Uncovering the Growing Threat of Employment Identity Theft

Employment identity theft is a serious and growing problem that can have devastating consequences for victims. According to the Federal Trade Commission (FTC), over 8% of reported identity thefts in 2022 were employment or tax-related, with a 45% increase in cases from Q1 to Q3 alone. As a cyber security expert specializing in identity crimes, I‘ve seen firsthand the damage that employment identity theft can inflict. In this article, I‘ll share an inside look at how criminals steal personal data and use it for fraudulent employment, the potential signs that you‘re a victim, and crucial steps you can take to protect yourself.

How Criminals Steal Identities for Employment Fraud

Identity thieves are constantly finding new ways to get their hands on the sensitive personal data needed to commit employment fraud. Some of the primary methods I‘ve observed include:

Data Breaches Exposing Billions of Records

Massive data breaches have become an unfortunate reality, with cyber criminals hacking their way into databases containing troves of personal information. In 2022, there were over 22 billion data records exposed across more than 4,100 publicly disclosed breaches. Notable incidents included:

• Twitter breach exposing over 5.4M accounts with email/phone numbers
• Uber breach compromising data of 57M customers and drivers
• Crypto.com breach involving 483 compromised wallets
• Cash App breach impacting 8.2M current and former customers
• Marriott breach affecting 20GB of confidential data

Many breaches contain extremely sensitive data like Social Security numbers, dates of birth, and even images of government IDs–the key ingredients for employment identity theft. Cyber criminals sell this data on the dark web to fraudsters who use it to apply for jobs and collect wages in victims‘ names.

The Dangers of Insider Threats

Not all employment identity theft originates from faceless hackers. In many cases, the threat comes from inside the organization. Unscrupulous employees and contractors with access to HR files, customer databases, and other records may steal information to commit fraud themselves or sell it to others.

A 2022 Ponemon Institute survey found that insider threats have increased by 44% over the past two years, with costs per incident up more than a third to $15.38 million. The massive volume of data, number of users accessing it, and shift to remote work have all expanded the insider threat attack surface.

Some sobering examples of insider threats leading to employment identity theft include:

• A background check vendor employee who stole 1000s of identities from the company‘s database and sold them on the dark web
• Multiple bank employees across the US prosecuted for accessing customer records and providing data to accomplices for fraud
• A debt collector who stole identities from consumer files and used them for fraudulent employment
• Healthcare call center employees who copied patient insurance and identity data to sell to fraudsters

Properly vetting employees, utilizing least privilege access models, implementing strong access controls, and monitoring for suspicious behavior are all critical to reducing insider risks.

Phishing, Smishing, and Other Social Engineering Tricks

Despite growing awareness of the risks, social engineering remains one of the top ways criminals trick people into handing over sensitive details used for employment fraud. In particular, phishing emails and smishing text messages that impersonate legitimate employers, job boards, and staffing agencies are increasingly common tactics.

These messages often contain links to convincing fake websites that prompt targets to enter extensive personal and financial details under the guise of applying for an open position or qualifying for a high-paying remote job. In reality, the information goes straight to fraudsters who use it for employment theft and other crimes.

Over a third of data breaches in 2022 involved phishing, and an estimated 75% of organizations around the world experienced some kind of phishing attack. Alarmingly, research shows that younger adults aged 18-29 are actually the most likely to fall victim due to overconfidence in their ability to spot scams.

The Costly Consequences of Employment Identity Theft

Employment identity theft is often harder to detect and resolve than other forms of fraud, leading to greater financial and reputational damage. Some of the most painful consequences include:

• Owing thousands in back taxes and penalties on fraudulent wages earned in your name
• Getting denied for jobs and apartments due to someone else‘s negative work history
• Having future wages garnished to pay off tax debts
• Struggling to obtain loans, housing, or government benefits due to unresolved fraud issues
• Dealing with the time and stress of proving the fraud to multiple agencies

If the thief is using your identity to work illegally, you could even face legal action from employers or immigration authorities. Victims often miss out on their own legitimate job opportunities and may have trouble accessing unemployment benefits if a fraudster is earning wages in their name.

In one tragic case, a Los Angeles man had his identity stolen by an undocumented immigrant who used it to work for over a decade. By the time the victim uncovered the fraud, he owed the IRS and state over $250,000 in taxes and was close to losing his home. Even after reporting the theft, it took years to fully clear his name and credit.

Signs Your Identity Was Stolen for Employment

Employment identity theft can be challenging to detect since criminals often use the stolen information for multiple job applications spanning various employers and states. This allows them to collect wages in a victim‘s name for years without raising red flags.

However, there are some warning signs I advise watching for that could indicate your identity has been compromised:

• IRS notices about unreported W-2 wages or 1099 income
• Your annual tax return is rejected because someone already filed
• Unfamiliar employers, locations, or occupations on your Social Security statement
• Notices of unemployment benefits applications or claims in your name
• Debt collection calls or legal notices about fraudulent employment
• Background check issues when applying for jobs yourself
• Alerts from your identity monitoring service about new employment inquiries

If you suspect fraud, I recommend immediately reporting it to the FTC, filing a police report, notifying the IRS and SSA, and disputing any fraudulent information with the credit bureaus. You should also proactively notify your current employer in case the perpetrator is a coworker.

