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David Chernick

TREACL Ltd

Managing Director

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Internal threats: Are you protected?

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David Chernick explains how fraudsters are making the most of the recession – thanks to scaled down HR, compliance and security – and warns both employers and employees to beware of the risks.


With around 300,000 more unemployed competing for 150,000 fewer vacancies than this time last year, it's easy to see why jobseekers, desperate to find work, are so vulnerable to the ever brazen and growing number of fraudsters.

Whilst HR departments are working harder with employment relations issues on the rise and managing consultations and redundancies, they are under the same pressures faced by the rest of the organisation to reduce cost and scale back.

"Even the most professional HR practitioners and resourcing specialists are easier targets for determined fraudsters during a recession."

Even the most professional HR practitioners and resourcing specialists are easier targets for determined fraudsters during a recession. It's difficult not to be tempted to rush through a recruitment process when the number of candidates for every vacancy has swelled so drastically. Even when faced with a recruitment freeze, how many organisations stipulate regular screening of existing staff even though their circumstances may change completely during their tenure?

Equally, permanent placements and temp billings at staffing companies have declined for nine and five consecutive months respectively. Unless they're exclusively focused on the few remaining buoyant sectors such as medical care, many recruitment consultants are frantically trying to secure scarce vacancies. And with compliance and security measures facing the same resource pressures, it's harder still to check who we're dealing with. Fraudsters quickly find out which employers are the easiest victims and return in greater numbers. Indeed, KPMG's Fraud Triangle tells us that fraudsters look for a lack of controls.

Worse still, when employers are still not properly checking applicants' ID documents, do we even know who are getting the jobs? This raises particular concern about employees that deal with children and vulnerable adults, or those who have access to sensitive personal information, or those who are working on sensitive infrastructure projects or delivering major events.

Target hardening improves business survival and makes HR more valuable

During a recession, employers are unwittingly exposing themselves, their employees, clients and other stakeholders to additional risk. A single act of fraud can wipe out a business as surely as a drop off in business – just far quicker. Managing this risk is, thankfully, far cheaper than the cost of recruitment. It's certainly cheaper than losses that – as in a recent fraud perpetrated against a staffing business by the so-called 'Lying Dutchman' – can easily top £100,000. As an employer, I'd always ask two key questions: who are we dealing with and who should check who we're dealing with?

How to check who we're dealing with

Screening employees – not forgetting the existing workforce, outside contractors and temps – has to start with checking ID. Although statutory (and usually contractual) compliance might only suggest the most basic 'reasonable steps' to checking ID, clearly any agency supplying staff into sensitive work, especially where they're relying on a candidate's ID to check a criminal record disclosure, needs to go further. Failure to properly check an ID document renders any further check of, for example, criminal records and employment history less than worthless.

Credit reference agencies now offer a wide range of relatively low cost, data-based historical data, internationally. It's easy for fraudsters to steal the identities of the deceased, so there's no excuse for not checking employees against a mortality register. And, with up to six years of address histories, it's easier still to figure out whether or not collusion may be taking place. After all, more than half of fraud is likely to be perpetrated in conjunction with existing or former employees.

Many employers waste too much time and money resubmitting Criminal Records Bureau (CRB) disclosure forms because of inaccurately completed forms. With timescales stretching to weeks for the return of disclosures, the average 20% of forms returned is a significant inefficiency for employers undertaking large numbers of CRB checks. This is definitely an area to get experts in to help.

Another commonly inefficient check is referencing. Employers expend disproportionate efforts trying to elicit subjective feedback from former employers, whilst at the same time admonishing about its worth because nobody ever volunteers more than employment dates and job titles.

Instead of chasing subjective comments that may be impossible to rely on for selection decisions anyway, don't underestimate the value of the employment dates and job titles about which a large proportion of job applicants regularly lie.

How to choose the screeners

Many employers grapple with the debate about who should undertake background screeners. Paying the same person to recruit and to screen a candidate introduces an intolerable conflict of interest unless they're rigorously monitored by a sufficient number of proficient compliance officers. But screening and even auditing staff outside the recruitment process obviously adds cost. HR departments should certainly be itemising these costs to highlight screening activities to hiring managers. After all, it's the organisation as a whole, be it a hospital, transport company or bank that carries the risk.

"When someone loses their job through redundancy they're particularly vulnerable to scams, even more so if they're trying to maintain mortgage or rent payments, or servicing other loans."

Organisations that know that the economy is risky enough as it is, without having to worry about internal threats too, either build their own ring-fenced, comprehensive, reliable, and quick background screening capability with advice from screening experts or, more likely, employ professional background screening companies who have the expertise, quality and scale to provide timely and reliable screening.

The recession has made jobseekers more vulnerable

When someone loses their job through redundancy they're particularly vulnerable to scams, even more so if they're trying to maintain mortgage or rent payments, or servicing other loans. Sadly, fraudsters know how desperate this jobseeker is to find work and they also know that their former employer may have made a redundancy payment directly into the redundant employee's bank account. It might seem obvious, but even the most astute can succumb to tempting employment offers during times of distress, that they'd otherwise consign to the 'too good to be true' spam box.

The same rule applies to employers as to employees, so know who you're dealing with. Candidates need to be more selective in choosing who to share their personal information with, even if the reason sounds rational.

David Chernick is one of the UK's leading experts on large volume employee screening and vetting and a founder of SAFER (Safe Advice for Employment and Recruitment)

One Response

  1. Having worked with David in the past I have been impressed with
    Too often its seen as only the employees that are the greatest risk to business, however we operate in a current climate that has been shaped by a few powerful individuals / organisations driven by non core tenets and only profit. The question then comes where does one start or stop regulating the regulators. Its easy to aportion blame especially when theres little or poor process, however when I first met and sat with David on projects, his findings were astonishing and what was more worrying is how screening is still viewed. This article scratches the surface to a number of issues relating to ownership, responsibilty, diligence and above all best practise. In these times we need a fair, impartial and more importantly a commercial vehicle that will enable all involved to achieve the required results to progress.

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David Chernick

Managing Director

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