To The Point Podcast Episode 5: Why Fraudsters are Becoming More Aggressive

A Point Predictive Podcast with Sgt. David Navarro

Sgt. Dave Navarro of the California Highway Patrol discusses the wide variety of fraud affecting auto dealers in California, both before and after purchase. He explains how fraudsters’ brazen and constantly evolving tactics can present a challenge for law enforcement, and how his agency is working to combat them.

The conversation also touches on fraudsters’ mindset in light of high inflation in recent years, as well as how Point Predictive technology helps the California Highway Patrol stay ahead of the curve.

Listen now at the link or read the transcription below.

“To The Point” is a production of Point Predictive.

Intro

This is To the Point, a podcast from Point Predictive.

Jeff Goldberg (Host)

This is Jeff Goldberg from the 2023 Auto Lending Fraud Roundtable presented by Point Predictive, I’m joined by Sergeant Dave Navarro of the California Highway Patrol. Dave, thanks so much for joining us today.

Sgt. David Navarro

I appreciate it. Thank you for the offer.

Jeff Goldberg

So Dave, in your work focused on auto fraud, auto theft, what are you seeing right now that really has your full attention in this field Dave?

Sgt. David Navarro

When it comes to the vehicle theft via fraud, right now in Southern California, what we’re dealing with is essentially a lot of credit washing, different types of fraud purchases, which is going to encompass fraudulent or identity theft, hybrid identity theft, fraud, or fictitious businesses, fictitious employer, income inflation.

And then after the fraud purchase, what we deal with is a lot of what we refer to as ‘Title Washing’, where if a purchase is financed, the suspects are able to submit paperwork through the Department of Motor Vehicles that will remove the bank off title before it is paid off. And then there’s other schemes, subleasing and there’s other ways of making money on these vehicles once they obtain them via fraud.

Jeff Goldberg

I’ve been asking this question to other people we’ve spoken with, how do you get your arms around what’s going on? With so many different things happening that you just mentioned, so much technology that the criminals can leverage; and it’s only growing and increasing. How do you even begin to tackle this problem?

Sgt. David Navarro

A lot of times, we’ll see a scheme go down and we won’t even know if it’s criminal or not. And at that point, that’s where we have to educate ourselves. And over the years, I’ve learned tremendously from Department of Motor Vehicle, their investigators on how the DMV process, how the registration process occurs, as well as working with finance companies on the auto lender side and dealerships.

And to be able to combat this and actually complete an investigation, you have to understand the process. And that’s where learning from the dealerships and the dealership process, then the finance process, then the registration process. And once you understand that, then you’re able to identify how the suspects are able to manipulate the system and find little loopholes to be able to commit their fraud.

Jeff Goldberg

Is it easy to identify? Or is it get harder and harder considering all the tools.

Sgt. David Navarro

Once you have a good grasp on how the proper way of things are, are done, then it’s easier to identify. And you know, then you learn about the new technology that comes out. And of course, there’s always going to be a loophole some way, somehow. And the suspects are very good to once a roadblock, they face a roadblock. They’ll just change their tactics and figure another way out on how to still accomplish their goal.

But when it comes to easiest, it’s just understanding and I try to when I teach I try to get everybody understand the proper way of doing things, what normal people do. And then once you understand that, then you’re like, oh, lightbulb goes on. And you can see how there what the fraudulent portion of it is.

Jeff Goldberg

Can you share a story quick anecdote illustrating what you’re saying right there.

Sgt. David Navarro

So for instance, we had, I had a case back in 2000- , I want to say ‘16 and started in 2016. And it was what it was, was a credit washing case. It was an individual who went and purchased two high end vehicles. He used a fictitious employer, that was the fraud. And of course, he inflated his income. But he did use his real social security number, real personal information, obtained both vehicles and then eventually those vehicles went default.

The vehicles were reported stolen, we recovered them. And then about three months later, before I even got the case filed with the with the district attorney’s office, he submitted a identity theft report saying he never bought the vehicles which cleaned his credit. And we were alerted by the finance company who received a letter from the credit bureau saying, Hey, this guy never purchase his car when reality we had all the evidence that he did. And then shortly after that, he went out and purchased six more vehicles.