Lax HR Practices Can Enable Employment Identity Theft

Another risk factor for employment identity theft is companies failing to properly verify candidates‘ identities, work eligibility, and other background information. A survey by HR.com found that 96% of employers have spotted lies on resumes, and 78% believe screening candidates has become more difficult.

With the rise of remote hiring, more HR departments are relying on virtual verification methods that criminals can exploit, such as:

• Asking candidates to submit photos of IDs that could be stolen or forged
• Allowing remote completion of I-9 employment eligibility forms
• Substituting video interviews for in-person identity checks
• Foregoing formal background checks in order to fill roles faster

There have been numerous cases of companies sued for negligent hiring practices after failing to detect employment identity theft. In one example, a woman in Kansas filed suit against her husband‘s employer alleging they allowed an illegal immigrant to steal his identity to work there.

Employer Liability for Employment Identity Theft

Employers can face significant financial and legal liability if they fail to exercise reasonable care in confirming employees‘ identities and eligibility to work. Some potential consequences include:

• Fines and penalties for hiring unauthorized workers
• Lawsuits from identity theft victims for negligence in hiring
• Reputational damage and negative publicity
• Disruptions to business operations
• Loss of customers and revenue

To limit liability, employers should follow best practices such as using E-Verify to confirm employment eligibility, conducting thorough background checks through reputable providers, examining identity documents in-person whenever possible, and securely storing employee records.

Companies should also have clear processes for employees to report suspected identity theft and fraud by coworkers or contractors. Promptly investigating complaints and taking appropriate corrective action can demonstrate reasonable care.

How Employers Can Help Protect Employees from Identity Theft

Employers are entrusted with a vast amount of sensitive employee personal and financial information that could be exploited for employment identity theft and other crimes. HR departments in particular must prioritize robust data security practices to safeguard employee identities, including:

• Collecting and retaining only necessary personally identifiable information (PII)
• Strongly encrypting all stored identity data, both at rest and in transit
• Tightly restricting and monitoring internal access to identity records
• Properly disposing of records once no longer needed
• Training employees on how to recognize and avoid social engineering attacks
• Implementing strong access controls and multi-factor authentication
• Regularly monitoring for signs of unauthorized access or data exfiltration

Another way employers can support identity security is by offering identity theft protection as an employee benefit. These services monitor for signs of employment identity theft and other fraud, alert employees of potential incidents, and provide expert assistance with remediation.

In a 2022 survey by Willis Towers Watson, 78% of employers said they currently offer or plan to offer identity theft protection as a voluntary benefit, up from 53% in 2021. With remote work increasing employers‘ identity risk surface, providing these tools can be an effective way to catch employment fraud early and reduce breach liability.

The Role of AI in Preventing Employment Identity Theft

As employment identity theft grows in scale and sophistication, many organizations are turning to artificial intelligence (AI) and machine learning (ML) to bolster prevention and detection capabilities. By training models on large datasets of known employment fraud patterns, security teams can uncover theft attempts that may otherwise go unnoticed.

For example, AI-powered anomaly detection tools can spot sudden spikes in payroll spend, wages earned in unusual locations or occupations, or attempts to change direct deposit details. Natural language processing (NLP) can help identify forged or suspicious identity documents in digital HR files.

Behavioral analytics fueled by AI is another growing defense against insider threats and compromised accounts. By baselining normal activity patterns, models can flag outliers like employees accessing abnormal quantities of sensitive records or logging in from new devices and locations.

According to Verizon, organizations that use AI and automation for identity verification have a 22% lower risk of data compromise. As criminals continue to evolve employment identity theft tactics, these advanced technologies will be essential to keeping pace.

Keeping Your Identity Safe from Employment Fraud

While organizations have a major responsibility to protect the employee identity data they collect, individuals can also take proactive steps to minimize employment identity theft risks:

• Place a credit freeze with all three major bureaus to restrict access
• Set up fraud alerts so creditors contact you before opening new accounts
• Enable two-factor authentication on all digital accounts
• Use an identity monitoring service to watch for signs of employment fraud
• Regularly review your credit report and Social Security statement for red flags
• Never provide sensitive details like SSNs over email or text
• Be wary of unsolicited job offers that seem too good to be true
• Keep antivirus software and operating systems up to date
• Securely store physical copies of identity documents
• Shred sensitive records before disposing of them

If you do become an employment identity theft victim, know that you‘re not alone and have a clear path to recovery. Reporting it promptly, contacting the relevant agencies and companies, and persistently following up can help clear your name. Consider working with an identity restoration specialist who can guide you through the process and advocate on your behalf.

The Bottom Line on Employment Identity Theft

Employment identity theft is a serious crime that can rob you of job opportunities, burden you with fraudulent debt, and create years of financial and legal headaches. As remote and digital hiring become the norm, criminals are finding innovative ways to exploit lax practices and steal sensitive personal data to secure illegal employment.

By staying vigilant for warning signs, following identity security best practices, and knowing what to do if you become a victim, you can minimize your employment fraud risks and remediate incidents faster. Together with robust protections from employers and advanced AI and ML detection tools, we can help stem the tide of employment identity theft.