Strategies to Prevent Fraud in Contract Recruitment

Their documents all check out, everyone seems thrilled, and the onboarding goes smoothly. But a couple of months later, you’re still chasing payment from your new client, and it dawns on you: the client isn’t who they say they are, and the contractor’s bank account you’ve been paying thousands into belongs to a fraudster. Nobody was doing the “work”, because the job never existed – the two were in it together from the start. Suddenly, your agency’s reputation and finances are in jeopardy.

In recent years, there has been plenty of media coverage about the risk of recruitment scams for individuals, but legitimate small and medium recruitment agencies are also prime targets.

Fraud in the recruitment industry is no longer confined to “fake job” scams as illustrated in the example above; it has also slithered its way into the back-end administrative processes that agencies rely on to conduct their business. From identity theft to payroll fraud, the risks are real and growing. In this article, we’ll have a look at the different types of fraud affecting recruitment, why the threat is escalating in contract recruitment, and, most importantly, how you can protect your business.

What is fraud in recruitment?

Fraud in recruitment can be defined as deceptive practices that exploit vulnerabilities in the hiring process. Front-end examples, such as fake job postings or fraudulent candidates, are often discussed. However, it’s back-office fraud that can often pose the most dangerous threat to agencies, as it can occur so unexpectedly.

Back-office fraud can include:

• Data breaches in which sensitive personal data is stolen and exploited, putting contractors, clients, and your business at risk.
• Identity theft where fraudsters provide stolen or falsified documents to impersonate contractors or employees.
• Payroll fraud where fraudsters submit false timesheets or use fake identities to claim funds.
• Invoice fraud where scammers pose as legitimate suppliers and submit invoices to agencies for payment.

These scams not only damage financial stability but can also tarnish a company’s reputation, making it harder to attract clients and candidates.

Why is fraud on the rise in recruitment?

The rise in fraud can be attributed to multiple factors:

• An increase in contract recruitment and umbrella companies. Strict IR35 regulations have added complexity to contract recruitment in the UK, and while it aims to promote fairness, it has created additional avenues that fraudsters can exploit, such as umbrella companies.
• Digital transformation. Recruitment processes are now pretty much all conducted online, creating new vulnerabilities for scammers to exploit.
• Economic pressure. Tough economic circumstances have pushed more individuals toward desperate measures, including fraud.

JobsAware, a not for profit organisation that supports recruitment scam victims, said reports of job scams were 290% higher Q4 2023 that the previous year, and scams have continued to be prevalent and across recruitment news throughout 2025.

Are you worried about umbrella companies potentially damaging your recruitment agency’s reputation? Download our free Umbrella Company Compliance Checklist to make you sure you have all your bases covered before entering into a contract.

Fraudsters are getting more sophisticated

In addition to more conventional tactics, fraudsters now also deploy cutting-edge technology to achieve their aims. These constantly changing tactics make it harder for recruitment agencies to prevent fraud and protect their operations.

These are some of the high-tech methods used by the scammers:

• Email phishing: phishing is one of the most common methods fraudsters use to exploit businesses. The recipient clicks on a link or attachment, which can install malware or spyware on their computer and steal sensitive information.
• Deepfake technology: used to conduct video interviews or fake ID and other official documents.
• Credential stuffing: automated bots can be used to try stolen login details across multiple platforms.
• Social engineering: hackers impersonate trusted entities to gain access to sensitive systems.

Protecting your recruitment business against the threat of fraud

Recruitment agencies, especially growing SMEs, are particularly vulnerable when it comes to the risk of fraud. With limited resources and thin margins, cash flow disruptions or reputational damage can be catastrophic.

To protect your business:

• Strengthen back-office compliance: Ensure robust identity verification processes for contractors and employees.
• Use verified payment channels: Avoid manual payments wherever possible to reduce errors and fraud opportunities.
• Conduct regular audits: Periodic checks can catch irregularities before they escalate.
• Partner with trusted tech providers: Reliable platforms with built-in compliance measures are your first line of defence.

A proactive approach to security not only minimises risks but also reassures clients and candidates of your professionalism.

Why tech security is more vital than ever in recruitment

The modern recruitment agency handles vast amounts of sensitive personal data, from ID documents to bank details. Protecting this information is no longer optional – it’s essential.

Secure software platforms that incorporate multi-factor authentication (MFA), advanced threat protection (ATP), data loss prevention (DLP), encryption, secure access management and automatic updates and security patching are critical.

Failure to secure your systems can lead to data breaches, financial losses, and legal repercussions under data protection laws like GDPR. Investing in secure technology is an investment in your company’s future.

3R’s top tips to help keep you safe

1. Avoid falling prey to email phishing

Key warning signs

• Emails may appear to come from someone you know, but on closer inspection, they might have a spelling error in the email content, sender name or email address.
• Fraudsters often request businesses to update bank details for suppliers, contractors, or clients. These changes seem legitimate but divert payments to their accounts.
• Emails might urge you to download a document or click a link. These can install malware or redirect you to a phishing site.
• Odd or unusual behaviour, such as requests to amend client, contractor or supplier details, or requests for system logins or password sharing.

