The Rising Threat of Applicant Identity Fraud

By Joy Henry, EVP, Americas at First Advantage

Key takeaways:

• Applicant identity fraud is rising rapidly, fueled by synthetic identities, AI deepfakes, and fraud-as-a-service networks — posing serious risks to staffing firms and employers, especially in remote hiring scenarios.

• Traditional screening methods are no longer sufficient; advanced digital identity solutions with features like biometric validation, AI pattern recognition, and liveness detection are now essential to combat sophisticated fraud tactics.

• Speed and user experience remain critical, so identity verification tools must integrate seamlessly into hiring workflows without delaying onboarding or creating friction for legitimate candidates.

In today’s fast-moving labor market, speed is everything. This especially rings true for staffing firms under pressure to fill roles quickly, and at-scale. But with that urgency comes a growing risk: skipping vital parts of the background screening process that can leave staffing firms open to applicant and identity fraud. From falsified credentials to stolen personal data, bad actors are finding new ways to exploit gaps in the hiring process. For staffing firms, this isn’t just a compliance issue; it’s a business-critical threat. The cost of onboarding someone who isn’t who they claim to be can affect clients, candidates, and brand reputation. As fraud tactics become more sophisticated, so are the safeguards organizations are using to stop them. 

In a recent high-profile case, a group of North Korean hackers successfully applied for jobs in the US by posing as remote IT workers. Once hired, these fake applicants began funneling their pay to the North Korean government to fund its weapons program, prompting an advisory from the FBI.

Synthetic fraud, when real and made-up information is combined, is the fastest growing type of fraud and one of the key drivers behind applicant fraud around the world. In 2024, losses attributed to synthetic fraud rose to an all-time high of $3.3 billion USD, according to TransUnion’s latest data. Its popularity has soared due to the ease with which fraudsters can acquire legitimate SSNs from the dark web, often from deceased or homeless individuals, to craft a plausible alias that can withstand basic scrutiny.

An entire industry of fraud-as-a-service has emerged around synthetic fraud, with organized criminal networks selling fake identity packages and providing guidance to help their customers successfully commit fraud. Fraudsters use these fake identities to apply for loans and credit facilities, open consumer accounts, or, in some cases, apply for jobs. Funneling funds to foreign governments is only one of multiple possible motives for applicant fraud. Fraudsters could also be looking to steal data and assets, plant malware, conceal their past criminal activities, or claim credentials they don’t have. 

The growing sophistication of AI-based technology and deepfakes also help hackers infiltrate unsuspecting companies by allowing them to pass online skill-based tests and remote interviews. In 2024, a deepfake attempt occurred every five minutes according to Entrust, with digital forgeries showing a 224% year-over-year increase. In addition to creating convincing counterfeit documents, fake applicants can alter their appearance through video spoofing, hiding their face behind an AI-generated filter.

Companies that hire remotely or through external agencies are particularly vulnerable to applicant fraud, since they may never meet the applicant in person during the hiring process. New identity fraud methods make it possible for a recruiter to interview one person over the internet, only for a different individual to show up for their first day of work.

How can employers protect themselves against fake applicants?

Some security experts recommend meeting all applicants in person before hiring them in an effort to deter bad actors. However, this practice may not be feasible for staffing agencies and employers that process large volumes of applications, especially if they have a remote or international workforce. In addition, while in-person interviews prevent the use of AI, determined fraudsters can still use realistic physical counterfeits to get past recruiters.

For most employers, having a digital identity solution accompanying the background screening process is the best practice to fight against applicant fraud. In recent years, a wide range of digital identity solutions have emerged in the market, driven by this growing threat. Here are some factors employers should consider before selecting a digital identity provider:

• Turnaround time: Skilled talent who isn’t hired and onboarded quickly may lose interest or get snatched up by a competitor. Look for a digital identity solution that integrates seamlessly with the rest of the hiring and onboarding process. Automation can also be used judiciously to confirm applicants’ identity without lengthening time-to-hire.
• Red flag detection: Don’t content yourself with a simple document check, since counterfeit IDs are only one of the many methods used by fraudsters to infiltrate companies. Look for a solution that uses AI-driven pattern recognition, biometric validation, and liveness detection to identify common red flags. 
• Applicant experience: Engaging your applicants from the start is important. Your identity solution should be mobile-friendly, fast, and intuitive, with support available in multiple languages if you hire internationally. Since applicants often have concerns about their personal information, make sure your identity provider doesn’t collect more personal data than is necessary.

With identity fraud becoming more sophisticated and widespread, staffing firms are finding themselves on the front lines of a rapidly evolving risk landscape. The urgency to verify applicant identities with precision and consistency has never been greater. A single bad hire, even made under false pretenses, can erode client trust, compromise safety, and damage reputations built over years. To stay competitive and maintain a screening program based on compliance, staffing organizations must invest in robust, tech-enabled digital identity solutions that meet the pace of modern hiring. 

Joy Henry is the EVP, Americas at First Advantage where she oversees P&L across Financial Services, Professional Services, Retail, Gig Economy, Staffing, Technology, Media, Entertainment, and Hospitality sectors. She leads strategic growth initiatives, aligning business objectives with operational execution while building high-performance teams and driving cultural transformation.