Contractor recruitment fraud, an old scam still producing new victims

It all might sound a bit complicated to people outside of the professional temporary work sector, but contractor recruitment fraud is a long-running scam of many years, still thriving today in 2023, in part due to its simplicity.

Two perpetrators club together. One poses as a household-name engager, the other as a fake contractor, writes Keith Rosser, chair of JobsAware, and a director at Reed.

As the two get matched together, thanks to a bit of suggestion from each to a trusting recruitment agency, the agency pays the fake contractor for supposedly working at the client every week -- maybe for months out of its own pocket, before realising 'the work' is a fiction.

Contractor recruitment fraud as it was, and is now

In the past, before the growth of job boards and social media, fraudsters acting as ‘the client’ would request the recruiter look for a specific type of contractor, and then soon after, a contractor with the exact requirements would call up. Too good to be true? Invariably, yes.

The legitimate recruitment agency would match them and set them up to receive payment for work, without realising that the contractor and fake client are working together to defraud the agency.

Ghost contractors could then be paid by the agency for months, amassing thousands of pounds before the legitimate recruiter realises ‘the client’ is as real  (and ethical) as ‘the contractor.’ Fraudsters would often choose real companies to pretend to work on behalf to pass agency company checks, and sometime make it the sort of company which a recruiter would want on its books, and quickly.

How contractor recruitment fraud is evolving

Contractor fraud has changed shape with the emergence of job boards and social platforms, and now it’s common that the fake client will provide the fake contractor upfront and ask the legitimate agency to payroll the fake contractor.

Some cases of contractor fraud have reached six-figure values. There are known fraudulent operator “companies” conducting this scam, one of which had in excess of £200,000 against its record in county court judgments.

And a previous JobsAware roundtable with South Yorkshire Police, the Metropolitan Police, and recruiters heard how agencies had, collectively, lost over £1million.

Thanks a lot Digital

Digital hasn’t helped. The rise of remote recruitment has benefits, but it also helps fraudsters succeed with these kinds of scams, as nobody meets each other as part of the hiring process. Arguably, they don’t need to, if all the hiring checks are done properly, 100% of the time. 

If contractor fraud is news to you, and you’re struggling to care because you’re not an agency, keep in mind that contractor fraud harms genuine contractors too.

It’s often the reason a recruitment agency goes onto impose stricter (and often slower) onboarding rules on real contractors, making the process tougher for everyone.

Practical steps for agencies

Contractor recruitment agencies can take steps to protect themselves from contractor recruitment fraud.

These primarily internet-enabled steps may include:

• Conducting online credit checks on suppliers / contractors and strictly adhering to the credit limits imposed on them.
• Acknowledging that if a company has lots (more than 200) credit enquiries against their name in one month, it’s a red flag.
• Spotting high value timesheets – fraudulent contractors will often attempt to claim as many hours as they can.
• Enforce a checking process on suppliers / contractors which includes checking their company is registered on Companies House.
• Using the Companies House website to identify companies that are filing ‘Micro Accounts’ as this could be a red flag.
• Looking out online for recent changes to website domain names – another potentially red flag.

How to check contractors are who they say they are

Contractor recruitment agencies can check the details of the contractor.

As a minimum check the:

• • Contractor’s identity documents – ensure they are genuine.
  • Physical location – look into the addresses they have provided.
  • Bank details – check whether the bank details match those of the contractor / supplier.
  • Landline numbers – these are harder than a mobile phone number to hide behind so ask all suppliers to provide a landline.
  • Company email addresses – check that these are from the correct company (impersonators may use an email address that is very similar to a legitimate company)

In addition, consider using a digital verification platform to cross-check these details and reduce the risk of falling victim.

Don't suffer in silence

If it’s too late, and you’re an agency who fears it has already been impacted by contractor recruitment fraud:

• Report it to JobsAware here
• Send evidence of phishing emails here.
• Report the contractor recruitment fraud to ‘Action Fraud’ using the “NFIB9 business trading fraud” category, here.
• Report impersonation Fraud to ‘Action Fraud’ using the above link but via the “NFIB1H advanced fee fraud” category.