Business impersonation fraud rises 10% YoY
With document fraud on the rise, dealer diligence helps
Fraudsters are using fake businesses to secure funding for equipment, and dealers need to be aware this is on the rise.
The use of legitimate business credentials to commit fraud rose 10% year over year, according to the recently released Equipment Leasing and Finance Association’s 2024 report on fraud, which surveyed 30 equipment lenders, 40% of which were banks.
Fraudulent impersonations of real business owners used to secure equipment increased 13% YoY, according to ELFA.
Dealer due diligence
The equipment finance and leasing industry is “a little less prone to fraud than the powersports or the automotive industry” because it facilitates larger sales, but dealers aren’t immune to bad actors and can take additional steps to vet the companies purchasing the equipment, Sgt. Darren Schlosser, vehicle fraud investigator with the Houston Police Department, told Equipment Finance News at the 2024 American Truck Dealers conference in Las Vegas Feb. 3.
When a buyer applies to purchase a piece of equipment worth hundreds of thousands of dollars, they’re likely to be subject to a personal credit check as well as a credit check on their business, he said.
Dealers should investigate the business to learn whether it has a public presence in the communities it serves, such as physical or digital ads, or white- page listings, he said. A business without notable advertising or public contact information — such as a website or social media presence — is a red flag, Schlosser said.
But social media checks may not be enough, as evidenced by an equipment fraud ring operating in Alabama, where fraudsters used the names of defunct, isolated or off-the-grid equipment vendors to create bogus websites and listings.
ELFA reported 84% of lenders surveyed were “very satisfied” after using credit reports to verify an identity. Further verification of a business’ existence with a third-party commercial bureau like Dun & Bradstreet or LexisNexis is often useful; 90% of respondents told the ELFA they were “very satisfied” with using those methods to verify a principal.
Law enforcement lags
It’s difficult for the law to keep up with the increase in fraud, making it all the more important for dealers to do their due diligence, Schlosser said.
For example, it is difficult for law enforcement to prove someone is using false documents because it requires subpoena of records and diving into personal histories, which strains limited resources, the detective told EFN.
Subpoenas for companies suspected to be fraudulent are difficult to obtain and the process diverts resources from larger cases, Schlosser said. In other words, a case would have to indicate “enough financial loss” to make it worth investigating. So, if a fraudster achieves global reach and is “trying to get a half a million dollars of equipment financing … [to] steal it,” that’s something police would start looking at, he said.
