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Fraud prevention — it starts with you!

Powersports Business contributor Mark J. Sheffield, a former dealer principal who now steers dealership owners in the right direction as a 20 Group facilitator for Spader Business Management, provides dealers with a timely piece on fraud prevention.

By Mark J. Sheffield
Contributing writer

We all look forward to the holiday shopping season and the customers coming in to spend their hard-earned savings. Many of us are coming off that small dip that happens as winter arrives, and that transition from slow to busy is where we often make mistakes. The problem with that rush of customers is that they offer the perfect cover for criminals. As our staff members are zipping through transactions, we aren’t always checking for counterfeit currency, driver’s licenses aren’t thoroughly examined, and customers are left alone for long periods of time.

While we will never eliminate all instances of fraud and deception, there are many things we can do to mitigate some of those risks.

• Upgrade to the newest credit card processing equipment. Because we have been slow to update our standards, more credit card fraud happens in America than any other country. Make sure you have chip-enabled equipment, configure address and ZIP verification, and use it. If a chipped card won’t process, that should raise a red flag.

• Conduct training with your staff on how to recognize fraud. If this isn’t your area of expertise, then find a local expert. Many police departments have officers who specialize in these types of crimes, and I’ve found many of them are happy to come out to the dealership to conduct training with your employees.

• Develop and implement a red flag policy. These programs are designed to detect, prevent, and mitigate identity theft. In some situations, you might be required by law to have a written red flag policy.

• Purchase and deploy a device like Fraud Fighter’s ID-150 counterfeit detector. The ID-150 is an identity document scanner used to capture images and data from driver-license-sized documents, and it’s coupled with the PALIDIN ID Document Authentication software. Each government-issued ID contains dozens of security features, many of which are tough or impossible for counterfeiters to replicate. A pass/fail response is provided within 10 seconds of scanning a customer’s ID. If the document fails, it’s probably fake.

• Ask customers to pay for large purchases using a wire transfer to the dealership. Wire transfers are safe and secure, and once the transaction has been completed; they are literally money in the bank. To add an additional layer of security, open a separate account at your bank that is just for incoming wires. (Never give out the account number for your main bank account.) Keep a minimum amount of money in this transfer account, and when wires are funded, immediately transfer that money to your primary operating account.

• For e-commerce sales, consider using a payment processor such as PayPal, and only ship items to confirmed addresses.

• Discuss fraud at your next 20 Group meeting. Different types of fraud normally happen in waves, and what works in one area of the country can quickly show up in dealerships across the nation.

• If you are unable to verify that a cashier’s check is valid, place a hold on that merchandise until your bank confirms the funds have cleared. (Banks will rarely do this in real-time anymore, but you might find that an employee of your bank might be able to make a call to a friend.)

• Use multiple devices to confirm that large denominations of currency are legitimate. Using just one method like a pen or ultraviolet scanner might not be enough.

• Include a section in your employee handbook that discusses the company policies for dealing with fraud. Set limits for how much a front-line employee can accept in payment before a manager has to double-check the transaction for compliance with company security policies and establish policies for manager approvals on large-dollar returns.

• Pay attention to the vehicle the customer is driving. A brand-new truck with dealer plates on it should raise suspicion. And, if the customer pulls up in a Penske or U-Haul rental, that’s another sign that there might be problems.

• Have a good security system that captures hi-definition images of customers at the point of sale. Instead of a hidden system, make these devices stand out.

• Confirm that you have insurance coverage for large losses related to fraud and identity theft. It’s probably not worth filing a claim for a fraudulent $500 transaction, but a $78,327 loss probably warrants a call to your insurance adjuster.  

There are many other methods that dealers can deploy to minimize the risk of fraud, both with customers and in other areas of the dealership. Criminals will often have stories to tell about why things are the way they are. Fraudsters will often create a false sense of urgency to make sure they get the item before the theft is noticed. Any signals like this should always warrant further examination.

Profit margins in our industry are too small to cover the costs associated with fraud. There are many times where the best decision you can make is to walk away from a transaction. In the end, the best tool to minimize fraud is going with your gut. If it doesn’t feel right, then it’s probably not right.

Mark J. Sheffield is a U.S. Army Veteran and former dealer principal who currently facilitates multiple 20-groups for Spader Business Management. When he’s not assisting with dealership performance, he can be found at the rifle range or digging holes with his backhoe. Contact him at

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