Establishing strong compliance practices has never been more important

Myril Shaw Dealer Profit Services
The business benefits of belonging to a 20 Group

By Myril Shaw

A new form of identity theft known as synthetic fraud is on the rise. And you won't like what we have to say about it.

With traditional identity theft, someone will normally notice something amiss or unusual or inflated on their credit report, credit card statement, or bank statement. With synthetic fraud, there is nothing 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 then create a name. They will apply for credit and get declined – but by so doing establish a file in the credit reporting bureaus. They will apply again for a low limit account and they will gradually build up a full credit profile for a non-existent individual, even paying some small bills along the way, so they build up good credit.

When they are ready, they do what is called the "bust-out."  They will purchase a $75,000 car or $100,000+ boat and then, poof, they are gone. The lender is going to ask for a buy-back. But the unit is gone! There is no trace and there is no recovery – only loss.

The fraudsters will typically manage anywhere from 10 to hundreds of these synthetic identities at one time. After their bust-outs, they will sell their purchased units for cash at a discount to unsuspecting individuals or ship the car or boat on a container overseas, and simply disappear with the money.

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So one side of compliance at your dealership is 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.

And it's not as simple as running the OFAC, checking the credit bureaus and confirming driver's licenses.

Synthetic fraudsters are VERY good at what they do. It is up to you to do all you can to detect these and to document your efforts along the way.

• 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 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 big or important the sale might be. If you are caught in a "bust-out" purchase it will cost way more than a lost sale!

It is estimated that last year in the auto industry 2.7% of customers making a purchase at a dealer using credit were synthetic, representing a loss of over $500 million dollars.

It is only a matter of time before this hits the boating industry in a wave.

Again, this makes all of your "standard" compliance measures all the more 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 – by making compliance a priority and not an afterthought!

Myril Shaw is the COO of Dealer Profit Services and a member of the Boating Industry Top 100 Leadership Alliance.

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