Identity theft has been the #1 consumer crime in America for more than a decade, and increasingly it’s hitting car dealerships too. And only expected to increase thanks to AI.

According to one recent study, car dealerships in the US lost more than $600 million to identity theft just in 2022, with a separate study showing a staggering $7.2 billion in total fraud losses at dealerships.

Few dealerships have avoided the sting of identity theft. That study found that nearly 90% of dealerships have seen an increase in identity fraud since the pandemic, more than 80% have directly experienced identity fraud at their dealership, and more than 60% of those dealers have reported a loss of three or more vehicles.

Adding to that pain, there’s growing concern that insurers could increasingly cite a lack of adequate controls and training, or vague or confusing language in the policy, to deny coverage for losses.

In October 2023 a Louisiana Federal Court found that an insurance company providing cyber insurance coverage for vehicles was not liable to cover losses for vehicles purchased online using fake or stolen identities.

ACCELERATING LOSSES

• In 2022, a 24-year-old stole $100,000 of cars in just three days, all using stolen ids. And although arrested, was released the same day.
• In one case alone, at the end of 2023, one thief stole more than $400,000 worth of cars, using stolen identities, over just 90 days.
• An identity thief operating in Houston stole 19 vehicles from 15 dealerships totaling $1.3 million. Half of the vehicles were never recovered.
• That same thief was also believed to have stolen more than 30 vehicles in another state.
• An identity theft ring in Massachusetts stole nearly 50 vehicles worth more than $2 million using fake identities.
• A women was charged with using fake identities to purchase three cars in three days, with a value of more than $130,000, while on bail for five previous cases.
• The two-person vehicle fraud unit of the Houston Police Department reported nearly $9 million in identity theft fraud losses just at their local dealerships in 2022.

According to a recent study from credit bureau TransUnion, the potential lender liability from synthetic fraud in auto loans was $1.8 billion for the first half of 2023.

THE SURGE IN AI-AIDED CRIME

We’ve identified more than 20 different ways that AI is accelerating cyber crimes, scams, fraud, and at least half a dozen of them are expected to increase the threat of identity theft to car dealerships.

MAKING THE TREASURE TROVE OF STOLEN DATA USABLE

Until AI came along, cyber criminals and identity thieves simply had too much information to make sense and use of it all. In 2021 alone it’s estimated that more than 40 billion personal records were stolen in data breaches, 150 billion records were stolen in just the last 5 years, and in one recent discovery in January 2024 a stash of more than 26 billion stolen records were discovered on the server of a criminal.

Until now, criminals simply didn’t have the tools to exploit all that stolen data. AI is making it much easier to join the dots and turn that data into usable identities primed for fraud.

And we’re already beginning to see the consequences. In just the 12 months following the launch of Chat GPT, deepfake-based identity fraud surged more than 1,700% in the US alone.

Synthetic identity is also surging with some estimates suggesting that nearly 80% of all identity thefts are using synthetic identities. Synthetic identity theft uses a mixture of real and fake pieces of information to create an entirely new identity that has no red flags attached.

The Deloitte Center for Financial Services predicts that synthetic identity fraud could lead to $23 billion in losses by 2030.

AI FORGING AHEAD

AI is very capable of forging and counterfeiting the most complicated documents, including birth certificates, driver’s licenses, and even passports.

In one recent demonstration, researchers were able to purchase a driver’s license on the dark web for less than $15 that was capable of bypassing advanced verification technologies.

AI is also capable of forging all the stuff that’s supposed to make counterfeiting much more difficult – things like watermarks, holograms, microprinting, special fonts and logos, and of course, a user’s photo and even signature.

AI can also easily forge utility bills, financial and bank statements and histories, W2s and other tax documentation, lease and mortgage evidence, wage information, even entire credit reports.

MORE THAN JUST IDENTITY THEFT

AI is making every kind of cybercrime and cyber attack easier, and dealerships might be more vulnerable than most businesses.

AI is already accelerating some of the most common attacks, including phishing emails and business email compromise (BEC) attacks. In the 12 months since the launch of ChatGPT, phishing emails not only surged more than 1,200%, but the quality was the best we’ve seen.

AI is also making it easier for criminals to create tools that will more easily detect vulnerabilities or weaknesses in networks, create undetectable malware, more easily crack passwords, and bypass multi-factor authentication systems.

SO WHAT CAN YOUR DEALERSHIP DO?

The simple answer is everything you’ve probably been doing so far, but just more of it. And especially focusing on training and tools.

Simply doing quick pulls of credit reports or scans of driver’s licenses is not enough anymore, and especially with the growth of highly accurate fake documentation and the rise in synthetic identity theft.

There are plenty of tools and technologies that will help you do a much deeper dive into the background of the credit applicant, quickly identifying suspicious anomalies, and without causing any unnecessary friction.

And on the training side, every employee needs to understand the behavioral “tells” of an identity thief, and how a scammer will talk and behave differently to a legitimate customer. So much fraud detection lies simply in the daily conversations with customers.