Hiring Fraud Is on the Rise: How Financial Institutions Are Fighting Back

Joy Henry, Executive Vice President, Americas

Financial institutions are trusted every day with the monetary assets and sensitive personal information of millions of customers — from working class households to global corporations. Operating in a highly regulated industry, they must comply with strict compliance guidelines and implement strong security measures to protect themselves from external threats. In the trust-driven world of finance, even a single misstep can compromise customer data and erode the goodwill and brand reputation institutions have worked for years to build. 

The vast wealth and confidential data managed by financial institutions make them prime targets for fraudsters, whose methods have become increasingly sophisticated over the years. While companies once focused on external breaches, such as hackers breaking through firewalls or phishing emails tricking employees, today, the threat may arise from within. 

AI, Deepfakes, and the Rise of Proxy Candidates

By 2028, one in four job candidates may be fraudulent, according to advisory firm Gartner. With the rise of remote work, fraudsters are exploiting new technologies to bypass the hiring process — using AI and deepfakes to pass the interview process and skill assessment or deploying proxy candidates to appear in their place. Increasingly sophisticated tools enable them to create convincing fake IDs that can easily fool the untrained eye. Once inside, fraudsters can steal data, plant malware, or funnel funds to foreign governments. 

This is highly relevant for financial and business services providers, who are heavily impacted by insider fraud: according to the Association of Certified Fraud Examiners, the industry reports the heaviest toll on their operations, with median losses of $120,000 across 305 incidents. To support global operations, financial institutions often hire internationally and remotely, heightening their exposure to fraudulent hires they may never meet face-to-face. 

As identity fraud infiltrates the hiring process, recruiters are becoming frontline defenders in the battle against deception. No one wants to be the person who failed to spot the AI-generated candidate profile or the counterfeit driver’s license and unwittingly hired a bad actor. But without proper safeguards, even the most vigilant teams can fall victim. To combat this, background screening providers have developed advanced digital identity solutions designed to flag high-risk indicators and help hiring managers navigate these evolving threats. These solutions often rely on AI and biometric recognition, which help to verify that an candidate’s identity matches their documents and to spot discrepancies and red flags early in the process. This not only mitigates risk but can save time and cost as well. 

What financial institutions should consider when searching for a digital identity provider 

In today’s high-risk hiring environment, identity verification is no longer optional for banks, fintech, and financial service providers – it’s a regulatory and reputational necessity. But with a wide range of solutions available, choosing the right identity provider can be daunting. Here are the key criteria financial institutions should weigh carefully:  

Compliance 

The finance industry operates under some of the strictest regulatory frameworks in the world. Financial institutions need a partner that not only understands these evolving requirements but also helps them stay ahead of compliance risks.   

Look for a background screening provider that acts as a trusted advisor — offering expertise in topics like biometric data usage, cross-border data, and digital identity standards. The ideal partner will prioritize the protection of sensitive candidate and customer information while helping you meet regulatory requirements with confidence. 

Global Scale 

Financial institutions today manage global customer bases, cross-border operations, and distributed workforces, often hiring talent across jurisdictions. Your identity provider must offer more than just broad reach – they need to deliver localized expertise. They should provide you with consultative information on compliance and share best practice information. Platforms, instructions, and support should be available in multiple languages to better meet the needs of international customer and candidates. 

Speed 

In the financial sector, speed is more than a convenience – it’s a competitive edge. Banks and financial firms often face urgent hiring needs to support everything from trading desks to customer support and compliance teams. Delays in onboarding can result in operational slowdowns, service disruptions, or even lost revenue opportunities.  

Identity fraud solutions must seamlessly integrate into fast-paced hiring workflows, especially for institutions filling roles across global markets or time zones. Leading providers like First Advantage offers an automated, real-time digital identity solution to speed up the process, which can be completed within 90 seconds on average. 

Given the intense competition for skilled talent, a frictionless candidate experience is also critical. Solutions must be mobile-friendly and intuitive, ensuring candidates can complete secure identity checks anytime, anywhere. 

First Advantage’s digital identity solutions uses a multi-layered approach to help mitigate potential identity fraud.: 

• ID Document Review: Our technology compares candidates’ IDs to a database of hundreds of standard government-issue documents in order to verify its authenticity.  
• Biometric Data: Validate an applicant’s biographic information, such as name, address, and other identifying information, against credit bureau records.  
• Liveness Detection with Facial Recognition & Biometric Matching: Candidates are asked to provide a real-time selfie for validation, which is matched to their government photo ID. Dynamic facial recognition and movement analysis tools are used to help counteract deep fakes.  
• Telecom and Device: Device- and telecom-based data, including device location, SSN, IP address, identity risk score and more are used to confirm candidates’ identity. 

Digital identity is completed before the background check, an important step to avoid searching unverified personal data and to uncover more criminal records and other potentially relevant details.  

In financial services, a single bad hire can expose your institution to regulatory penalties, reputational damage, and significant financial loss. As candidate fraud becomes more sophisticated, the need for proactive, tech-enabled digital identity has never been more urgent.  

Protect your organization from the inside out. Strengthen your hiring process by choosing a digital identity solution tailored to the complex demands of financial compliance, data security, and global hiring.  

To explore how digital identity can enhance your screening program, contact our experts and take the next step toward hiring smarter, and onboarding faster.