly, temporary agency workers recruited to cover peaks in workload are a particular risk because they are often drafted in at short notice and are not subject to the same checks and controls. She urges all recruiters to carry out thorough document checks making sure that all the information, such as the date of birth, photograph and academic claims match up. Although there is no typical type of offender, men commit 70% of these crimes, and the perpetrators are likely to be motivated by short-term greed. “ID fraudsters are able to obtain information from a number of sources such as bin raiding, theft of wallets, mail theft and unsolicited contact. They then use this information to infiltrate organisations as employees,” says Kelly. “Recruiters need to look at all the information available to make sure there are no mismatches. If a passport is provided, study the picture and check the date of birth. Where there are academic qualifications, these should be checked with the institutions rather than simply trusting certificates.” Verifying the identity and experience of candidates is proving to be a major headache for recruiters as more and more jobseekers choose to lie, exaggerate or use another person’s qualifications or identity to find work. Carratu thinks this is another area where recruiters must be vigilant and – in some cases – willing to take court action when they uncover deception. “Using false identities is an absolutely huge problem and it’s amazing how many people are willing to try it. Pre-employment screening needs to be taken more seriously because many candidates are quite happy to tell lies,” he says Carratu. Kevin McCavish, a partner at law firm Shoosmiths, says more than half of all CVs have some discrepancies, while 36 per cent of candidates have altered academic qualifications. Where there is any deception, McCavish advises that employers make an example of these employees or new recruits by taking appropriate legal action – in some circumstances, candidates who provide false information in job applications can be charged with fraud or obtaining advantage by deception. No safety net On the flipside, the legal onus on recruiters to get it right is immense. There are plenty of high-profile examples of where deeper reference and identity checks could have avoided a scandal. McCavish cites Maxine Carr and Ian Huntley, or Barian Baluchi – who posed as a Harley Street consultant despite having no medical qualifications – as examples of what can happen when things go wrong. Not all employers go as far as taking the perpetrators of ID fraud to court, but that doesn’t mean it doesn’t affect their recruitment and retention levels. According to research from the Chartered Institute of Personnel and Development (CIPD) a quarter of employers withdrew a job offer last year after discovering a candidate had lied or falsified their application, while 23% dismissed an employee for the same offence. The CIPD also found, however, that there is a general lack of any safeguards against this, with many employers failing to carry out even routine checks on the people they employ. Rebecca Clake, recruitment adviser at the CIPD, says these issues are becoming an increasing cause for concern among recruitment professionals. “A strong economy and low unemployment means many companies are struggling to find applicants, but there are risks that go with rushing candidates into vacancies without pausing to make basic checks,” she says. “If you don’t have rigorous pre-employment checks in place, you risk being a soft touch for people who are willing to be dishonest. “The problem ranges from candidates’ slight exaggerations to complete lies about who they are. This seems to be happening across the board and recruiters must check references properly.” On top of this, the growth of the European Union and the influx of migrant workers into the UK means agencies recruiting staff from overseas have to work doubly hard to track down identities, qualifications and references. Home Office figures released last month suggest that one in every 100 people is in the UK illegally. John Davison, chairman of recruitment firm Europeople, believes that, in response to this, “every reasonable measure must be taken to confirm candidates are genuine and that factual information is correct”. “Identity fraud is a growing problem for every recruitment company and is of particular importance for recruiters working with candidates from overseas,” he adds. Davison points out that there are now strict guidelines for employing overseas workers, and anyone found guilty of breaching these is liable for a fine of up to £5,000 per illegal worker. Financial penalties such as this, coupled with the potential damage that could be caused if an agency or employer gets it wrong, mean that the pressure on recruiters to get the right checks in place is greater than ever. Legal obligations The government is so concerned about identity fraud that in 2003 the law was changed to make it a criminal offence to even possess false documents, while a Home Office steering committee was established to investigate the extent of the problem. Since May 2004, all employers have been responsible for checking the identity of every potential employee and ensuring he or she has the legal right to work in the UK. They must also be satisfied that the candidate is the rightful owner of the documents he or she presents to confirm identity. Anyone found guilty of breaching these guidelines is liable for a fine of up to £5,000 per illegal worker.

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The following comments have been posted in response to this article:

The recruitment industry still appears slow to react to the reality of identity fraud,with the implications of the right to work in the UK legislation starting to hit employers now is a good time to establish a robust ID checking service from outset. Sean Clifford Verify ID Ltd www.veri-fy.co.uk
sean clifford 05 Jun 2008

I knew of this problem back in 2003 when running a large conveyancing operation via the Internet. I developed Verify Identity via the UKs Post Office branch network to help prevent identity fraud.The recruitment industry will need to get to grips with the 2007 AML rules before they too become targets for professional fraudsters.
Sean Clifford 25 Feb 2008

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