Establishing Strong Compliance Practices Has Never Been More Important – Synthetic Fraud Is On The Rise

 

                     By: Myril Shaw - Dealer Profit Services 

Of course, Compliance includes the manuals, the locked cabinets, the cross-cut shredders, the regular inspections to prevent allowing identity theft, etc.  The other side of compliance is preventing yourself (the dealer) from becoming a victim.

"Easy"," you say.  "Run the OFAC, check the credit bureau, confirm the Driver's License – I'm good."  Well, sadly, it is not that easy.

A new form of Identity Theft known as Synthetic Fraud is on the rise.  It is estimated that last year auto dealers saw 2.7% of their credit buyers actually be synthetic and that synthetic fraud presented a potential loss of between $500M and $1B.

Synthetic Fraud is only a matter of time – and you won't like it.

The difference between "normal" Identity Theft and Synthetic Fraud is that, while with traditional Identity Theft someone will normally notice something on their credit report, credit card statement, or bank statement, with Synthetic Fraud there is no someone to notice.

Synthetic fraudsters take their time.  They will generally buy a social security number or numbers on the dark web.  These will be from people who are deceased, a minor, or in some other way are no longer associated with active account individuals.  They will create a name.  They will apply for credit and get declined – but by so doing establish a file in the bureau.  They will apply again for a low limit account and they will gradually build up a full credit profile for a non-existent individual and they will pay the bills along the way – so they end up with good credit.

When they are ready, they do the "bust-out".  They purchase the $75,000 car or boat and then, poof, they are gone.  The lender is going to ask for a buy-back.  The unit is gone.  There is no trace and there is no recovery – only loss.

The fraudsters will typically mange 10's to 100's of these synthetic identities at one time.  After their "bust-outs", they will sell their purchased units for discounted cash to unsuspecting individuals and simply disappear with the money.

So…the other side of compliance is being diligent about who is receiving credit – and it is not necessarily easy.  Synthetic fraudsters are VERY good at what they do.  It is up to you to do you best to detect these and to document your efforts along the way.

What can you do to give you at least a chance of identifying Synthetic Fraud efforts:

• Verify what you know about an individual based on their Social Security Number – The first three digits of the SSN show where a person was born – have a chat with them about their birthplace
• Be immediately suspicious about limited credit profiles – Synthetic fraudsters typically have credit profiles that show strong credit but few accounts. When you see a limited credit profile from an individual who, by age, should have had the opportunity to establish a larger profile and investigate why
• Confirm addresses and residences in multiple ways – Remember that payroll statements and records have their own black market – and getting fake proof of income is not hard, so don't rely on income statements to prove addresses
• Train your team – if you see something, say something – anything odd on a credit application, bureau, or supporting documents needs to have a light shined on it – no matter how important a sale may be, if it is a "bust-out" purchase it will cost way more than a lost sale

Just the "standard" compliance elements are all critical.  Protecting against Synthetic Fraud and being proactive against all forms of fraud will save potentially millions of dollars – and documenting those efforts will help in supporting your claims if needed.

Protect others – protect yourself – make Compliance a Priority and not an afterthought!

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Dealer Profit Services, LLC can help you achieve F&I excellence - no matter where you are in the development and/or maturity of your store or stores F&I success model.  As the industry's best Finance Solutions Provider and the only one to take your customer to Fun and Inspiration with a Free and Idyllic lifestyle through F&I, thus driving industry-leading levels of F&I profit, Dealer Profit Services can and will equip you with what you need to take that next step in your F&I success - regardless of what that next step might be.  Whether you want someone to help you take over take over your F&I and with our experienced personnel just help you drive profit to your store, provide help to you some of the time, need some quick advice, or just provide F&I Training/Consulting, we are here to help you.  If you are not fully equipped with all of your Compliance Manuals and Training, Dealer Profit Services can do that too.  Contact us anytime at info@dealerprofit.com or give us a call at (470) 326-0966.