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Protect Your Dealership from Fraudsters

2020-06-16


As an experienced auto dealer, you’ve seen your fill of ruses and attempts to defraud dealerships. But thanks to the global pandemic, it’s a new world out there – for you, your workforce and for criminals.

Physical distancing and other measures to help keep COVID-19 at bay have resulted in more people working from home and virtual business transactions becoming more common. The economic downturn also has put financial pressure on dealerships and employees, making it tempting to ignore obvious risks, according to insurance firm Pitcher & Doyle.

Stolen or falsified financial information is slipping by dealers anxious to complete a sale, particularly when the customer says there is an urgent deadline to get the vehicle, the Ontario-based insurance provider said in a recent warning notice. They warned auto retailers about a “dramatic increase” in scams targeting dealerships.

The company suggests “touring” customers around so they are captured on video, copying and verifying three pieces of identification, and not being pressured into waiving a 24-to-48-hour wait for final approval.

Managing Risk

What remains the same, COVID-19 or not, is being wary of promising deals: don’t mistake “too good to be true” for “too good to pass up.” Automobiles, particularly high-end models, are attractive to money launderers and fraudsters.

Avoid getting scammed and / or getting penalized for non-compliance of anti-money laundering legislation:

  • Be alert for cash transactions, altered or inadequate documentation
  • Watch for third-party purchasers who seem uninformed or unconcerned about the details of a transaction (i.e., not concerned with features or with price negotiations)
  • Be suspicious of transactions with unusual changes to the purchaser’s name, method of payment, or sales with requests for refunds shortly after
  • Carefully review transactions where purchases or sales involve international shipping
  • Closely inspect vehicles for altered or removed VINs, inconsistent documentation, undisclosed damage or repairs

Bolster Your Cyber Security

On the technical side, it’s always a good time to tune up your cyber security posture with these steps:

  • Consider IT infrastructure to prevent and manage cyber threats
  • Ask your insurance broker about cyber insurance coverage
  • Train your staff about IT security
  • Don’t share passwords, change them regularly, keep them strong
  • Don’t open attachments from unknown senders, or click on links from email or text messages
  • Confirm permissions with your bank, to avoid transactions being made by unauthorized emails

Employee Misconduct

As the weaker economy has seen industries across the world cut back their workforce, it is important to ensure the new work environment doesn’t threaten your business.

  • Evaluate if headcount reductions amongst finance staff have undermined internal controls and segregation of duties
  • Consider employee compensation plans and incentives – is there an opportunity for staff to game the system for personal benefit?
  • General managers and/or dealer-principals should regularly review financial and operational results as well as banking transactions
  • Use downtime in the dealership to spot-audit parts inventory and floor-planned vehicles
  • Ask your insurance broker about employee theft coverage
  • Implement a confidential reporting line such as MNP’s Ethics Alert service to give your honest employees a safe place to share their concerns

As the world transitions through the pandemic and its impacts, you can depend on insights and strategies from MNP’s National Dealership team to help keep your business sustainable.

For more information, contact Michelle Miller, National Dealership Leader, at 780.769.7821 or [email protected]