Automotive News Canada - August 2020 - 5

* AUGUST 2020

Dealerships can fight
back by watching
for common cons

BEST PRACTICES

SPOTLIGHT

By STEPHANIE WALLCRAFT
TORONTO CORRESPONDENT

WHEN THE PAPERWORK FOR A
vehicle sale crossed David Tingley's
desk last December, one detail stood
out that made him suspicious.
The customer "never wanted to
negotiate on the price, but they asked
if they could get some cash back," said
Tingley, dealer principal at Redwater
Dodge, just outside Edmonton. "That is
immediately a flag."
Tingley dug deeper and found that
the address on the credit report differed
from the one on the customer's identification. When
asked to produce
a driver's licence
after arriving at
the dealership,
the customer provided a different
one from what
was submitted
with the application.
As soon as the
customer realNadolny:
ized his identity
Fraudulent
had aroused sustransactions
often start when a picion, he bolted
from the showcustomer arrives
room and disapwithout a car,
and at odd hours, peared.
Fraud consuch as just
before closing.
tinues to be a
PHOTO VIA
problem at dealCHRISTOPHER
erships across
NADOLNY
the country, but
some telltale signs can help retailers thwart criminal activity, said
Christopher Nadolny, vice-president of risk management at Pitcher
and Doyle, a Toronto-area dealership
insurance provider.

A RED FLAG: NO CAR
A transaction that ends in fraud
often begins with a client who arrives
on foot or in an untraceable vehicle,
such as an Uber ride, and at an unusual time of day, such as an hour before
closing or on the afternoon before a

THE FOOTPRINTS OF

FRAUD

David Tingley said his Dodge dealership thwarted a fraud attempt because the paperwork reached the right level of
management. He connects with salespeople via online chat to watch for red flags. F I L E P H O T O

long weekend, Nadolny said.
The deal will often carry a sense of
urgency where the customer insists on
leaving with the vehicle on the same
day and is willing to pay list price to
speed up the process.
Fake identification is usually provided that allows conditional financing approval to go through immediately, Nadolny said. And so dealership
staff deliver the vehicle and allow it to
be driven off the lot.
A day or two later, when the
financing falls through and the customer vanishes, the dealer discovers
the transaction was fraudulent. By
then, the vehicle is unrecoverable.
"More often than not, it's not an
insurable loss," Nadolny said. "The
car is oftentimes already in a [shipping] container."
In November 2019, four Halifax
dealerships were targeted by a group

of fraudsters from Quebec, according
to local news reports. Nadolny said he
has seen examples this spring in other
small cities, such as Kingston and
Sudbury, Ont.
The Sudbury incident took place in
mid-March just before the COVID-19
lockdown began. Perpetrators become
more active in challenging times
when pressure increases to close
every deal possible, Nadolny said.
"Some of these fraudsters are taking advantage of the opportunity right
now. If the deal [looks] too good to be
true, chances are it is."

FIGHTING FRAUD: THE BASICS
Slowing down the transaction for
as long as it takes to confirm irrevocable financing is most effective
for averting fraud, Nadolny said,
although he concedes that faster delivery has become common practice.

Online deals buy time to catch fraud
MOVING PORTIONS OF THE
to become firm before delivery takes
purchase process online extends
place and documentation is verified
transaction timelines, which can
in person.
reduce instances of fraud,
In cases where customsaid Christopher Nadolny,
ers pay in cash, the vehicle
vice-president of risk manis not released until Genesis
agement at Pitcher and
is certain that the funding
Doyle, a Toronto-area dealmethod is valid.
ership insurance provider.
"We will not deliver that
"Starting a deal online
car to your residence or
or over the phone may give
place of business until we
the dealership the required
can confirm that the draft is
time to have the deal irrevo- Pellat: Genesis
going to clear the bank, for
has not
cably approved for financexample," he said.
experienced
ing before the customer
Shahin Alizadeh, CEO
actually arrives at the deal- fraud since it
of Downtown Auto Group
began selling
ership."
in Toronto, said initiatGenesis Motors Canada cars online. Part
ing transactions online
of the process
- which conducts sales
has resulted in fewer fraud
is a thorough
entirely online through
attempts.
vetting of the
its Genesis at Home plat"In all cases of online
customer before
form, up until delivery -
transactions, we now require
has not experienced fraud the vehicle
two pieces of government-isis delivered.
in three and a half years
sued ID before we begin
FILE PHOTO
of operation, spokesman
finalizing any transacJarred Pellat said. Customers comtions," Alizadeh wrote in an email to
plete their credit applications online
Automotive News Canada.
and upload images of their identifi"We also verify insurance coverages
cation, allowing time for financing
by reaching out directly to the agent/

company."
Motoinsight
CEO Andrew
Tai, whose company provides a
digital-automotive-sales platform,
said moving most
of a sales transacTai: The online
sales processes tion online doesn't
risk the integrity of
still use the
the process because
traditional
the traditional
checks and
checks and balancbalances.
es such as in-perFILE PHOTO
son ID verification
remain in place.
"The only difference [online] is
instead of filling in [an application]
with a piece of paper and a pen and
then having the finance manager at
the dealership reenter all the information, I as a consumer can fill all
of that information in digitally from
home. If I fill in bogus or false information, that will still get caught
through the process of adjudication
and verification. We've just made the
process more convenient." - ANC

When delays are not an option, establishing the following best practices
can help a dealership prepare for and
identify fraud:
Review identification carefully
Nadolny recommends requesting
three pieces of identification from
every customer, taking copies of each
and reviewing them thoroughly for
discrepancies such as mismatched
information or dates.
Use security cameras
Video proof becomes important when
matters must be escalated to law
enforcement. Nadolny suggests ensuring that staff know where security
cameras are located and that they are
trained to walk suspected fraudsters
past them. Professional criminals will
know to avoid cameras, which can
serve as a red flag.
Double-check insurance coverage
Placing a call to the customer's insurance provider to verify the coverage
is another worthwhile step, Nadolny
said. Fraudsters, he said, are "great at
bringing in manufactured pink slips
or paperwork that says the coverage
is in place. You don't find out [the
paperwork is falsified] until you actually make the phone call."
Communicate with and train staff
Redwater dealer Tingley said the
key to catching his dealership's most
recent fraud attempt was ensuring
that it reached the right level of management. He maintains an online chat
group with his sales staff to facilitate
communication and monitor for red
flags. "If you're a commissioned salesperson and you're working for managers who are also paid on the gross
profit, all you see is the approval on
the deal," Tingley said. "I had a salesperson telling me everything is good. I
saw that things definitely weren't adding up."
Fraud is no longer a big-city problem
It's also not exclusive to large dealerships with expansive inventory.
Tingley said his smaller dealership,
located in a town of 2,000 people 50
kilometres north of Edmonton, has
experienced multiple fraud attempts
over the past five years. "They pick
little stores like ours because they
think we're soft targets," he said.
- ANC

Automotive News Canada - August 2020

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