Candidate fraud and CV lies have been a significant problem for employers recently, but more stringent vetting procedures are starting to have an impact on those trying to submit false applications.

New research from pre-employment screening firm Powerchex suggests that fewer applicants to UK banks and financial institutions are lying to recruiters compared with 12 months ago. The firm's analysis of almost 3,000 applications recorded an 18% drop in major discrepancies on CVs and job applications between July 2006 and July 2007.

Alexandra Kelly, managing director, Powerchex, thinks that a stricter vetting regime across the UK is finally starting to bite — with more fraudsters being caught and more jobseekers deterred from lying in the first place. "Fraudulent applicants who misrepresent their educational qualifications and experience cost the financial services industry millions of pounds a year. However, there's now a recognition by applicants that misrepresentation on CVs is no longer viable.

"More rigorous vetting procedures are allowing companies to clearly discern an applicant's past and then make an informed choice about whether that person is right for the organisation," she said.

Previous studies carried out by the Chartered Institute of Personnel and Development (CIPD), accountants BDO Stoy Hayward and risk management consultants The Risk Advisory Group have indicated that CV lies were becoming an increasing problem for all employers, but particularly those in the financial sector where businesses have a duty to prevent fraudsters gaining access to personal data.

In 2006, several research projects by organisations including BDO Stoy Hayward and The Risk Advisory Group pointed to a scenario where applicant lies were getting out of control, with as many as one in five CVs containing serious misrepresentations.

So Powerchex's findings will come as good news to recruiters and employers alike, although it highlights some remaining areas of concern.

According to the findings, younger people are more likely to have discrepancies in their applications, with the under-20s marked as the worst offenders.

Anne Fairweather, external relations manager at the Recruitment and Employment Confederation, said this is an area where recruiters can use their experience to help employers attract the right candidate.

"It's essential that people stop this sort of misrepresentation, but recruiters can help candidates who have made a genuine error," she said.

Rebecca Clake, organisation and resourcing advisor of the CIPD, warned that employers need to be more cautious due to the growth in identity theft. In a previous CIPD poll, carried out two years ago, one in four bosses admitted they had withdrawn a job offer because they had been lied to, while 23% had sacked an employee because they had obtained the role dishonestly.

Clake said that although there can be a fine line between exaggeration and outright lies, recruiters must make sure people are being honest. "A CV or job application is not the best place to be really modest but at the same time it needs to be truthful. If employers feel misled, this could lead to an offer being withdrawn or a dismissal later on," she said.

The research also revealed an alarming lack of security in the use of temporary workers in the City, with 89% of undisclosed criminal records found on the CVs of this group. Financial institutions in the City rely heavily on temps for back office and administrative work and Powerchex claims many companies are exposing themselves to fraud.

"An army of unchecked workers are potentially inside the nation's banks and potential fraudsters are more likely to come in as temps. Computer workers pose the biggest threat," warned Kelly.