Combating Finance Fraud

Nobody likes to be regulated, but if you have to work under regulations, it’s best if they can promote your business objectives.

When it comes to addressing identity fraud and finance fraud in vehicle transactions, the Federal Trade Commission’s “Red Flags” rule, imposed in 2011 on auto dealers as well as other enterprises, creates a framework for systematically identifying, addressing, and reporting fraudulent behavior.

On its website, www.ftc.gov, the FTC states that every business subject to the rule must develop a written plan that meets these four criteria (reproduced here verbatim):

1. A program must include reasonable policies and procedures to identify the red flags of identity theft that may occur in your day-to-day operations. Red Flags are suspicious patterns or practices, or specific activities that indicate the possibility of identity theft. For example, if a customer has to provide some form of identification to open an account with your company, an ID that doesn’t look genuine is a “red flag” for your business.
2. A program must be designed to detect the red flags you’ve identified. If you have identified fake IDs as a red flag, for example, you must have procedures to detect possible fake, forged, or altered identification.
3. A program must spell out appropriate actions you’ll take when you detect red flags.
4. A program must detail how you’ll keep it current to reflect new threats.

At Quoteasy Insurance, we are aware of the large increase in claims for vehicle thefts committed through identity fraud and use of false pretenses. Advances in technology now give criminals tools for forging driver’s licenses, Social Security cards, bank statements, and vehicle titles—all of which can be used to trick a dealership into handing over a vehicle.

Given the nature of vehicle transactions (sales,leases, rentals, or loaners), there are several points where a “red flag” may arise, including personal identification, license and driving record, credit history, and insurance. Careful attention to red flags when reviewing these may prevent a costly loss; overlooking them may lead to heavy fines in addition to a loss.