5 simple tips to protect your dealership from identity fraud risks

Here’s how it works: Ken buys a person’s information on the dark web. He then proceeds to a third-party automotive website, completes the transaction and has a brand-new SUV delivered. Or perhaps he uses a manufactured ID and swings by the dealership to finish the deal. Ken could decide to buy data from the dark web and create a new person, using a blend of real data and fake facts to create a synthetic identity – a fake person who will of course never make a payment. He might also be a really bad guy and use his son’s personal information to buy a car or two. In fact, he might even be a part of a ring that’s in the business of dealership theft. It’s a common occurrence: Recently, a senior citizen was arrested in Virginia for purchasing a $160,000 luxury vehicle. He was the physical point person for a group of people that stole identities online and would go from state to state with different IDs, purchasing vehicles and shipping them to foreign countries. In another case, a Rhode Island man and a local dealership were victimized by synthetic identity theft. The vehicle, a $40,000 sedan, was already long gone when they figured out that the fraud had been committed.  

The point is that our online, and occasionally masked, world gives criminals like Ken endless ways to rip dealers off. Every time criminals like Ken strike, dealers suffer from inventory loss, probable lender buybacks, and potential consumer lawsuits. And they’re doing it all the time.  

According to a recent study by Point Predictive, auto lenders have endured over $7.7 billion in exposure due to fraud and misrepresentation during 2021. According to a recent eLEND Solutions survey of auto dealerships, dealerships see the same trend: 84% of the 700 dealers we surveyed said that identity fraud has increased, with 60% losing three or more vehicles in the last year. Most dealers surveyed point to the increased digitization of the deal as the reason for the increase in theft. Despite this – a trend that has been on the march since COVID-19 struck in 2020 – 67% lack adequate identity fraud protections. More insights are available in the new report: Is Identity Fraud Jeopardizing Digital Retailing Profitability.  

Dealerships are uniquely vulnerable to identity theft, due to the dollar amount of the average vehicle transaction, combined with the emergence of digital retailing. The fact that many aren’t prepared to protect their stores – and are unsure how to go about it – makes it much worse.  In addition to implementing a documented identity theft prevention program (Red Flags Rule), here are five things you can do to help protect your dealership from identity fraud:  

1. Forensically Authenticate the Driver’s License 

Make sure you have a robust automated authentications scanner. Today, scanner technology is available that can perform as many as 50+ forensic tests, in real time, to evaluate security features of driver’s licenses (e.g. watermarks, infrared patterns, ultraviolet, photo overlays, etc.). And check to be sure the solution you choose meets KYC compliance requirements and safeguards rules.  It’s a small investment to significantly upgrade to your dealership’s capability to identify, manage, and avoid fraud –ultimately protecting your business, your reputation and your customers’ safety.

 2. Verify Personally Identifiable Information (PII)

Confirm that your solution includes the ability to verify PII, including address, phone, email, and the individual’s unique ID combination of SSN, Name, and Date of Birth. This is simply critical to catch stolen, forged or fabricated identities before it’s too late. This data can be cross-matched against hundreds of databases of consumer data (government agencies, cell phone carriers, public utilities, credit bureaus, and other sources) to verify the identity and/or detect synthetic fraud red flags.

 3. ‘Proof of Presence’ Authentications  

Replace traditional out-of-wallet questions and basic passcode number generators with AI solutions that can establish ‘proof of presence’ in an interaction.  For example, these AI solutions send a one-time passcode to the cell phone number of the customer – identified by the phone carrier.  Combining identity information with phone security checks fights account takeover and true name fraud, while reducing the risk of ‘consumer-not-present’ and other identity fraud tactics.  

4. Credit First

Pull credit first! Pulling it before the test drive or first pencil creates opportunities to uncover unusual occurrences, patterns or suspicious credit characteristics that may warrant additional due diligence.  Examples of these include: large amounts of unsecured debt (which requires less documentation than a mortgage); high numbers of recent credit inquiries, potentially indicating the fraudster is attempting to quickly build credit; mismatches between the account holder’s age and duration of credit history. Another plus is that your credit provider will also do Anti Money Laundering (AML) screens for Office of Foreign Assets Control (OFAC) lists, government watch lists and other high-risk alerts. 

5. Normalize a Fraud Prevention Culture  

Make fraud prevention part of every training and best practice! Fraud is happening every single day, in every single market, across every brand — and it can happen to you. Train your team to trust their instincts: suspicions should trigger a higher level of scrutiny which will be easy implement with the above technologies. And always remember to check more than just identity: make being proactive with employment and income verification due diligence part of your team’s process. Invite your local police department to help your employees spot fake driver’s licenses and other documents. By giving your employees the information, tools and training they’ll need, you’ll stand a much better chance of identifying fraud before it happens. 

There’s no doubt that in the future fraud schemes will become increasingly difficult to detect, and more challenging to prevent. We’ve seen that with the emergence of online retailing. Despite this reality, the technology is in place to protect your dealership, now and for the long term. This, combined with common sense rules and a documented identity fraud prevention program, will protect you no matter what kind of crime the “Kens” of the world create.