According to CNBC, employment identity theft costs US businesses $50 billion every year. In this type of identity theft, unqualified people use fake identities to get recruited by businesses. They can also steal information about your existing employees and then use their identities for personal gains.
Usually, such criminals use these fake identities to gain employment benefits and access to company resources. It is a growing concern for small and medium-sized businesses (SMBs). It’s harder for them to recover from such small losses.
In this modern world, everything is connected and happens online. Cybercrime and data breaches are therefore the most critical employment identity theft risks for SMBs these days.
71% of eCommerce businesses are concerned about employee identity theft more than any other type of crime. Let’s explore what employment identity theft is, how it affects SMBs, and what they can do to stop it from happening.
Understanding Employment Identity Theft
In the domain of cyber threats, employment identity theft is one of the most important ones. Here’s how it happens. Employee information is stolen from a company’s records and criminals use those identities for personal gain.
Employees may also create fake identities within a company. Such a breach can lead to dire consequences for SMBs because it’s harder for them to recover from such losses.
Types of Employment Identity Theft
Tax Fraud
Cybercriminals commonly use stolen employee data to file fake tax returns. That’s how they manage to claim tax refunds. Such unauthorized activity puts SMBs at risk of financial penalties and legal consequences. That’s why identity theft risks must be mitigated before you face such a situation.
Benefits Fraud
Criminals also manipulate fake employee identities to falsely claim employee benefits. This practice can potentially increase costs for SMBs offering benefits packages. It makes it harder for SMBs to invest in employee retention and engagement.
Medical Identity Theft
Employees exploit stolen information to access medical services or prescriptions. They use medical insurance benefits under fake identities. SMBs can end up having to compensate victims for losses and that makes it harder for them to scale.
How Cybercriminals Exploit SMBs for Identity Theft
When SMBs’ cybersecurity infrastructures are weak, it makes them attractive targets for cybercriminals. These attackers use your security gaps to get sensitive employee data. Then they use it for a variety of fraudulent activities.
Employee identity theft can harm both individual employees’ lives and business operations. That’s why data breach prevention should be the first priority for SMBs.
The Impact of Employment Identity Theft on SMBs
Damage to Reputation and Trust
The revelation of a data breach can damage an SMB’s reputation and reduce trust among customers, partners, and stakeholders. Trust is everything for such businesses and the loss of credibility can be a barrier to their growth and sustainability.
Financial Consequences
SMBs affected by employment identity theft can suffer considerable financial losses. For example, they would have to cover legal expenses. They also need to compensate affected employees and face regulatory fines due to what happened.
Legal and Compliance Issues
Failure to use strong data security measures can cause legal issues. It can also result in regulatory non-compliance. That further increases the financial strain on SMBs. Anything that stops a small- or medium-sized business from operating for some time can have a lasting impact on it.
Factors Contributing to Employment Identity Theft in SMBs
Inadequate Data Security Measures
A lack of comprehensive cybersecurity protocols can make SMBs more likely to face data breaches. Without enough identity theft prevention measures in place, criminals can easily access sensitive employee identities and steal from you.
For example, you might be skipping regular software updates and patches. That might create gaps that attackers can exploit. Moreover, the absence of multi-factor authentication (MFA) makes it easier for them to get into employee accounts.
Lack of Employee Education
Employees who have not been informed about identity theft risks can be easily exploited by phishing schemes and other identity theft tactics. Educating employees is a critical component of strengthening your defenses against employment identity theft.
Employees might end up sharing their details with attackers involuntarily. That’s why they must be trained and educated about employment identity theft. They would have trouble recognizing suspicious activity of any type too.
Insider Threats and Employee Fraud
Insiders with access to sensitive information can also participate in such activities. They may succumb to the temptation of misusing their own privileges for personal gain. 75% of employees admit to stealing from their employers. Employees may even collude with external attackers to compromise data security.
Such insider threats are usually due to a grudge against the employer or, financial pressures. That’s why you need to carefully monitor employee activity as well. Conducting regular security audits can be a great way to detect and prevent insider fraud.
Identifying Employment Identity Theft
Signs of Potential Identity Theft
SMBs need to be vigilant for red flags that help them detect possible identity theft. Unusual activities in employee accounts or unexplained changes in employee information could be indicators of a breach.
For employees, signs of potential identity theft can be strange emails or messages asking for personal info. They also need to beware of charges on your bank or credit card statements that they don’t recognize. Login troubles even with the right info can also be a major red flag.
Regular Audits and Monitoring
Consistent audits of employee data and vigilant monitoring of network activities can help swiftly detect unauthorized access, minimizing the damage caused by identity theft incidents.
Monitoring starts from very simple steps in the workplace. You can install security cameras to guard unattended desks. That will prevent anyone from accessing information that they shouldn’t have.
