Best practices to prevent identity theft and fraud at auto dealerships

Professional female office clerk searching files and paperwork in the filing cabinet

Criminals are targeting and exploiting dealerships in the online and remote buying environment. Any dealership can fall prey to fraud, regardless of brand, size, or location.

As more dealership business is transacted online than ever before, it is pertinent to be aware of the risks that bad actors may pose to your operation.

Most individuals think of identity theft as strictly online crime. However, over the past few years we have seen numerous instances where criminals are completing transactions in person, using falsified documents to complete the purchase of vehicles and high-valued retail parts. The following scenarios have become increasingly common:

Providing fake driver’s licences upon request of a test drive.
Providing false documentation with fake or stolen identities to purchase vehicles or high-valued retail parts.
Providing false insurance documentation when picking up a vehicle.

Risk control recommendations:

For test drives:

Obtain a copy of the customer’s driver’s licence prior to the test drive.
Cross-reference the driver’s licence with two other pieces of identification, such as a credit card, and if the customer drove in, a copy of the ownership and insurance on their existing vehicle. This can add another layer of protection, as criminals tend to follow the path of least resistance. When they notice the dealership is diligent in their approach to a test drive, they generally think twice about proceeding any further.
Have the customer review and sign a test drive form.
Provide a preferred test drive route.
Have the salesperson follow the test drive in another vehicle.
Install a GPS tracking unit to each vehicle dedicated as a test drive unit. A unit such as the Spy Tec STI GL300 can easily be placed discretely inside a vehicle or a weatherproof magnetic box can be purchased to attach it to the under carriage of the vehicle. They have options where they can be hard wired into the vehicle (for example, for dealerships where they have a dedicated fleet of test-drive units) or battery operated (for example, for dealerships that used random inventory vehicles for test drives).
Use vehicle recovery devices, such as KCYS Locate or the TAG tracking system.

For vehicle purchases:

Call the insurer to ensure coverage is in place before releasing the vehicle.
Ensure lienholder on insurance slip matches what is on the financing documentation.
Complete a basic internet search of the customer’s name. In today’s society, it is common to find at least a white page listing for most individuals.
Most individuals who are victims of identity theft usually have an online presence, and simply calling or emailing the information found online can verify if the purchaser is who they say they are.
In many identity theft situations, the victim is unaware that the information has been compromised until they receive a call from the dealership or financing company after a payment has been missed, usually a month after the vehicle was delivered to the fraudster.

Vehicle delivery (if applicable):

Confirming that the address on all documentation matches where the vehicle is being delivered is just another layer of protection to prevent identity theft/fraud. Why would a legitimate customer want such an expensive purchase delivered to anywhere but their home?

Real-world example:

A potential customer entered a rural dealership looking to test drive a new Toyota Tundra.
The customer was dropped off by a third-party outside the lot and walked into the dealership.
He provided his driver’s licence, which turned out to be fake.
The salesperson provided the customer with the vehicle key.
The customer got into the vehicle and drove off.
The dealership has checked their video surveillance, but cannot identify the suspect, as there was no clear footage of the individual.

How can this have possibly been prevented?

Request additional information aside from just the customer’s driver’s licence.
Have the customer complete a test drive form, which asks for proof of personal insurance and a signature.
Set up a desk with a conspicuous video camera (even if fake) where customers are to complete the test drive form — criminals do not like to be on camera, especially when they believe a clean, up-close, detailed image can be obtained.
Pre-qualify the client better as opposed to allowing an immediate test drive to an unknown customer.
Do not provide the customer the key.
If the vehicle is equipped with a keyless ignition system, do not give the key to the customer at any time. If the ignition is keyed, have the salesperson start the vehicle and perform the first drive with the customer in the passenger seat.
Conceal a GPS tracking device within the vehicle and advertise this.
Vehicle recovery devices should be utilized.

Key takeaways:

It has been noted that vehicles stolen in this manner are generally crimes of opportunity where controls are informal and thorough procedures are not followed.
Pre-qualifying conversations generally determine the interest level of a potential customer.
Identification and documentation related to the test drive will allow for a greater possibility of identifying the suspect if the vehicle is stolen during the process and it puts up roadblocks where a potential thief may just walk away.
Thorough control over the test drive will minimize the opportunity for a vehicle to be stolen.
Criminals tend to shy away from vehicles that are tracked.

Overall, regular crime and fraud prevention training with your staff can greatly reduce your dealerships susceptibility to risks associated with identity theft and fraud.

As always, please contact your broker or Marsh Advisory representative if you have any questions or concerns.