By: Myril Shaw - Shaw Consulting US

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!

Shaw Consulting US – Helping You Maximize Profit and Minimize Risk Every Day 

Shaw Consulting US, LLC can help you achieve F&I excellence and Compliance safety – or at least a demonstrable “good faith effort” in Compliance - no matter where you are in the development and/or maturity of your store or stores F&I success / Compliance Effectiveness models. The Founders have helped lead dealers and Service Providers to achieve the highest levels of “per unit F&I profit” and have significant experience and success in equipping and training dealers in Compliance best practices. 

We train, consult, provide tools and documents, and can help source the best people. We can also assist in building out the best systems for delivering both F&I profit and Compliance best practice. Whatever you need, Shaw Consulting US is here for you.

Visit our website (and see our Blog posts) at https://shawconsultingus.com, contact us at info@shawconsultingus.com, find out about our special Comprehensive Compliance Program at compliancespecial@shawconsultingus.com, or just give us a call at (678) 641-8419.



Whether it is maximizing F&I Profit or minimizing Compliance risk, or both, or a combination Shaw Consulting US, LLC an help you be your best (https://shawconsultingus.com)