I hope against hope that when they say they don't have a licence we're talking about something less egregious than 'never had any formal training as a pilot'. Something like didn't bother getting a type rating for the specific aircraft type or failed to renew their licence at the correct point.
> If the issue is that someone else is taking tests for the fakers, how do they know who's a faker?
I can only talk about what I've heard in India.
1) No test is done. An official with access to blanks just prints another one for $1,000. The govt. could match up tests with the complete list of pilots with authorized licenses and get an exact count.
2) An impostor does the written and practical (flying) tests. This is common in IT also.