Hello, I'm Grant Wahlstrom, contributing editor to internal auditor magazines, fraud department and senior manager of fraud, forensics and investigations at ADT in Boca Raton, FL.
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I'm pleased to introduce this episode of fraud on the All Things Internal Audit Podcast, which provides fictionalized accounts of fraud based on actual events.
Frankenstein Roadster, Part 1, the mysterious customer. On the last day of the month, Sheila Jackson walked into Speedbird Automotive in Kansas City, heading straight for the sales floor.
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Young, well dressed in with a sharp air of urgency, she pointed at a sleek grey Mercedes SL Roadster and declared to Eddie Foghorn, the sales associate.
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I'll take that one. For Foghorn, it was a dream come true. One more sale and his bonus was secure. As he began explaining the cars features, Jackson cut them off. I know what I want and I'm in a hurry, she snapped. She offered to pay the listed price outright, requesting 100% financing through the dealers lender. Froghorn eagerly collected her information, including a drivers license and Social Security number. And brought the paperwork to Jim Sinclair, the finance manager. But Sinclair's instincts tingle. Few customers passed up negotiating a deal, especially on a luxury vehicle. Jacksons impatience and constant phone use added to his suspicion. Yet Jacksons credit check cleared. With the financing approved, she drove off in her new roadster.
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#2. Cracks in the controls weeks later.
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Speed Birds Chief Audit executive received an alarming call from the Vice President of Finance over $100,000 had been stolen through a synthetic fraud scheme centered on Jacksons Purchase.
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Harley, already aware of five similar incidents at other dealerships, was tasked with investigating synthetic fraud is a modern financial crime where a fraudster builds a fake identity using stolen and fabricated personal information. These Frankenstein, like personas trick lenders into approving financing for non existent individuals. Harley's first step was to untangle the identity behind Sheila Jackson. Research revealed the real Sheila Jackson was a 96 year old resident in an assisted living facility. The fraudster had used Jacksons name and Social Security number, but mixed in details from her former address and phone number. Leading to a false positive during the dealerships. Check the fraudsters, sophisticated forgery of Jackson's driver's license had gone undetected. Harley conducted a walkthrough of speed Birds, Credit approval process, mapping out vulnerabilities the internal controls failed to detect synthetic fraud schemes. Credit checks relied heavily on automated systems, which flagged mismatches only in extreme cases. Employee training on identity theft was minimal and there were no tools in place to validate government issued IDs or phone numbers. Harley's findings were damning. The dealerships lacks control environment, left it wide open to sophisticated fraudsters.
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Part 3. Fortifying the system, Harley turned to Ingrid Nori, president of Orion security, for advice on bolstering speedbirds defenses. Nori recommended immediate it control enhancements, identity document authentication to detect forged IDs. Identity verification services to cross check applications against databases of known fraudulent personas and device based authentication to verify phone numbers provided by customers in real time. Nori also stressed the importance of employee training and physical deterrence. Such as visible surveillance systems, fraudsters often move on if they suspect they're being monitored. She explained. Speed bird implemented all these recommendations within months. The dealerships fraud prevention tools were operational and staff were better equipped to handle suspicious transactions. Despite Harley's thorough investigation and the dealerships revamped controls, the fraudster behind Jackson's Roadster. Elusive. The incident highlighted the growing threat of synthetic fraud and the importance of proactive controls and vigilant staff. Speedbird Automotive story is a testament to the power of a well fortified. Control environment.
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Want to learn more about fraud related topics? Don't miss the Iias 2025 Fraud Virtual Conference on February 20th. Visit theia.org or check the show notes to register now.
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And secure your spot. This has been the all things internal audit fraud podcast.
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Fictionalized accounts based on actual events brought to you by the Institute of Internal Auditors. Ia members can access the full story in this month's issue of Internal Auditor magazine, including bonus materials on lessons learned. To read more, visit internalauditor.theiia.org for more fraud related resources, including guidance and thought leadership from the IIA and the Acfe, visit. The IIA org. A CFE fraud.
