Fake Employees: A Growing Problem With Significant Legal Risk
A multinational employer in need of specialized expertise to meet a project deadline finds the ideal candidate. The individual has an impressive resume with all the right credentials and experience and passes the standard background check. The interview, conducted via video conferencing, goes well. He’s hired.
There’s only one problem: He’s a fake worker.
Malicious actors increasingly pose as legitimate employees and contractors by using stolen and forged identities, AI-generated photos, and deepfake videos. Often, the goal is payroll fraud, but victim organizations may suffer more than financial losses.
In many cases, fake employees infiltrate companies to conduct espionage, gain access to sensitive systems and data, or launch cyberattacks. Victim employers may face regulatory penalties and an array of legal risks. If the fake worker is a North Korean national, there may be more severe consequences.
The stakes are high, and organizations should take steps to identify fake workers in the hiring process. They should also develop processes for mitigating risk if they determine that fake workers are on the payroll.
How Fake Worker Schemes Work
In a fake worker scheme, operatives use stolen or synthetic identities and create fraudulent profiles on job sites. AI enables them to create convincing profile photos and write resumes that appear to be legitimate. They typically apply for highly paid, remote IT roles, often working for multiple companies simultaneously to maximize income.
U.S.-based accomplices, called facilitators, are a crucial part of the scheme. They receive company-issued laptops and other hardware and install remote desktop software to make it appear that the worker is physically present in the U.S. These physical locations are referred to as laptop farms. The fake workers’ salaries, which can total hundreds of millions of dollars annually, are often paid into U.S. bank accounts set up by facilitators.
North Korea’s scheme is unique in that it’s a coordinated, state-sponsored effort to generate money for the regime. Up to 90% of the workers’ salaries are funneled back to the North Korean government. This income provides a critical stream of foreign currency that helps fund North Korea’s weapons programs. The funds are moved through various online payment platforms, money transmitters, and cryptocurrencies to evade international sanctions and mask the money trail.
Fraud at a National Scale
Cybersecurity firm CrowdStrike reported a 220% increase in the number of companies hiring North Korean fake workers between 2024 and 2025. Companies with large remote and hybrid workforces are most at risk — as well as those with valuable digital assets or export-controlled information.
Each fake worker can earn as much as $300,000 a year, generating hundreds of millions of dollars in revenue in total for the North Korean government. The FBI and the DOJ, in cooperation with international partners, are actively pursuing enforcement actions to combat this national security threat.
Victim organizations may find themselves in the federal government’s crosshairs. Companies that unwittingly hire these workers may face significant legal and financial penalties for violating U.S. and international sanctions against North Korea.
The Office of Foreign Assets Control (OFAC) enforces U.S. sanctions, which prohibit the import or export of goods and services from the North Korean regime. Hiring a North Korean worker is likely to be considered a violation, which may result in DOJ investigations. Because OFAC penalties are based on strict liability, organizations may face fines even if they unknowingly hired a fake worker.
Potential Legal Implications for Employers
Fake workers pose additional legal threats to their employers. The specific consequences often depend on whether the employer can demonstrate that reasonable steps were taken to prevent the fraud.
For example, the employer could be sued for negligence if a fake employee harms a customer, client, or another third party. This is particularly true if the employer failed to implement robust vetting processes to verify the person’s identity or if the employee was unqualified for a job requiring specific licenses or skills.
If a fake employee gains access to critical systems and compromises sensitive data, the employer could face fines and legal action for violating data privacy laws and regulations. Fake workers can trigger scrutiny from the IRS or the Labor Department due to false tax filings or wage and hour law compliance.
The organization could be sued by investors, partners, and other parties for damages resulting from the fraud. Business owners could face personal liability if they are found to have been willfully blind to the fraud.
Detecting Fake Workers Before They’re Hired
Fake worker schemes are on the rise despite law enforcement efforts to combat them. Gartner has predicted that 25% of job applicants could be fake by 2028.
The problem isn’t limited to startups and smaller organizations that lack robust hiring practices. Fortune 500 companies have fallen victim to fake worker schemes. Organizations have processes for checking employment history, criminal records, and other background information, but they don’t usually check the individual’s identity.
Organizations should modify their hiring practices to include rigorous identity verification. Identity verification systems ask a person to scan a government-issued photo ID and then take a selfie. The system validates the authenticity of the ID and the selfie and verifies that the two match. Organizations can also use a notary public to verify an applicant’s identity and documents in person.
Role-specific interviews should be conducted by multiple individuals with an eye toward indications of deepfake technology. A skills assessment can help weed out fake applicants and deter fraudulent activity.
Organizations should continue to monitor remote employees for suspicious behavior that may indicate a fake worker. Audits of payroll records can also help prevent future incidents and provide evidence of good faith compliance efforts if legal issues arise.
Mitigating the Harm Caused by Fake Employees
An organization that falls victim to a fake worker scheme should immediately terminate the individual’s employment and cut off all access to company systems. Because fake workers often expose sensitive data, the organization should promptly engage legal counsel and IT forensic experts. These professionals can determine the full scope of the breach and ensure all necessary data breach notifications and legal procedures are followed.
The organization should promptly report the fraud to relevant authorities, including law enforcement and federal agencies. Reporting to the FTC may be appropriate if identity theft is involved. Correcting payroll and tax records by submitting forms such as W-2c and W-3c to the Social Security Administration can reduce the risk of tax penalties.
The financial impact of fake worker fraud can be substantial, including direct financial loss from the fraud, fines and penalties, and legal fees. The organization may also suffer reputational damage and loss of customer trust. Organizations should engage legal counsel to understand their specific risks and develop appropriate policies and procedures.
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