I have investigated a number of frauds in my career, and those frauds have cost dealerships several hundred-thousand-dollars in losses. One particular case involving a parts department offers a good example of the schemes employed by fraudsters and how you can reduce your risk.
Diverted Funds Using Phone
In this scheme, a parts manager was charging parts to wholesale customer credit cards and diverting the funds elsewhere. Copies of certain wholesale customer credit cards were kept on file and charged when purchases were made. The parts manager used a device that plugged into their phone, and the funds were diverted to a personal account.
Sometimes, the customer returned the original parts. Rather than issue a credit to the card, the parts manager would either give the customer different parts of the same value or issue a credit memo to the customer’s account. The original proceeds remained in the parts manager’s account. In at least one instance, a wholesale customer was charged twice on the manager’s device. When the customers questioned the second charge, they were given credit through their receivable account with the dealership
The fraud was uncovered because the parts manager appeared to have lost track of customer activity. Customers noted unrecognized charges and called the General Manager to complain. The subsequent investigation led to the discovery of the fraud.
Fraud is prevalent in more places than you think. What is it costing you?
Although I do not necessarily agree with keeping wholesale customer credit card information on hand, I understand the efficiency created by having it. With that being said, there are controls that can be implemented to mitigate the fraud risk.
By implementing these simple procedures and making your employees aware of them, you can help prevent or detect dealership fraud.
Controls are Essential in Spotting Dealership Fraud
Dealerships have several factors that make them susceptible to fraud or embezzlement schemes. An understanding of these risks, and ensuring proper controls are in place to deal with these situations is the first step in prevention and detection of fraud.
What do you do if fraud does occur?