With modern anti-theft devices making it harder to steal vehicles, criminals have turned their attention to using automotive-finance fraud as a way to illegally obtain cars.
Using stolen or synthetic (made-up) identities, they take out loans and drive away from a car dealership in a "purchased" vehicle. Only when loan payments aren’t paid does fraud become apparent.
The need for identity proofing for automotive finance providers is not limited to fraud prevention. Financers must also comply with applicable anti-money laundering regulations, which include doing customer due-diligence.
Organizations that cannot prove they took the necessary steps to adequately check the identity of loan seekers risk fines, increased regulatory scrutiny and damage to their reputation.
Responding with more onerous checks to establish identity at the dealership level is not necessarily the answer.
Showroom staffers are not trained security professionals. Expecting them to distinguish between genuine documents and clever fakes is unreliable. Providing them with the necessary level of training is expensive and time consuming. Moreover, policing the identity-checking process is not conducive to the car-selling process. The more stringent checks dealers do, the more off-put their customers are.
Watching a potential customer walk out, exasperated with identity checks, is not palatable for dealers.
FICO Identity Proofing makes identity checks more secure but without increasing the friction that causes some customers to say, "Enough."
It is designed to work across all channels. Customers can use their documents and a “selfie” to establish their identities whether online or in the showroom.
FICO Identity Proofing can check the validity of the documents provided and determine that they have not been tampered with.
A smartphone is used to photograph government-issued identity documents and then take the selfie. Machine-learning algorithms compare photographs of identity documents, such as driving licenses and passports, with the person making the application to ensure that they match.
It establishes identity and, crucially for online applications, makes sure the applicant is real.
Dealers and finance providers must have trust that they are dealing with a legitimate customer. Having a consistent approach for identity verification is critical. (Jason Keegan, left)
Jason Keegan is vice president and general manager-fraud and protection at FICO.