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Fraud Alert

Mansfield Auto World employees were stunned when a seemingly normal online transaction nearly turned into an international crime. Authorities say the dealership was the victim of a troubling new trend in auto theft.

November 2015, F&I and Showroom - Cover Story

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In January 2015, a man using a fake name purchased at least two vehicles online from Louisiana dealers with the intention of shipping them overseas.
In January 2015, a man using a fake name purchased at least two vehicles online from Louisiana dealers with the intention of shipping them overseas.

When the Internet department at Mansfield Auto World closed a deal this past January with an out-of-state customer for a 2012 Toyota Venza, staff didn’t expect the dealership to end up on the hook for the car’s $16,900 selling price. But they were even more stunned when the dealership’s brush with fraud ended when the vehicle was discovered on a cargo ship bound for Nigeria.

On Jan. 26, U.S. Customs and Border Protection (CBP) agents seized the car from a vehicle carrier called the Morning Calypso, which had just docked in the Port of Philadelphia — more than 1,300 miles from the Louisiana dealership where the vehicle was purchased with stolen credit cards. The perpetrator, who bought the car using a false name and address, is still at large.

“All our checks and balances failed us,” says John Adams, Mansfield’s co-owner and general manager. “This guy was brazen.”

Mansfield’s Venza was just one of 272 stolen vehicles seized by customs at U.S. ports in the first quarter of 2015. And according to a CPB agent who worked the case, the majority of those vehicles were acquired via financial fraud.  

“We don’t see vehicles on these ships because of carjacking,” says Supervisory CBP Officer Timothy Walinskas. “They are most likely there due to some kind of fraudulent purchase.”

Dangerous Trends
Last October, the National Insurance Crime Bureau launched an initiative to highlight a growing trend in auto theft: financial fraud. Stats from the nonprofit agency indicate that auto theft has been on the decline for decades, but NICB Director of Public Affairs Carol Kaplan points out that financial crime doesn’t fall under the traditional auto-theft umbrella.

“It’s not like somebody goes and smashes a window and hot-wires a car to steal it,” she explains. “They are stealing it through financial means, so when the statistics for stolen cars are submitted, they do not include cars that have been stolen through this method.”

The NICB’s initiative was spurred by a multistate scam that came to a close at the August 2014 sentencing of 54-year-old Verita Hines-Flagg and her nephew, 29-year-old Benjamin Hines. The pair had leased five luxury vehicles worth more than $300,000 from dealerships using stolen identities — crimes NCIB Senior Special Agent Mike Kelso calls “the tip of the iceberg.”

“There were other people involved,” says Kelso, who worked the case in conjunction with the police department in Brown Deer, Wis. “We couldn’t get the rest of them charged.”

In fact, Hines-Flagg and her nephew managed to lease vehicles across several states without being apprehended. It wasn’t until the pair opened a line of credit at a Kohl’s department store in Wisconsin and immediately purchased $1,000 worth of merchandise that police were alerted.

Since 2010, customs agents have seized more than 3,000 stolen vehicles in U.S. ports, the majority of which were stolen via financial fraud.
Since 2010, customs agents have seized more than 3,000 stolen vehicles in U.S. ports, the majority of which were stolen via financial fraud.

When officers arrived on the scene, they found a brand-new Lincoln sedan valued at more than $50,000. The vehicle, which was retagged, had been fraudulently leased and payments had never been made.  

New Auto Theft
Off the top of his head, Kelso can list dozens of cases in which a fraudster was able to walk into a dealership with fake identification and walk out with a car. “This is the new auto theft,” he says. “In the early 2000s, it was cloning cars. Now it’s this.”

As recently as mid-May, customs agents seized a stolen 2008 Nissan Quest from a ship headed to the West African country of Benin. The vehicle was purchased from a dealership in Paducah, Ky., using a stolen credit card. And from 2010 through the first quarter of 2015, customs has seized 3,128 stolen vehicles in U.S. ports bound for other countries. Many of those cars were headed to Africa or Eastern Europe, which comes as no surprise to the NICB’s Kaplan.

“In some of these countries — and in Africa in particular — it’s just not possible to buy some of these vehicles over there,” she says. “So let’s say they get somebody to purchase a vehicle here and they ship it out of the country, they can sell it for three times the value that it would get in the United States.”

In the same month the NICB launched its initiative highlighting financial fraud in the automotive industry, credit and fraud risk solutions provider ID Analytics issued a white paper addressing a type of fake credential called “synthetic identity.” The company’s chief analytics and science officer, Dr. Stephen Coggeshall, says that using synthetic identities is now “the dominant mode of identity fraud,” overtaking other methods like identity theft and identity manipulation.

Synthetic identities are incredibly difficult to trace, because they don’t lead back to a real person. Fraudsters use a combination of elements such as a fabricated Social Security number, name, date of birth, address or phone number, and then establish that identity by applying for credit cards or a cellphone.

“For credit agencies, it’s hard to tell that applicant from an immigrant — someone who is new to the credit-granting system, and they just haven’t seen them before,” Coggeshall explains. “And there’s a rule some of [the credit agencies] use: They decline the application the first two times, but on the third try they will say, ‘It’s probably somebody we’ve never seen before, so we’re going to let it through.’”

Once the identity is established, the fraudster will often spend long periods of time building up his or her credit line by paying off small purchases. Then the fraudster will “bust out” the entire credit line by using it to secure vehicle financing with no intention of paying it off.

Mansfield Auto World employees were stunned when a 2012 Toyota Venza they sold to an Internet customer turned up on a ship bound for Nigeria. The vehicle was purchased using stolen credit cards.
Mansfield Auto World employees were stunned when a 2012 Toyota Venza they sold to an Internet customer turned up on a ship bound for Nigeria. The vehicle was purchased using stolen credit cards.

“It’s actually not that hard to establish the validity of a synthetic identity,” Coggeshall says. “And once you’ve done that, you can start doing all sorts of things.”

Data from ID Analytics shows that roughly 2% of new credit card and cellphone account applicants from 2010 to 2013 were actually synthetic identities. The firm also found that synthetic fraud was about four times more risky than other types of fraud.

“Dealers’ exposure to fraud continues to increase,” Coggeshall notes. “They need to be serious about protecting themselves.”  

Fraud Online
The rise in synthetic identities was spurred, in part, by a change in how the U.S. Social Security Administration generates Social Security numbers. In 2011, the agency switched to a randomized system, making it easier for fraudsters to create potentially valid Social Security numbers.

But another major contributing factor was the advent of the Internet and advances in digital technology, Coggeshall says. The anonymity the Internet provides allows identity thieves to easily and quickly carry out scams from remote locations.

And that could be bad news for today’s dealers, who are contending with an increasingly web-centric customer base. An April 2015 study from technology consulting firm Accenture found that 80% of car buyers are using some form of digital technology to research vehicles, while 62% are initiating the car buying process online. And 75% of consumers polled said they’d consider conducting the entire transaction over the Internet.

Mansfield Auto World’s Adams is no stranger to the online car buyer. The dealership, he says, sells at least three vehicles to out-of-state Internet customers each month. So when the Internet department received an email inquiry for the 2012 Venza from a shopper in Florida, employees thought nothing of it.

Comment

  1. 1. Mark [ June 03, 2015 @ 09:39AM ]

    Back to the basics... if it dosen't feel right stop and dig deeper..

 

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