What do real-world examples of email phishing look like in recruitment?

• Requests to update contractor, client, or supplier payment details.
• Emails asking for system login credentials or unexpected placement instructions.
• Unusual email addresses not consistent with previous points of contact.

Steps to protect your recruitment agency from email phishing attacks

• If in doubt, avoid clicking links or downloading images or attachments until you’ve verified the email.
• Call the company using a verified phone number (i.e. not the one in the email) and confirm that any request for a change in bank details is valid.
• Double-delete phishing emails from your inbox and trash to ensure they’re completely removed.
• Fraudsters may follow up emails with a call to pressure you into acting. Verify the caller independently before taking any action.
• Check for other subtle red flags, such as:  “lookalike” characters in email addresses, like Cyrillic letters that mimic similar English ones as well as inconsistencies or missing information in email signatures

When in doubt. Always verify the sender and the request. Trust your instincts: if something feels off, take extra precautions and stay proactive by training your team to recognise phishing attempts and report suspicious activity immediately.

2. Simple steps to prevent data breaches

• Choose software platforms with multi-factor authentication (MFA), timeout settings, and regular updates.
• Use strong, unique passwords for each system, change them regularly, and store them in a password manager.
• Avoid public wifi especially when working with high risk data where possible use a VPN to secure your connection when working remotely.
• Install antivirus software and keep it updated to protect against malware.
• Limit access by assigning minimal permissions based on job roles and regularly review who has access to sensitive information.
• Use password protection or secure document sharing platforms such as DocuSign instead of email for sensitive documents.
• Keep the storage of sensitive data to a minimum and avoid unnecessary sharing.
• Monitor and regularly check for unauthorised access or unusual activity.
• Act fast on suspected breaches. Change passwords immediately and notify stakeholders if a breach occurs.

3. Beef up your internal security processes

Implement team training:

• Teach good security practices, like logging off and locking computers in secure drawers when stepping away from their desks or computers, especially in public places or shared offices
• Leverage existing additional security training such as courses on LinkedIn Learning if your team have premium accounts.

Incident response preparedness:

• Train recruiters to follow incident response protocols for handling data breaches or suspicious activity.
• Ensure everyone knows how to report and contain potential breaches quickly.

Keep your team updated on common scams:

• Learn about phishing and other types of email scams to spot red flags.
• Follow cybersecurity blogs or subscribe to fraud alerts to keep up with new scams and threats.
• Share this knowledge with your team regularly.

What to do if you think you have been scammed

You’ll need to follow the steps below straight away if you suspect fraud:

Freeze your accounts: stop all payments immediately.

Inform clients and candidates: be transparent to maintain trust.

Contact the authorities: report the incident to law enforcement and relevant financial institutions.

Review your systems: identify the breach and patch vulnerabilities.

Seek expert help: consult cybersecurity or compliance specialists to minimise damage.

Real-life stories from 3R

Here are a couple of real-life anonymised case studies of how our processes have helped avert our clients from falling victim to fraudsters.

If it sounds too good to be true, it probably is!

Recruiter A, who was in the process of onboarding with 3R, was contacted directly out of the blue by a new client, requesting help with taking over the payroll of a number of contractors. According to the new client contact, some internal changes necessitated the employees to be moved from permanent roles to contract assignments.

Recruiter A had a funny feeling that the deal might not be above board, so they asked us at 3R to run some of our standard checks on the company upfront. Our checks did indeed highlight a few oddities, so 3R suggested Recruiter A call the company via a legitimate contact number to confirm the validity of the new client contact, and by doing this, the company confirmed there was no such person working there.

Beware of international recruitment scams

Recruiter B recently experienced being approached by several international businesses, two of which were based in Dubai. Initially, they requested permanent staff, only to change their minds at the last minute and ask for a contract payroll agreement instead.

During standard back-office compliance checks run by 3R, irregularities and other red flags with these businesses came to light (such as dormancy records and unusual balance sheets).

Some advice from Recruiter B: “Be naturally wary of any overseas companies approaching you directly or your consultants. Do your checks on all inbound companies that want to work with you. Luckily for me, my back-office provider does these rigorously and saved us from this potential scam.”

How 3R can help

At 3R, we are constantly evolving our security solutions, not only for our own business and our provisioned technology, but also to keep you compliant and safe from the risk of fraud. Here’s how partnering with us helps to protect you:

Our services are hosted via Microsoft Azure for highly secure and scalable operations.

Our automated risk mitigation processes identify red flags before they become problems.

We have a dedicated risk and compliance team to support you whenever you have doubts about potential fraud.

We proactively conduct regular penetration testing and disaster recovery drills to ensure we’re always ready.

When you partner with 3R, you’re choosing a company that’s committed to protecting your agency from fraud and data breaches. Let us handle the risks, so you can focus on growing your business. Contact us today to find out all the benefits of working with us.