Andy Thompson finds out about vehicle finance fraud at a recent
FLA conference
The Finance & Leasing Association (FLA)’s Automotive
Financial Crime Conference in Coventry on June 24 gave
opportunities for a useful exchange of views among finance houses,
dealers and professional advisers.
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“It is vital to know your customer, what you are financing and
where the risks are”, said Martin Parr, fraud and compliance
manager at BMW Financial Services. He commented that the 2006 Fraud
Act had improved the statutory framework in England and Wales.
“There are now clear definitions of fraud. It can include
circumstances where another party is exposed to unexpected risks of
loss, as well as where the fraudster actually realises a gain,” he
said.
“A huge proportion of credit applicants lie about their
salaries. All of this is potentially fraudulent, but you need to
focus on major risk areas. False identity frauds can include sons
or daughters stealing their parents’ identities. We all need to be
aware of risks in the supply chain,” Parr commented.
Dealing with brokers brings its own risks, but when taking
business from dealers it is vital to remember that finance brokers
often introduce customers to dealers, Parr pointed out. A number of
recent frauds have involved impersonations of solicitors, he said,
drawing on the availability of partners’ identities on the law
firms’ web sites.
Meanwhile, on the corporate customer side, false information
filings at Companies House are an increasing problem. “Fraudsters
can adopt sophisticated tactics, filing a false change of address
for a genuine company and then ‘sitting on it’ for a while rather
than immediately making a fraudulent use of it,” Parr
warned.
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By GlobalDataSome typical early warning signs of fraudulent uses of cars on
finance include exceptionally early payment defaults, and, in
contract hire where the finance company is the registered vehicle
keeper, a high incidence of parking and speeding fines.
James Baird, partner and head of banking and asset finance at
solicitors HBJ Gateley Wareing, noted other possible flags of
fraud, such as immediate bank account changes, payments made in
advance or coming from third parties, and an interest in VAT issues
by apparently non-business customers.
Baird drew attention to the range of recovery opportunities
against third parties where finance companies suffer vehicle fraud
losses. “In the case of corporate lessees, managing directors may
have a duty of care even in the absence of contractual personal
guarantees. We secured a full recovery after suing one director for
a fraudulent conversion loss, where a car which was not supposed to
be taken outside the UK ended up in Kazakhstan.”
Even third party handlers like auction houses can be sued for
conversion losses, he noted.
Claims to innocent purchaser status by private buyers can often
be challenged. We require claimants to complete questionnaires
designed to identify fraud cases. In one case we secured a court
order for bank statements, which showed amounts of £450,000 a year
passing through the accounts of one person with an £18,000 salary
who had paid £47,000 for a high-value used car. She turned out to
be a drug dealer’s associate,” said Baird.
Motor Finance Issue: 45 – July 08
Published for the web: July 25 08 11:49
Last Updated: July 25 08 11:50
