Hello, I'm Grant Walstrom, contributing editor to Internal Auditor magazine's fraud department and Senior Manager of Fraud Forensics and Investigations at a DT in Boca Raton, Florida. I'm pleased to introduce this episode of Fraud on the All Things Internal Audit podcast, which provides fictionalized accounts, a fraud based on actual events. Frankenstein's Roadster, part one, the Mysterious Customer.
On the last day of the month, Sheila Jackson walked into Speed Bird Automotive in Kansas City, heading straight for the sales floor, young, well dressed, and with a sharp air of urgency. She pointed at a sleek gray Mercedes SL Roadster and declared to Eddie Foghorn, the sales associate. 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 car's features. Jackson cut 'em 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 dealer's lender. Foghorn eagerly collected her information, including a driver's license and social security number, and brought the paperwork to Jim Sinclair, the finance manager, bud Sinclair's instincts tingle. Few customers passed up negotiating a deal, especially on a luxury vehicle. Jackson's impatience and constant phone use added to his suspicion.
Yet Jackson's credit check cleared with the financing approved, she drove off in her new Roadster. Part two cracks in the controls. Weeks later, speed Bird's 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 Jackson's purchase. 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 Jackson's name and social security number, but mixed in details from her former address and phone number leading to a false positive. During the dealership's credit check, the fraudster's sophisticated forgery of Jackson's driver's license had gone undetected. Harley conducted a walkthrough of speed bird's 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. Part three fortifying the system. Harley turned to Ingrid Norie, president of Orion Security for advice on bolstering speed bird's defenses.
Norie recommended immediate IT control enhancements, identity document authentication to detect forged IDs, identity verification services to crosscheck 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 dealership's 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 remained elusive.
The incident highlighted the growing threat of synthetic fraud and the importance of proactive controls and vigilant staff Speed Bird Automotive story is a testament to the power of a well fortified control environment. Want to learn more about fraud related topics? Don't miss the I'S 2025 Fraud Virtual Conference on February 20th. Visit the iia.org or check the show notes to register now and secure your spot.
This has been the All Things internal Audit fraud podcast, fictionalized accounts based on actual events brought to you by the Institute of Internal Auditors. I a A 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 internal auditor dot the iia.org for more fraud related resources, including guidance and thought leadership from the IIA A and the A cfe. Visit the iia.org/afe fraud.