You've Hired a Fraudulent Employee. What Comes Next?
Data Strategy, Security & Privacy attorneys Matthew Welling and Neda Shaheen were featured in an HR Dive article talking about a new cybercrime phenomenon in which companies are tricked into hiring fake employees. Federal law enforcement officials have reported multiple instances in which state actors from foreign adversaries such as North Korea made up job candidates through deepfakes or other methods to obtain remote work positions at U.S. companies and then, once hired, funneled wages to their host countries or looked to infiltrate security vulnerabilities. Holland & Knight's attorneys described red flags indicative of fake remote worker schemes and explained how companies should respond if they uncover one within their organization.
Mr. Welling stressed that vigilance begins during the recruiting process: Those reviewing applications or conducting interviews should screen for false candidates by noting instances in which qualifications provided do not match those listed in written materials or someone's voice or appearance seems to change. Ms. Shaheen added that the stakes are high; because of a strict liability standard for imposing sanctions, employers can be held accountable for illegal activity funded by a bad actor's pay, regardless of knowledge of said actor's aims.
"Companies could face consequences even if they unknowingly hire somebody and give them their regular salary," she said. "The company is balancing not just being a victim of the fraud but also being subject to legal and regulatory scrutiny."
Mr. Welling clarified that the steps for addressing suspected fraud mirror those of a normal HR investigation. He noted that one factor making these situations more difficult to root out is that the individuals are often cooperative, going so far as to return company equipment or arrange meetups for handoffs.
"The actors seem to be motivated to get one more paycheck or a severance payment or something like that," he observed. "For an organization that doesn't know what they're looking at yet, it doesn't raise the same alarm as someone who behaves like a criminal."
He also advised businesses to engage their legal and finance teams to identify patterns of criminal behavior and document actions taken to deal with suspected fraud – both of which can help a company protect itself from future claims or enforcement. Creating a set of policies and procedures so employees and leadership know how to handle these scenarios is another key component, he said.
"These are all decisions that companies are going to have to make, but they should at least have a playbook," Mr. Welling emphasized.