Ryan Mer, CEO of eftsure Africa, says the most common thread in cases of fraud is the human element, which can involve sophisticated fraudsters or unscrupulous employees.

In either case, strengthening processes and protocols can mean the difference between being an easy target and stopping fraud in its tracks, he said.

Mer sketched two scenarios and explained why fraud happens and how it can be prevented.

The first scenario involves the external risk of “a walk-in criminal”.

Mer said a client wants to sell his/her car and then presents his/her ID document, ownership papers and bank details.

However, Mer said what the dealership does not know is that the "customer" is using a stolen or defrauded ID document and is not even the legitimate owner of the vehicle, but because the customer presents what looks like credible documentation, the dealership pays the “customer” either in part or in full for the vehicle without realising they have been dealing with a criminal.

Explaining why it happens, Mer said the car papers match the falsified ID document and there is nothing to suggest that the “customer” is not the legitimate registered owner of the vehicle.

“In their haste to close the deal and get some desired second-hand stock as quickly as possible and avoid inconveniencing the customer, motor dealership employees rush or skip the necessary verification checks, which sometimes require confirmation from various other third parties within the onboarding and payment process,” he said.

Turning to how the fraud could have been prevented, Mer said an effective Know Your Payee (KYP) solution would have flagged a mismatch between the client’s stated name and bank account number to prevent the transaction taking place and alerting the dealership of the need for caution and additional investigation.

Mer added that a fully digitised workflow management tool would also ensure a full audit trail for each step in the process to assist employees in following the right procedures for every transaction while increasing efficiencies by automating key verifications in a matter of seconds to guarantee details are not compromised prior to releasing payment.

The second scenario involves the internal risk of a corrupt employee.

Mer said in this scenario, a long-term employee in the accounts department of a respected dealership can defraud the employer by creating various fake suppliers with his/her own personal banking details, and those of a friend and relative.

He said the employee then adds these fictitious payments to a payment batch each month without those responsible for releasing payments even realising.

Mer said this type of fraud could have been prevented with the use of a trusted electronic fund transfer (EFT) payment verification platform, which would have flagged a mismatch between the “supplier’s” name – in this case, the employee’s friend – and the bank account number.

He added that an effective solution would prevent such an incident from occurring in the future as supplier details and bank accounts would be audited, verified and approved at the onboarding point in the process.

“People, combined with technology and sound business processes, are at the frontline of fighting fraud and mitigating risk.

“Considering the potentially devastating financial and reputational harm from payment fraud, implementing KYP technology is an urgent need in the digital transformation for all businesses today, and motor dealerships are definitely not exempt from this,” he said.