The Risk of Employee Identity Fraud — and the Importance of Identity Background Checks

Identity fraud — also known as identity theft — happens when someone takes another person’s name and other personal information (like the social security number) and uses them without the latter’s permission to access accounts, obtain medical services, or even apply for a job.  

To prevent employee identity fraud, an identity background check, also known as identity verification or personal information validation, is conducted to confirm if an individual or candidate who applies for a job or seeks to do business with an organization is truly who he or she claims to be. 

In this blog, we’ll explore employee identity fraud, the risks associated with hiring candidates using false identities, and the importance of conducting identity background checks supported by real-world case studies. 

5 Common Types of Employee Identity Fraud

Employee identity fraud can take many forms. There has been a noticeable increase in job candidates presenting false, stolen, or altered information to navigate standard hiring processes.

Fake or Stolen Identities

This happens when a job candidate uses an entirely fake name or borrowed identity from someone else, e.g., a relative, friend, or stranger, without the latter’s permission. With supporting documents like fake IDs, a birth certificate, or TIN/SSS numbers, the goal is to pass initial screenings while hiding a criminal record, immigration status, or a disqualifying work history. 

Forged or Altered Documents

Common in industries like healthcare and engineering, where legal compliance or professional certification is required, this fraud occurs when a candidate forges diplomas, licenses, NBI clearances, PRC IDs, or other employment application documents to easily get qualified for the role.  

False Educational Backgrounds and Employment

It happens when a job candidate commits fraud by inflating or fabricating academic credentials, job titles, and work experience to appear more competent and experienced. This often involves listing fake employers, unverifiable references, or unaccredited schools. 

Multiple or Hidden Identities

Especially in high-turnover or project-based roles where long-term verification is often overlooked, the use of multiple identities or switching between names to cover up prior employment issues, legal troubles, or poor performance also happens. 

Unauthorized or Undocumented Workers Using False Papers

This occurs when an undocumented worker, e.g., an illegal alien, uses falsified or borrowed documents to gain employment in the formal sector. This puts employers at risk for violating immigration and labor laws, in addition to facing sanctions for hiring individuals not legally allowed to work.  

Risks of Hiring Someone Using a False Identity

Hiring someone who uses a fake identity exposes your business to serious legal, operational, financial, and reputational risks.

Internal Security and Fraud Risks

An individual who conceals their identity could be hiding criminal intent or a problematic past. Having them onboard to your team increases the risk of theft, data breaches, insider fraud, or workplace misconduct. If something goes wrong, you may experience difficulty tracing responsibility, as background information is tied to the false identity.

Legal and Regulatory Violations

If you’re running a business in regulated industries, e.g., healthcare, finance, and construction, and employing someone with a fake identity, especially if the individual is unqualified, undocumented, or using forged documents, you are most likely violating the labor, tax, and immigration laws and are, therefore, at risk of fines, penalties, and lawsuits. 

Financial Losses and Operational Disruptions

Replacing a bad hire is costly. The costs may include additional business expenses for recruitment, background checks, assessments, and all work hours invested. Beyond these, your business may also suffer direct financial losses if the dishonest employee engages in internal theft, fraud, or other criminal activities. All of these can cause disruptions to your business operations.  

Reputational Damage and Loss of Trust

When your clients, partners, or the public discover that your business hires someone under false pretenses, it can also lead to loss of credibility, public backlash, or damaged business relationships. A false identity used by someone posing as a licensed professional can spark customer complaints and negative publicity.