June 7th, 2023 | Sterling

Tighter candidate screening — the antidote to rising employee fraud

One of the major downsides of the inexorable rise of remote work and rapid advances in technology has been the notable increase in candidate and employee fraud. Given the sophisticated ways in which fraudsters operate, this can not only prove costly in terms of hiring the wrong person, but it can also pose a major threat to the very security of the hiring organisation. It is an increasingly common trend that we’re seeing around the world, particularly in the APAC region, which makes the need for comprehensive, robust digital vetting and screening processes an urgent requirement to mitigate against the risks of employee fraud and increase confidence in new hires.  

To give a sense of the financial costs involved, a recent global report on occupational fraud and abuse by the Association of Certified Fraud Examiners found that the total losses that were incurred from the 2,500 reported cases in 125 countries across the world amounted to a staggering $3.6bn. For the APAC region, the median loss was estimated to be $195,000 with Singapore accounting for just under 10% of reported cases. For western Europe the number was lower at $139,000, but these losses are just the tip of the iceberg if you consider the damage to brand and reputation.

Whether hiring and onboarding full time employees, highly skilled contractors, gig workers, or any other type of position for your business, the relevant checks must be carried out to verify and validate the person is who they say they are, done via all the necessary background checks required to establish credentials and qualifications. This is a particularly important part of the recruitment process and shortcuts should not be taken given that you could be putting your own organisation and its people at high risk. From identity verification to criminal records checks through to financial and employment verifications, there are many different areas to consider.  

And with so much hiring and onboarding in today’s post-pandemic world now conducted remotely, employee fraud is getting a lot harder to detect. Technology will play a pivotal part to help stem the tide and can help to verify a candidate’s identity at the outset before further checks are implemented. Such are the advances in AI, facial recognition technology and biometric data that a person’s identity can be established from their expressions and gestures through a mobile app.

Improving the hiring experience for candidates

For employers, the growing sophistication of screening modes has several benefits. Being able to use technology that can validate a person’s identity not only eliminates the need for in-person physical verification of documents such as passports or ID cards, but it also makes the hiring and onboarding process quicker and more simplified. This will have a knock-on effect on the candidate experience, which is a key differentiator in talent attraction. As we discovered in our “Hiring Reimagined” report, the background screening process increases the confidence of candidates in the organisation and the job.  

Another key area that will help to identify potential red flags is, of course, social media. As long as it is applied ethically to assist in the decision-making process — in other words, devoid of any potential discrimination against any candidate — then social media searches can provide invaluable insights into a person’s behaviours which could prove harmful at work. Candidates should be informed beforehand if such searches are being used as part of the selection process and must be given the opportunity to respond to any adverse findings.

Both the UK and Singaporean governments have announced new screening and anti-fraud measures. Certified identification document validation technology (IDVD) for “right to work” schemes came into force from 6 April 2022 in the UK. It is also in the process of passing its Economic Crime and Corporate Transparency Bill, which will hold organisations liable. Singapore’s Complementarity Assessment Framework (COMPASS), due to be implemented in September 2023, aims to ensure that qualifications for foreign workers are verified given the recent spate of false documentation cases. 

Employee fraud is on the rise across all levels of role and sector, and verifying people’s identities can prove challenging both remotely and onsite. But it is by investing in a thorough screening and vetting process that organisations can significantly reduce their exposure to risk of fraud.     

Steve Smith is President International at Sterling.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.