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Combating digital fraud for automotive dealerships

Driven by increased digital transactions and sophisticated criminal tactics, understand what the risks are and implement prevention strategies.

05/27/2026 · 3 minute read

Fraud in the automotive dealership industry is evolving rapidly, driven by increased digital transactions and sophisticated criminal tactics. Canadian dealerships face growing risks from synthetic identity fraud, document forgery, and payment scams that threaten financial stability and reputation. Understanding these risks and implementing robust prevention strategies is essential to protect your business and customers.

Synthetic identity fraud

Fraudsters create synthetic identities by combining real and fabricated personal information, often enhanced with AI-generated images or deepfakes. This method allows criminals to bypass traditional identity checks and secure financing fraudulently. In Canada, synthetic identity fraud has surged, accounting for a significant portion of auto loan fraud cases reported to the Canadian Anti-Fraud Centre (CAFC) and the RCMP.

Document fraud

Altered or counterfeit documents — such as driver’s licenses, income proofs, and employment letters — are commonly used to deceive dealerships and lenders. Document fraud represents nearly 50% of identity-related fraud attempts in Canadian automotive sales. These falsified documents can be difficult to detect without advanced verification tools.

Device analytics and behavioral biometrics

Modern fraud prevention leverages device fingerprinting and behavioral analytics to detect anomalies in how customers interact with digital platforms. For example, unusual typing patterns, inconsistent IP addresses, or repeated use of the same device for multiple applications can signal fraudulent activity. Canadian vendors like Focal.ai provide such analytics to help dealerships identify and block suspicious transactions in real time.

Best practices for dealerships

Dealerships can help their frontline employees manage fraud risks in the following ways:

  • Verify identity thoroughly: Always request government-issued photo ID and cross-check with digital verification tools.
  • Observe customer behavior: Be alert for evasiveness, inconsistent information, or reluctance to provide documentation.
  • Use technology: Employ AI-powered identity verification and document authentication solutions.
  • Document everything: Keep detailed records of all verification steps and customer interactions.
  • Escalate suspicious cases: Have clear protocols to escalate concerns to compliance officers or fraud prevention teams immediately.

When fraud is suspected, timely escalation is critical:

  • Notify insurers: Inform your insurance provider to assess potential claims and risk exposure.
  • Report to law enforcement: Contact the RCMP or local police to initiate investigations.
  • Engage the CAFC: Report fraud attempts to the Canadian Anti-Fraud Centre to aid in national intelligence and prevention efforts.

Regulatory and industry support

Canadian dealerships must also comply with updated anti-money laundering (AML) regulations enforced by FINTRAC, effective April 1, 2026. These rules require rigorous customer identification, recordkeeping, and suspicious transaction reporting, further strengthening fraud defences.

Industry bodies like the Insurance Bureau of Canada (IBC) provide resources and collaborate with law enforcement to combat auto fraud, offering educational materials and fraud detection tools to dealerships.

Fraud in the digital age demands a proactive, technology-enabled approach combined with vigilant staff and strong regulatory compliance. By integrating advanced identity verification, leveraging device analytics, training frontline employees, and following clear escalation protocols, Canadian auto dealerships can significantly reduce fraud risk and protect their customers and business.

Marsh offers tailored solutions that help dealerships navigate and mitigate fraud risks by providing expert risk advisory services. 

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