Employment application fraud is the number one insider threat to organisations, representing 48% of all the staff fraud cases reported to the CIFAS Staff Fraud Database during the first six months of 2013.
written by Arjun Medhi, Staff Fraud Operations Manager, CIFAS – The UK’s Fraud Prevention Service
In my previous HireRight blog post, I mentioned the increased reporting of staff fraud through the CIFAS Staff Fraud Database during the last six months of 2012. The level of staff fraud reported in this period was so high; it was greater than that reported in the whole of 2011. Much of this increase was attributable to the increase in the reporting of employment application frauds -which constituted 35% of all cases filed on the Staff Fraud Database, the second most prevalent fraud during the period.
Since then, HireRight has reported an increase in job applicants including lies and inaccurate statements in their application forms. It was quite startling to read that nearly six out of every ten job applications contain lies and inaccuracies. This also came at a time when HireRight also reported an increase in recruitment. It therefore appears that the competition in the labour market brought about by high unemployment has become so fierce that it has led to potential employees engaging in unethical and fraudulent behaviors. Analysis of the CIFAS Staff Fraud Database activity during the first six months of 2013 certainly testifies to this.
Employment application fraud is now the number one insider threat to organisations, representing 48% of all the staff fraud cases reported to the Staff Fraud Database during the first six months of 2013. It is important to note that these are more serious than a minor fib or small exaggeration on a CV. These are cases of fraud where an application contains serious material falsehoods – the kind of lies that actually make a difference between whether an employer would choose to employ them if the truth had been told. These cases are all offences under the Fraud Act 2006: fraud by false representation (Section 2) and fraud by failing to disclose information (Section 3). The last time employment application fraud was at the number one spot was just before the credit crunch, i.e. a time when there were more job opportunities and proper vetting became more prevalent.
The reasons behind this increase mirror what was reported in my previous post. However, the good news is that organisations that participate in the CIFAS Staff Fraud Database and vetting specialists are picking up on these frauds, often in advance of a commencement date. If these fraudsters had passed the vetting stage and managed to enter employment, then there would have been a heightened risk that they might perpetrate fraud against their employer.
The second most prevalent insider threat to an organisation during the period was what participating organisations define as “Dishonest action by staff to obtain a benefit by theft or deception”. This constitutes 43% of cases reported on the CIFAS Staff Fraud Database in the first six months of 2013. As expected, cash continues to be king. No matter what type of economy we are living, corrupt staff steal cash direct from the customer or their employer, driven by desperation or greed. Organisations using the CIFAS Staff Fraud Database have also identified corrupt sales staff involved in making up fictitious customers to facilitate further frauds or manipulating a customer’s application to push a sale through illegally. Although these people will be reported to Action Fraud, however, it is unlikely that there will be any subsequent police or court action as the rate of prosecution of fraud continues to be low. It is worrying to think that these people are free and out there trying to get jobs, possibly fraudulently, with the intention of committing further fraud.
Another interesting insight into cases reported to the CIFAS Staff Fraud Database is that nearly a quarter of the fraudsters resigned. This means that it is more than likely that the fraudster’s employer reference will merely confirm dates of employment and state that the individual resigned. It is likely that the employer will not mention the fraud due to fear of any potential legal action (even though it is highly unlikely as it is factually correct that former employee committed fraud before they had resigned). Quite clearly, more needs to done to screen these types of individuals before they are recruited.
Employment application fraud has become the number one threat for the first time since 2007. With this in mind, I would like to finish with a quote from a CIFAS research report published back in 2004, which I think reflects what is reported above and expresses what needs to be done:
“The lack of employee recruitment checks and controls in some organisations lies at the heart of the employee fraud problem. They are the first line of defence in stopping the criminals placing individuals inside your organisation.”
The CIFAS Staff Fraud Database is a data sharing scheme run by CIFAS – The UK’s Fraud Prevention Service, whereby organisations upload and share information about their cases of confirmed staff fraud across a variety of industries. Recommended by the Financial Conduct Authority and the National Fraud Authority, the database is used by nearly 100 organisations, most of which are well known financial services firms, including major retail banks and insurers.