Employee Training
One of the best tools for preventing identity theft is educating employees. You can start training sessions that empower employees to recognize identity theft indicators. SMBs also need to encourage employees to quickly report suspicious activities.
Employees need to know what red flags they should be looking out for. We have described many such red flags in signs of employment identity theft above. When they know what to look out for, it’s less likely that they will unwillingly contribute to identity theft.
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Preventive Measures for SMBs
Using data protection measures is very important for avoiding employment identity theft. Using the preventive measures that we have listed below can significantly improve cybersecurity for SMBs.
- Encryption and Access Controls: You can use encryption to safeguard sensitive data and limit access to authorized personnel only.
- Regular Software Updates: Frequently update software applications and implement security patches to stay safe from any possible risks.
You can increase your online data security by adding multiple forms of verification. This is the simplest and the most commonly used method of keeping data secure. Criminals can’t access codes that you receive on your phone number or email address.
Make sure that you store employee information very safely. Also, make sure that you discard the information of those who have left in a proper way. Attackers are looking for loopholes in your data security to exploit them.
As remote work becomes more common, SMBs must make sure that remote employees are as aware of the threats as on-site staff. They also need to adhere to the same cybersecurity protocols.
Responding to Employment Identity Theft Incidents
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Incident Response Plan
Crafting a detailed incident response plan is the most important thing. It explains the steps to take when an identity theft incident occurs. That minimizes chaos and potential damage.
An incident response plan is like a guide that a company creates to know what to do if something bad happens. For example, in a data breach or an identity theft incident. It’s like having a plan for a fire. You know where to go and what to do.
In this plan, a company might list all the steps to take when they find out about the problem. This could include who to tell, like the people affected and maybe even the police. They might also talk about who is in charge of fixing the problem and how they will do it.
The plan might also say how they’ll let everyone know what’s happening and how they’ll help the people who got hurt. Basically, the plan is a roadmap that helps the company stay calm and organized when something bad happens. That’s how they can make things better as quickly as possible.
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Notifying Employees and Authorities
Quickly informing affected parties about the breach is necessary. You need to notify employees and relevant authorities. This is a crucial step in identity theft recovery.
Since employees are the ones directly in control of their information, notifying them is very important. They’re the only ones who can secure that information and access their resources quickly.
Authorities will be less likely to hold you accountable for the problem if you notify them in time. That will reduce the burden of error that the company is carrying.
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Assisting Affected Employees
When identity theft happens, the affected employees must have the necessary resources and support. They have to recover from what they faced. It can help ease identity theft’s emotional and financial toll.
To maintain your employee’s interest in working with you, you have to make sure that they feel safe with your company again. That’s the only way to increase and keep up employee engagement and retention scores.
Compliance and Legal Obligations for SMBs
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Understanding Laws and Regulations
Familiarizing oneself with pertinent data protection laws and regulations is paramount to ensure compliance and avoid legal entanglements.
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Reporting Requirements
SMBs must follow mandatory reporting procedures outlined in data protection regulations. That is the only way to avoid additional costs in the event of an identity theft incident.
Training and Educating Employees
Training Sessions
SMBs should be regularly conducting training sessions on identity theft prevention and response. That is the only way to make sure that employees know how to avoid such breaches and what to do if something happens.
Updates on Emerging Threats
You need to provide employees with timely updates on emerging identity theft techniques and trends. They need to remain informed and vigilant to stay safe.
Importance of Employee Awareness
When employees know the risks of identity theft, they can take measures to avoid contributing to it. That’s why your employees need to have all the knowledge and resources to prevent employment identity theft and recover from it.
Employees are the ones with the greatest responsibility for safeguarding their information. They are also the ones that are the most important targets in such incidents.
Seeking Legal Support for Employment Identity Theft
Evaluating Partners' Security Practices
You need to assess the security measures of third-party vendors that have access to employee resources. For example, your website might be connected with multiple third-party apps that can compromise that information.
Legal Recourse
SMBs need to have a comprehensive understanding of potential legal actions. That includes the possibility of suing an employer for identity theft. It can guide affected parties in seeking appropriate resolutions.
Contracts for Data Security
Make sure to establish clear agreements that define data security responsibilities between partners and vendors. That helps reduce the responsibility on your part in case of a breach or a loss that they have caused.
Conclusion
Employment identity theft is an ever-growing risk to the stability and reputation of SMBs. To stay safe from it, SMBs need to adopt proactive measures like improved data security and employee education on identity theft. Your organization needs to know what to do in case something happens too. That’s where an incident response plan can help. The responsibility is on SMBs to prioritize identity theft prevention. That’s the only way you can safeguard your reputation and keep scaling.
