Fraudsters are targeting auto dealerships — here’s how to protect your business

Running a successful auto dealership entails managing a variety of expenses, but that doesn’t typically include paying the monthly utility bill for an unaffiliated residential property located in another city.
That’s one real-life example of the fraud threat auto dealerships face every day. In this case, a fraudster gained access to a dealership’s bank account number and routing number, then used that information to pay their home’s utility provider.
Since the COVID-19 pandemic, fraud targeting small and middle market businesses has been on the rise. Now, auto dealerships are being specifically targeted. From old-fashioned check fraud to social engineering and business email compromise, auto dealers need to know which schemes to watch out for and how to safeguard their businesses.
The persistent and pervasive threat of check fraud
Check fraud is not a new tactic, but it has gained momentum in recent years. Between 2021 and 2022, the number of Suspicious Activity Reports (SARs) filed with FinCEN to report potential check fraud increased from 350,000 to 680,000, prompting the agency to issue an alert1 on mail theft-related check fraud schemes.
And while many businesses and consumers have embraced various forms of digital payment, certain transactions — for example, reimbursements for DMV fees by auto dealerships — often still depend on the use of paper checks.
Fraudsters target and exploit the vulnerabilities of paper checks in a few different ways. For example, a fraudster can obtain a dealership’s bank information (specifically their account and routing numbers), use those details to create counterfeit checks from the dealership and cash them to steal funds from the dealer’s accounts.
Another common check fraud tactic is check washing. Fraudsters often steal legitimate checks from the mail — and even sending checks via USPS Certified Mail or taking checks directly to a post office isn’t a foolproof way to prevent check theft. The check thieves then use chemicals to erase the payee’s name and the dollar amount from the check. They write in a new amount payable to a new recipient, who then presents the altered check to be cashed and walks away with the funds. These perpetrators are often working with sophisticated criminal operations, and businesses can suffer significant losses due to a single check falling into the hands of a skilled fraudster. Unless your business has fraud protection tools in place, a paper check becomes susceptible to fraud as soon as it is cut.
Business email compromise and other scams
Stealing and counterfeiting paper checks isn’t the only way fraudsters are targeting auto dealerships. Business email compromise and social engineering scams trick employees into disclosing login information or authorizing fraudulent transactions. In a 2024 alert2, the FBI referred to business email compromise as “The $55 Billion Scam” due to the combined total of domestic and international exposed losses between 2013 and 2023.
Here’s an example of a business email compromise scheme that targets auto dealerships: while on vacation, an employee in the sales department emails the person in charge of payroll requesting that their paycheck be deposited into a new account because they’ve recently switched banks. The person in charge of payroll updates their direct deposit information and issues their next paycheck to the new account via ACH.
After the employee returns from vacation, they ask why they haven’t received their paycheck. The reason? The email providing the new account information was fraudulent. A scammer created a fake email address using the employee’s real name, and the person from payroll who received the email didn’t notice that the email address wasn’t correct. This is known as spoofing, which is when fraudsters send convincing communications that appear to be from a trusted person. In addition to email, fraudsters can use text messages, and with the advent of deepfake technology, even voice messages, to impersonate colleagues, bosses, or customers.
Finally, keep in mind that a fraud perpetrator isn’t always a total stranger. For instance, former auto dealership employees have initiated fraudulent transactions using login credentials or account numbers to which they had access as part of their jobs.
Combat the threat of financial fraud with tools and expertise from your bank
Fortunately, there are ways for auto dealerships and other businesses to protect their enterprises against all kinds of fraud. These include reducing the use of paper checks where possible, performing daily reconciliation of business accounts, closely reviewing and reporting suspicious or urgent emails, and investing in fraud prevention tools (see KeyBank's Check Fraud Solutions) to detect fraud and prevent unauthorized payments.
The first step to protect your business is tapping into your bank’s experience and knowledge of fraud prevention and cybersecurity. Your relationship manager and other experts can suggest a variety of best practices and solutions to guard against the latest scams and schemes.