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Our second Market Insight Forum dedicated to Fraud Prevention Month took place on March 26th and focused on sharing insights about auto lending fraud and money laundering trends in 2024.
Tim Rye, Teranet’s Senior Vice President of Financial Solutions hosted Cameron Field, Vice President, Vidocq Group, John Armit, Acting Detective Sergeant, Anti-Rackets Bracket, Canadian Anti-Fraud Centre, Tom Houlihan, Detective Constable, Peel Regional Police and Karol Buczkowski, Detective Constable, Peel Regional Police. During the forum Cameron, John, Tom and Karol shared how money laundering and auto lending fraud is impacting the industry, examples of attempted money laundering and fraud they have witnessed and best practices to avoid these serious risks.
We have included a link to a video below if you’d like to watch a recording, but here are some highlights from the latest Market Insight Forum:
- The onset of COVID-19 prompted a surge in financial crime due to increased automation in response to limited physical transactions. This automation, coupled with the ease of online financing, has led to a rise in auto lending fraud. Trends include volume and velocity issues, where smaller dealers inundate lenders with numerous loan applications, often utilizing deep fakes, synthetic identities, and fabricated car financing schemes. This fraudulent activity extends to money laundering, with real vehicles sold down market to recoup funds, contributing to a complex ecosystem of crime. Addressing these challenges requires robust due diligence to detect and prevent potential fraud.
- According to John, in 2023, the Canadian Anti-Fraud Center experienced a record year in losses, totaling nearly half a billion dollars, with investment frauds, crypto-related scams, romance frauds, and job/service scams topping the list. Identity fraud remains a significant concern and this problem often originates from phishing and data breaches. Auto financing fraud saw a notable increase during COVID-19, involving stolen credit cards and compromised IDs.
- Detective Constables Carl and and Tom shared some fraud trends that they’re seeing recently, including the noticeable trend of street gangs and organized crime venturing into fraud, attracted by the low risk and high rewards compared to other criminal activities. Vehicle financing fraud, in particular, offers significant opportunities, with little scrutiny at the dealership level and minimal risk for the perpetrators. Despite increased media attention and law enforcement efforts, frauds remain underreported and overshadowed by more sensational crimes in the public eye.
- Organized crime utilizes fake and synthetic IDs, along with compromised credit cards, to orchestrate auto financing frauds through straw buyers. Recent government funding aims to combat auto theft, which is closely linked to auto fraud. Operations like Project Volcano target organized crime groups involved in auto thefts. Stolen cars may be used overseas by rental companies, contributing to trade-based money laundering, a lucrative venture for organized crime worldwide.
- Cameron spoke about his perspective coming from the private sector and stated that trade-based money laundering (TBML) serves as a foundational aspect of money laundering, and can be seen in various criminal activities such as auto loan fraud and auto theft in Canada. TBML poses a significant challenge for law enforcement, the financial sector, and consultants due to its complexity and pervasiveness. The COVID-19 pandemic has both disrupted traditional banking and real estate practices while also providing opportunities for facilitating financial crime. To combat money laundering effectively, commercial lenders must adopt a holistic approach, leveraging tools to better understand their customers and identify potential red flags. Collaboration and data sharing among law enforcement agencies and financial institutions are essential for detecting and preventing TBML and fraud effectively.
Tom and Karol were also able to share specific examples of fraud cases they’ve encountered including a recent case that highlighted how simple fraud can result in significant financial damage. An individual’s identity was compromised through a workplace computer hack, allowing perpetrators to obtain his driver’s license and banking information. Using this data, they purchased high-value vehicles from multiple dealerships without verification. The victim only became aware of the fraud when he received letters congratulating him on the purchases and notices of unpaid bank loans. Tom and Karol shared that unfortunately, by the time law enforcement gets involved, crucial evidence is often lost, making it challenging to solve such crimes. This incident resulted in nearly $300,000 in losses for the bank, highlighting the need for increased collaboration between dealerships, banks, and law enforcement to prevent and address such frauds.
To watch the full Market Insight Forum click on the button below.
