Ghost Employees and Contractor Fraud

Ghost employees, people on a payroll who don't actually exist, or who exist but aren't performing the work, are one of the oldest forms of payroll fraud. Remote work has made them dramatically easier to create and harder to detect.

The Contractor Problem

In the contractor world, the problem compounds. Companies hire through staffing agencies or freelance platforms, often without ever meeting the person doing the work. A single individual can operate under multiple identities, collecting pay from several companies simultaneously. Or a staffing firm may subcontract work to unvetted individuals in other countries while representing them as domestic employees.

Nation-State Exploitation

The Department of Justice has prosecuted multiple schemes involving North Korean IT workers who obtained employment at U.S. companies using stolen identities of American citizens. These workers operated laptop farms, physical locations where company-issued laptops were set up to appear as though employees were working from U.S. addresses, while the actual work was performed overseas, with wages funneled to sanctioned entities.

The Compliance Risk

For companies with government contracts, security clearances, or compliance requirements, a ghost employee isn't just a financial loss, it's a regulatory violation that can result in contract termination, fines, or criminal liability.

The Fix

Ghost employees succeed because no one verifies that the person behind the credentials is real. In-person verification eliminates this vector by requiring a physical appearance at a confirmed location with government-issued ID, witnessed by a state-licensed notary.