Beyond Background Checks: Adding Identity Verification to Your Hiring Process to Better Address Fraud Risk

October 25th, 2021

It’s no secret: The retail industry is in hiring mode. In addition to filling gaps left from the pandemic shutdown, retailers are ramping up for seasonal shopping. Unfortunately, they aren’t the only ones looking for candidates. As SHRM points out, “We are facing a convergence of all these industries — retail, shipping, hospitality and more — all trying to hire at the same time. Recruiters are going to face increased competition for hourly workers as all these industries look to hire.”

Despite the pressure to move quickly on hiring, retailers face another challenge. The 2021 National Retail Security Survey released by the National Retail Federation (NRF) found that 69% of retailers reported seeing an increase in fraud, employee theft, cargo theft and workplace violence in the past year.

Sophisticated Attacks Demand a Proactive Hiring Process

Retail shrink has several causes. Identifying shoplifters may be central to every retailer’s loss prevention strategy, but given the latest trends, retailers need to reconsider hiring practices too. Earlier this year, for instance, Business Insider reported that organized retail theft grew nearly 60% between 2015 and 2020.

Use of stolen identities is one way that such “crime crews” infiltrate retailers. Even if internal theft doesn’t involve an organized ring of shoplifters, one study found that employee thefts typically result in five times higher losses than those of the average shoplifter. This study also points out that supplier fraud has also become more prevalent, with schemes ranging from kickbacks and understocked orders to price inflation by suppliers’ internal employees.

These costs add up quickly. According to the NRF, retail store losses add up to $61.7 billion annually. Given the risks to employees, customers and the wider organization, retailers can’t afford to cut corners, especially when hiring demand is so high. Having an efficient hiring workflow — beginning with identity verification — enables high-volume hiring with confidence. Likewise, implementing more robust screening of suppliers, their key personnel or contingent workers can identify red flags before a bad actor becomes a problem.

Verifying Identity While Keeping Pace with Hiring Demand

Before the pandemic, identity verification was simpler. You could shake hands with a new employee and do a face-to-face comparison of the individual’s driver’s license or passport. As retailers use a mix of virtual and in-person hiring to extend their reach to likely candidates, traditional methods of identity verification need to adapt.

Crucial to note, however, is that in most companies, the identity verification step is typically done on the employee’s first day, well after they have been hired. Even in a pre-COVID world, identity verification was happening too late in the process. Retailers that conduct identity verification before background screening and even at the start of the interview process are in a better position to mitigate the risks they’re looking to avoid.

Put Identity Verification Ahead of Your Background Check

Background checks typically start when a candidate provides identifying information — a complete name and birth date, for example. But we are seeing a rise in identity fraud, which means that self-reported details should be verified before the background check even begins. This becomes a first line of defense should candidates assume false identities to hide red flags in their work history or criminal records check.

Even if a candidate doesn’t have fraudulent intent, a simple typo or failure to include a middle name can lead to an inaccurate or incomplete background check. An innovative solution like a digital identity wallet can be used in combination with traditional in-person verification to accommodate a hybrid hiring workflow. From there, you can move to the background check step with confidence that you are screening the correct person.

When Identity Verification Isn’t Put First

A multinational staffing company sent a new retail sales associate to work for a large retail company at one of its stores. That employee wound up stealing thousands of dollars’ worth of products from the store. Only after this incident did it come to light that an item on the I-9 form did not match that of the job application, meaning this individual successfully started the job based on a fraudulent identity. It’s no surprise that this fraudulent identity, the one used in the background screen, came back with a clean criminal record.

This case of identity fraud resulted in permanent inventory loss as well as financial and reputational damage to both the retail company and the staffing firm. It could have been avoided with an identity check up front. Verifying identity prior to background screening not only guards against situations like this but also gives retail companies and staffing firms greater confidence that the person they are interviewing and onboarding is who they say they are.

While this occurrence is something of a worst-case scenario, it is indicative of a larger trend in identity fraud, and exactly why having a candidate confirm they are who they say they are is incredibly important. Organizations have the ability to mitigate the variety of risks that can negatively impact the entire employee population, customers, finances, security and reputation.

Many organizations will state that they understand the risks but that time to offer needs to stay compressed in this competitive, high-volume hiring landscape. The truth is, you don’t have to sacrifice safety for speed. With today’s advanced technology and seamless processes, organizations can have both, allowing them to hire at the pace they want, while maintaining a foundation of trust and safety.


Vincenza Caruso-Valente is the General Manager of the Staffing, Retail and Franchise business of Sterling, a leading provider of background and identity services.

This article was originally published in Retail TouchPoints.

Sterling is not a law firm. This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.