And from credit washing and it got to the point where, where he changed his employer again, still used his personal information. We actually located all the vehicles, recovered them from his possession. And he still had the audacity to go and file another identity theft report saying he didn’t clean those vehicles. And so it didn’t end well with him. We did end up locating him, arresting him, and having a successful filing on that.

Jeff Goldberg

Dave, you mentioned the word audacity, I’m not going to ask you to think get in the minds of these criminals. But, boy, when you hear some of these stories, you think that is really audacious. What is driving; is it easier for them to do this or they just are gonna go for it because the reward is really strong.

Sgt. David Navarro

The reward definitely outweighs the you know, the punishment for them. And unfortunately, it’s a property crime and without getting into politics or the criminal justice system. They essentially, when it comes to property crime, they get a slap on the wrist.

So to them, if the reward outweighs that punishment, and they know they’ll probably either get probation in but they, you know, but they still get $100,000 car or they make multiple $100,000 in profit. So to them, it definitely is worth it. And so they’ll just keep going and that greed will just keep going and until the punishment outweighs the crime. It just continues to benefit them.

Jeff Goldberg

When you look at some factors in play right now, throughout the conference, we’ve heard a lot about how COVID was a bit of a turning point in terms of how people, criminals were sort of taking advantage of the system. Technology, obviously being central to this, how do you think maybe economic conditions Dave? Inflation? You know, questions about, you know, I know, unemployment is pretty low, but other economic conditions that you’re seeing, that could be impacting what’s going on right now.

Sgt. David Navarro

You know, obviously, the economy and inflation, the rise of prices and vehicles. But the fraud, unfortunately, are- we have a lot of policies procedures, when it comes to the purchasing vehicles or ways to obtain money, illegally. And it’s pretty easy.

And those loopholes are still in place where the suspect has taken more and more advantage of it. And as prices go up, it again, they’re able to as prices go up, they’re able to make more of a profit. So it just feeds their greed and feeds them to keep on continuing to do this.

And a lot of these fraudsters, the suspects that their mindset is that they’re not stealing from an individual person, they’re not taking your livelihood. But they’re thinking, ‘Well I’m just taking from these banks who make a lot of money. I’m taking from these dealerships who screw people over all the time.’ And this is when we’re interviewing them, these are the reasons why they’re doing it. They’re going, ‘I’m not screwing anybody else over. You know, everybody doesn’t like the banks, and they make all this money.’

Jeff Goldberg

It’s justification.

Sgt. David Navarro

Exactly. And but what they don’t understand is that a bank’s loss is only temporary, they’re gonna recover that versus, where it really impacts us is the individual citizen. And they don’t understand that they just think, ‘Hey, I’m not hurting anybody.’ But in reality they are. And as prices go up, they’re allowed to make more money. So it’s going to keep on driving that and fueling that fire.

Jeff Goldberg

Don’t understand or don’t care a little bit of both?

Sgt. David Navarro

They just don’t want to wrap their heads around it. And again, they don’t care because again, they’re allowed to make more money, especially as prices go up in vehicles. Where a Cadillac Escalade, back in 2010, was a $70,000 car. Now that vehicle’s a $120,000 car. So to them, they see $120,000, that means that’s more of a profit. So as prices keep going up, it’s not going to stop them, it’s just going to fuel that fire.

Jeff Goldberg

I want to focus on prevention a little bit. That’s a lot of what we’re discussing here today at the roundtable. Point Predictive uses data analysis, AI everything possible to try and prevent the fraud and work with their partners in doing so. What are some preventative measures that you’ve seen, from Point Predictive specifically, but overall in the industry that really are working?

Sgt. David Navarro

Well, let’s talk about Point Predictive. What I like about them, and I’ve worked directly with Frank McKenna on multiple occasions, is they stay ahead of the curve. And they’re identifying trends before- , as they come out. Or they’re pretty much staying up to date with a lot of these trends, which allows law enforcement, which allows the finance companies in the private sector to stay on top of and try to defend it before they’re actually taking a huge loss.

