Maldem Investigations - Private Investigations agency in Ottawa



Fraud and Identity theft are common occurrences that touch merchants in almost every industry. With online sales soaring, contactless credit card fraud is also on the rise and very little can be done to avoid it since, without direct contact with the buyer, the businesses and their sales staff don’t have the opportunity to observe any red flags of potential fraud in customers’ actions or check the original documents authenticity or signs of tampering.

The automotive sales industry is also not immune to fraudulent transactions either. Low risk and high reward potential make car dealerships lucrative targets for criminals who don’t mind manipulating documents and even people in order to obtain credit for luxury vehicles that can later be shipped and sold overseas for 90% profit.

The frauds car dealerships deal with are facilitated by the competitive nature of the business, in which the dealers want to complete the transactions as quickly as possible (without making the potential clients wait for proper background checks or verifications to be completed) in order not to lose the sale to the competition. Fraudsters know this and are counting on such behavior that only plays in their favor.

The main types of fraud that car dealerships face are:

  1. Card-Not-Present (CNP) fraud

This is a type of fraud that is on the rise (especially in the time of a pandemic when in-person transactions are discouraged) in which the criminals place purchase orders over the phone, email, dealership website, or other online sales platforms. The suspects’ then use counterfeit driver’s licenses to complete the transactions, obtain additional credit, financing, and insurance using stolen identities and falsified documents.

The scammers then ask the dealer to deliver the vehicle to a public location (such as a parking lot) once the payment clears. The real victims of the identity theft will eventually receive notifications regarding new financing under their name, a purchase of a vehicle, or other unauthorized charges that they will have to dispute with their financial institutions (who, in most instances, will reimburse their clients).

As a result, the dealerships will receive chargebacks from the banks and will be held responsible for paying back the amounts charged on the stolen credit cards, which can add up to significant sums of money and thus represent significant losses for the business. In addition, once the vehicles are delivered and the payments stop, the dealerships will suffer additional losses due to the loss of the product that can no longer be recovered and resold (unless they manage to track and recover them in time).

  1. “Traditional” fraud

The automotive sales industry still relies heavily on the traditional sales model and face-to-face interactions with their customers for signing purchase agreements because some jurisdictions still don’t accept electronic signatures and documents, thus making an in-person appearance mandatory. And while the traditional model also suffers from the same issues of falsified documents and stolen identities, the main difference, from the contactless transactions, is that the dealership staff have an opportunity to interact with the clients and thus have a better chance of noticing inconsistencies, discrepancies, behavioral red flags, and signs of tampering and document manipulation.

Financial documents that don’t add up, identification cards with bad photographs and bad quality of the print, wrong codes, wrong dates, unusual or unnatural looking signatures, and bad Photoshop attempts are only a few of many signs of fraud that can be observed on the documents during a transaction. Not to mention several behavioral clues that a person can exhibit when interacting with the sales representative.

All those clues, however, can only be observed by vigilant employees and only if they look for them in the first place. It’s easy for those clues to go unnoticed especially when no one is paying attention and when the sales staff is under pressure to close deals quickly and are interested in getting their commission for selling a high-end vehicle even when something does not feel right.

  1. The straw buyer fraud

This is the type of fraud in which existing businesses and people with good credit histories are approached by criminal groups and are offered payment in exchange for using their names and good credit to purchase a vehicle or multiple vehicles in rapid succession from several dealerships (before multiple credit checks appear on their credit records and raise alerts).

It usually involves people in desperate situations who are experiencing financial difficulties and need extra cash fast and who don’t particularly care for (or chose to ignore) the negative consequences that such deals may bring to them; because once the payments stop and the vehicles disappear, they are the ones who remain on the hook for the purchases, and since they are unable to pay, they are often forced into bankruptcies and/or lengthy legal disputes.

Regardless of the consequences for those buyers, their situation does not help the dealerships to recuperate their losses since there is very little chance of obtaining any payments from those buyers (since they were in a bad financial situation in the first place), and the vehicles are most likely already gone to be sold overseas.

In certain situations, however (especially when action is taken promptly) it is possible to track down the vehicles before they disappear. In those instances, Private Investigators can be of tremendous help and provide valuable services and guidance to the dealerships and help them recover the merchandise that was fraudulently taken from them and reduce the risks of future frauds.