India’s $564bn fraud problem – who’s paying the price?

By Puja Sharma

Fraud in employee background verification is becoming a growing concern for businesses in India, with Chennai emerging as the city with the highest instances of fake and forged documents. A recent study by IDfy, India’s identity verification platform, analysed data from 3.5 million background checks across 16 industries, uncovering alarming trends in fraudulent activities, especially in the finance sector.

The Rising Cost of Financial Fraud

The study revealed that Chennai saw the most cases of forged qualification and experience documents, accounting for 9.4% of all education and employment verification fraud. Close behind was Bangalore, with a 9.3% fraud rate in background checks. The findings underscore a critical challenge for financial institutions and digital platforms that rely on secure transactions and trustworthy employees.

A striking insight from the study is that 95% of fraud cases are driven by financial distress, including debt and medical emergencies. While factors like greed, gambling, and drug use contribute marginally, financial strain remains the dominant motivator. Alarmingly, global employee fraud losses reached a staggering ₹4.7 lakh crore ($564 billion) last year, with financial services firms being primary targets.

BFSI: A Sector Under Siege

In the banking, financial services, and insurance (BFSI) sector, 33% of fraudsters are repeat offenders. Employment verification fraud is the most prevalent type of fraud in this segment, with 10.9% of all cases flagged. The financial sector faces unique vulnerabilities, as fraudulent employees can exploit access to sensitive data, manipulate transactions, and bypass internal security measures.

With India’s rapid push toward digital payments and fintech innovation, fraud prevention has never been more critical. Fraudulent backgrounds in financial services can lead to insider threats, regulatory penalties, and reputational damage—issues that can erode consumer trust in an industry built on credibility.

eCommerce: A Breeding Ground for Credential Fraud

eCommerce has emerged as another high-risk sector for employee fraud, with employment fraud making up 20% of reported cases. The industry ranks among the top fraud-prone sectors at 14.46%, revealing a concerning trend of false credentials and fake employment histories infiltrating digital marketplaces.

Similar to the food delivery sector, eCommerce platforms are battling an underground black market where fraudulent login credentials and employee IDs are sold. This allows unverified individuals to gain access to platforms, compromising security, enabling financial scams, and threatening data integrity.

The Consumer Goods Industry and Finance Fraud Risks

The fast-moving consumer goods (FMCG) sector sees one of the highest rates of employment fraud, with 15.66% of cases flagged. Fake university documents were the leading cause of education fraud, while 6.43% of employment checks revealed tampered documents or false work experience.

Financial fraud within FMCG companies can have far-reaching effects, especially when bad actors misuse company resources, forge supplier contracts, or manipulate internal procurement systems. When combined with weak verification processes, these fraudulent activities can result in significant financial losses beyond just employee fraud.

The Cost of Fraud: Beyond Monetary Losses

The report highlights that for every rupee stolen through fraud, companies incur an additional ₹4 in related costs. Financial institutions and eCommerce firms, in particular, bear the brunt of these losses, as fraudulent employees can exploit access to payments infrastructure, customer data, and digital wallets.

Ashok Hariharan, Co-founder & CEO of IDfy, emphasised the pressing need for companies to adopt proactive fraud detection strategies. “Fraud is often seen as a distant problem until it hits home. Our study shows that employee fraud isn’t just about stolen money—it’s about compromised security, lost trust, and systemic risks. In industries like BFSI, FMCG, and eCommerce, where fraud rates exceed 14%, unchecked credential misuse is a ticking time bomb. Businesses need to move beyond reactive measures and invest in robust verification systems.”

Strengthening Financial and Digital Security

The study also outlines several measures businesses can take to mitigate fraud risks:

• Pre-interview verification: Screening applicants before interviews can help detect fraudulent credentials early.
• Reducing turnaround time (TAT): A streamlined hiring process with real-time verification can prevent fraudsters from slipping through the cracks.
• Continuous monitoring: Leveraging AI and machine learning for ongoing fraud detection helps businesses stay ahead of evolving threats.
• Stronger compliance frameworks: Enforcing stricter policies and industry standards can serve as a deterrent for potential fraudsters.

The Way Forward

As fraud tactics become more sophisticated, companies must stay vigilant and adopt cutting-edge verification technologies to safeguard their operations. Financial services, eCommerce, and consumer goods industries remain prime targets, and proactive fraud detection will be the key to maintaining trust, security, and business integrity.

The message is clear: organisations that invest in advanced fraud prevention strategies today will be the ones securing a safer and more resilient financial ecosystem for the future.