Where before Point Predictive was around, we’re two years behind the current trends. And we’re constantly playing catch up to where now with the data analysis and collecting all the information and staying on top of the curve, or staying on top of the trends, are allowed to get ahead of it. And hopefully combat it before it gets a little bit worse.

And with those tools, you know, different companies have come up with different identity theft procedures and tools, and where it’s filtering from the finance companies all the way down to the dealership. So obviously, there’s some dealerships and finance companies that are a lot better, that stay on top of it that have the higher, the better technology than others. But everybody it’s like a slow pendulum. It’s slowly swinging to where a lot of people are getting on board, which is making it still a lot harder. It’s making it harder on the criminal to defraud the system.

Jeff Goldberg

In the conversations you’ve heard today, what are the big takeaways that that you’ve heard, not only in terms of some of the problems, challenges that are emerging, but also the ways in which they’re being fought? Moving forward, what are some big takeaways?

Sgt. David Navarro

I would say they experience and education coming from some of the speakers. They have a wealth of knowledge. And what’s nice is that a lot of these speakers, I would say they’re experts in their field to where they’re staying on top and again, staying on top of what is going on. And that’s the biggest key is if we’re behind the curve, then we’re constantly playing catch up. But with people that are constant staying in it, and then they’re just involved, deeply involved in what is going on. It helps us be to able to combat it as it’s happening versus trying to play catch up and clean up, you know, clean up the damage.

Jeff Goldberg

And does it give you sort of some hope and promise moving forward, even with all the different ways in which criminals, you know, can use these tools?

Sgt. David Navarro

100%. And going back when I started working fraud at work, I started back in 2009, is when I went into a view with F-unit. And my first case was a title wash case. And at that point, I was reaching out to finance companies who they didn’t know what was going on, I didn’t know what was going on. DMV didn’t know what was going on. And we were kind of learning together.

So going from that starting point to now I could walk into a room and speak with a finance investigator or finance company investigator, and they’re just as knowledgeable if not more knowledgeable than myself in this. And so now it’s like, okay, how do we combat this together versus taking the time to teach everybody what’s going on, and then getting everybody on board to and, you know, working well with each other. So it’s nice to where it’s at now.

Jeff Goldberg

Sharing information, knowing what’s going on, a lot more power, a lot more tools. Dave, what motivates you? What keeps you going? Especially considering there’s so many cases, criminals have so many tools, I would imagine it can be overwhelming. What keeps you moving forward?

Sgt. David Navarro

It’s the challenge, it’s the challenge. It’s let’s see, you know, initially when it comes from the law enforcement side, and I, when I teach, I always ask people, What do you think about fraud? And one of the biggest comments we always get is a lot of paper. It’s time consuming. It’s boring.

And on the law enforcement side, we like that excitement. We like that drive. We like the adrenaline. And what I found out working fraud is when we work in patrol, yes, you’re sometimes getting some good criminals off the street. But for the more it’s day to day kind of stuff. With the fraud, we’re actually getting involved in organized crime, with the cartels, with the outlaw motorcycle gangs, and you are having a bigger impact. And it leads you into bigger cases to where you’re getting the guns and you’re getting the drugs. And it’s leading us into human trafficking and you know, transportation of narcotics to- and all it is, is a small portion. And what these criminals enterprises, they like the high end cars. Well, they’re gonna commit the fraud. So the fraud, just a small portion of their big organization. So that drives me as well as again, the challenge and learning new things and keep me on my feet where it’s nothi- It’s not just going to be something boring where – sorry about that. It’s not going to kind of get dull, I guess. So it’s more of a challenge staying on top of these and more of I got you when they think they’re smarter than you and you outsmart them, so it’s good.

Jeff Goldberg

It’s a good feeling makes a difference. Yes. Sergeant Dave Navarro, California Highway Patrol. Sergeant, thank you so much for joining us today. We appreciate it. It’s been great speaking with you at the 2023 Auto Lending Fraud Roundtable presented by Point Predictive.

Sgt. David Navarro

I appreciate it, thank you for the time.

Outro

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