How ID Verification Prevents Fraud in Auto Finance

It used to be a long and complex process to complete a transaction. There were lots of meetings, paperwork, and hard signatures involved. But now, when any process involves too much effort, customers tend to take their time and efforts elsewhere. So, businesses must go digital to keep up with the demands and changing needs in the market. Once a business goes through digital transformation, there are many factors to keep in mind. One of the most important aspects to think about is the online safety of customers. It’s true that going digital simplifies processes, tremendously decreases turnaround times, and does even more -- but none of this could be done without a secure platform. With ID verification, the stress of tedious paperwork and long processes gets replaced with safe, secure online transactions. Today, auto finance lenders depend on ID verification to stay compliant and prevent fraud. With the mandatory use of Know Your Customer (KML) and Anti-Money Laundering (AML), lenders are up-to-date with the latest safety precautions. In this blog, we’ll discuss how the latest forms of ID verification can prevent fraud in the auto finance industry.

Types of Auto Finance Fraud

Technology is constantly evolving, forcing fraudsters to become more creative and forcing businesses to protect themselves in even stronger ways. It is no longer safe to rely on checking only one form of ID to confirm a person’s identity. Auto lenders are facing these challenges when and are always wondering if the individual is trustworthy and legitimate. Since there are many ways to initiate a purchase, there are different challenges associated with each. Four major types of auto finance fraud include:

1. True name application fraud: The person is legitimate and who they say they are, but they have the wrong intentions.
2. Manipulated fraud: The information seems legitimate but has slight inaccuracies such as misspellings or a slight change in address, making tracking payments nearly impossible.
3. Synthetic fraud: Parts of a legitimate identity are combined with fake information. This could include using legitimate personal ID or Social Security Number and then attaching them to fraudulent people, making it look like the person has good intentions, when in fact they do not.
4. Stolen identity fraud: The fraudster completely takes the identity of an innocent stranger, resulting in a damaged credit score and future.

The Rise of Sophisticated Auto Finance Fraud

In 2019, a group of fraudsters was caught and sentenced for conspiring a Ponzi scheme. Over the four-year period, the group of seven obtained over 80 auto loans, totaling about $2.7 million in attempted fraud, and actually obtained approximately $1.7 million. The scheme incorporated fake names of companies that appeared to be dealerships, but really they had no employees, cars, car lots, or dealership licenses. According to the Department of Justice, the fraudsters brought in people to apply for auto financing with banks and credit unions. The applications would claim they had intentions of buying a vehicle from one of the fake companies. If a check was issued to the applicant, it would be deposited into the accounts opened by the conspirators and held in the names of the fake companies. This is not the only story revolving around auto finance fraud. Instances like this occur more than you think, and auto lenders need to stay on top of things to constantly check that the people they work with are who they say they are and have good intentions.

How ID Verification Comes In

With advanced technology, there can be better fraud detection at each touchpoint across the entire loan application process. Originally, it would take a borrower a lengthy amount of time to complete a loan application. Borrowers were going back and forth between digital applications, call centers, scanning, faxing, and mailing to get the process done. In this case, there is a lot of extra room for error, misplaced paperwork, and fraudulent behavior. However, with the latest technology, the loan application process can be completed in one mobile environment, decreasing the risk of fraud. Such technology enables tools for ID verification, authentication of documents, and more. Lightico provides an easy solution to keep customers safe while also keeping in mind the terms Know Your Customer (KYC) and Anti-Money Laundering (AML). Here’s how ID verification worth with Lightico:

• Customer receives a text message with a link. The link takes you to a secure session with a request for photo ID.
• Customer takes a photo of their ID (drivers license, passport, etc)
• Customer then takes a live selfie which is instantly compared to the ID provided. This will be used to confirm that the person on the phone and the person on the photo ID are the same.
• Customer ID and photo is matched and verified

Features of ID Verification

When auto lenders adopt electronic ID verification, they must do so in a way that is beneficial and convenient for buyers. It’s all about the customer experience, so even if something is new, it will not be pursued if it is difficult to understand. If this is done correctly, ID verification will thrive. Some futuristic aspects of electronic ID verification include:

• Real-time: Businesses can view their customers’ personal information immediately, rather than waiting for files to be sent back and forth over the course of a few days or even weeks. With Lightico, customers and agents can communicate over a live session via a mobile platform. Not only does this accelerate any process, but it also ensures a company has up-to-date information.
• Secure: Lightico’s solutions exceed the standard legal requirements such as the ESIGN Act and Uniform Electronic Transactions Act. All activities in the session are time-stamped with a complete audit trail to eliminate legal risks.
• Mobile-friendly: Not only can customers fill out eForms and provide eSignatures from their mobile device, but they can also prove their identity.

The Bottom Line

Not only does a fully digital auto loan application process ease the lives of customers, but it also helps lenders work together against fraud. They can more easily detect any red flags or suspicious activity. The mobile technology involved with digital ID verification has even increased load application completion rates, as well as reduced turnaround time. Since dealers no longer have to waste time worrying about getting people to complete physical documents, they have more time to spot any fraudulent activity. Lightico’s solution helps prevent car loan fraud and allows customers to fill-out loan applications quickly and efficiently. Learn more about Lightico’s ID verification capabilities, along with the full platform of eSignatures, digital payments, eForms, and more at Lightico.com.