If you’re lending in Florida, you’ve probably been hit by the South Beach Bust Out Syndicate
Bust out fraud is a sophisticated scheme where criminals obtain loans with no intention of repaying them, often using straw purchasers to acquire cars that quickly disappear. Point Predictive fraud analysts are alerting auto lenders to a large operation operating out of Miami – we call them the “South Beach Bust Out Syndicate” – which is targeting high-value vehicles through this method.
Close to $10 Million in Affected Loans and Applications
Hundreds of loans and applications have been tied to this fraud syndicate with a total value of close to $10 million. As further analysis is completed, we anticipate the value of affected loans to increase significantly.
The syndicate operates with a plan to follow the “path of least resistance” and employs the same general characteristics on their applications.
The scheme relies heavily on recruiting straw purchasers who apply for loans on behalf of the actual fraudsters. These individuals occupy a peculiar position as both willing participants and victims, often lured by empty promises of financial gain.
Affected applications exhibit the following loan patterns:
- High Value Vehicles – $65,000 to $100,000.
- High Reported Income for Applicants– The average stated income $284,000.
- Suspicious Employers – Self-employed borrowers using suspicious LLC business names that include their name. Employers are often trucking companies.
These criminals found vulnerable access points and exploited them repeatedly. One dealer group alone received 44 applications from this ring, demonstrating how fraudsters tend to target the same dealerships over and over.
Another common pattern unique to this ring is that they are often tied to employers in trucking or transportation. While those employers are generally authentic companies; their reported incomes appear dramatically inflated.
The South Beach Bust Out Syndicate Shows Great Sophistication
This ring demonstrates a higher degree of sophistication than many rings we’ve encountered in the past in that there is no repeated linking information across applications. Each application exists as an island unto itself, presenting a unique profile without the usual shortcut’s fraudsters take when creating multiple fake identities.
The absence of duplicate employers or phone numbers which is evident in most rings makes “connecting the dots” through data analysis difficult.
Yet clever detective work still breaks through these sophisticated schemes. One particularly resourceful lender followed the money trail rather than identity markers, revealing the truth hiding in plain sight.
Their payment analysis uncovered the smoking gun that demographic data couldn’t reveal. Through careful linking analysis, they discovered the same payee and bank accounts appearing across multiple applications, exposing the invisible connections between these seemingly unrelated borrowers.
A Complex Web of Add-On Fraud After Vehicles Are Obtained
Once these criminals acquire vehicles through fraudulent loans, they deploy an arsenal of secondary schemes to extract maximum profit from the cars. The cars themselves are merely the beginning of a sophisticated fraud chain that converts these cars into untraceable cash.
Some vehicles vanish into international shipping containers bound for overseas markets. Others remain stateside but generate income through illegal subleasing arrangements through sites like Turo that create multiple revenue streams from a single car.
The most disturbing technique involves creating fictitious lien releases that magically “clear” the title of any bank’s legal claim. This paperwork sleight-of-hand allows the fraudsters to sell vehicles quickly at tempting discounts to unsuspecting buyers who have no idea they’re purchasing stolen property.
In some cases, the syndicate will turn the cars over to local mechanics, who will file mechanics liens against the vehicles and hold the vehicles hostage until the lender pays exorbitant bills.
These scenarios create nightmarish recovery challenges for lenders who must often confront innocent third parties. This happens all too often and creates a real pain point for lenders’ fraud teams trying to recover vehicles. It’s even worse if the vehicle has a new lien from another bank.
Point Predictive will continue to follow this ring, providing our analysis as we uncover more information.
Author: Scott Ellefson,
Fraud Consulting Manager, Point Predictive
Connect with Scott on Linkedin.
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Point Predictive powers a new level of lending confidence and speed through artificial intelligence, powerful data insight from our proprietary data repository, and decades of risk management expertise. The company’s data and technology solutions quickly and accurately identify truthful and untruthful disclosures on loan applications. As a result, lenders can fund the majority of loans without requiring onerous documentation, such as pay stubs, utility bills, or bank statements, improving funding rates while reducing early payment default losses. Subsequently, borrowers get loans faster, and lenders realize a more profitable bottom line.
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