Fighting Fraud. Industry initiatives and best practices in the fight against fraud. print next page Fighting Fraud Leaseurope

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1 Fighting Fraud Industry initiatives and best practices in the fight against fraud 1

2 About Leaseurope Leaseurope brings together 45 member associations in 32 European countries representing the leasing, long term and/or short term automotive rental industries. In 2010, these associations represented more than leasing firms and more than short term rental companies. The scope of products covered by Leaseurope members ranges from hire purchase to finance leases and operating leases of all asset types (automotive, equipment and real estate) and also includes the rental of cars, vans and trucks. Leaseurope represents approximately 95% of the European leasing market. Visit Leaseurope website at for more information on the Federation s members and many activities. 2

3 Contents About Leaseurope p.2 Acknowledgements p.4 Foreword p.5 Introduction p.6 09 Germany p.35 Bundesverband Deutscher Leasing-Unternehmen e.v Austria p.7 The Association of Austrian Leasing Companies Belgium p.10 Renta - Fédération Belge des Loueurs de Véhicules Car-Pass Sagora Croatia p.17 Adnet Czech Republic p.19 The Czech Leasing and Finance Association Denmark p.22 Finans og Leasing Italy p.38 Assilea - Associazione Italiana Leasing Latvia p.41 Latvian Lessors Association The Netherlands p.44 Bovag De Lage Landen International B.V. Portugal p.49 ALF - Associação Portuguesa de Leasing, Factoring e Renting Romania p.53 ALB - Asociatia Societatilor Financiare din Romania 06 Estonia p.25 Estonian Leasing Association 15 Slovenia p.56 The Bank Association of Slovenia-Leasing office 07 Finland p.28 The Federation of Finnish Financial Services 16 Sweden p.59 Finansbolagens Förening 08 France p.31 Europcar SG Equipment Finance 17 United Kingdom p.62 BVRLA FLA Manheim 3

4 Acknowledgements Leaseurope would like to thank all those who made this publication possible: Its relevant members for contributing an overview of their recent projects. The company experts for providing their valuable insight. Ravi Bhatiani, Legal Adviser, for initiating, coordinating and bringing to a successful end the project. Carolina Villamizar for designing a professional, elegant and user-friendly publication. Our thanks also go to Professor Rüdiger Baron von Fölkersamb of Deutsche Leasing AG and Patrick Kennedy of Hertz Europe for sharing their knowledge and broad industry expertise in the foreword and introduction to this publication. June

5 Foreword Professor Rüdiger Baron von Fölkersamb, Chairman, Leaseurope Welcome to the Leaseurope electronic publication on the leasing/automotive rental industry s fight against fraud. Inside you will find a selection of interviews with national trade associations and a number of articles by companies. As well as highlighting concrete initiatives taken by associations and firms in the fight against fraud, the contributions contained within bring together best practices in fighting fraud from across Europe. The content, written by members of the leasing community, offers a unique overview of how lessors can fight against fraud across Europe. Information is also provided on the types of fraud encountered at national level and what is being done to counter them. Mindful that fraud is a cost that can be ill-afforded in current economic times, Leaseurope hopes that the various initiatives and best practices described in this publication will be emulated in the future and raise awareness of what can successfully be done by industry participants. 5

6 Introduction by Patrick Kennedy, Vice President Field Operations, Hertz Europe Sophisticated and well organised crime, including financial and insurance fraud, money laundering and the systematic theft of mobile and easily convertible assets are, today, unfortunate facts of our daily business lives. This is true for almost any industry in one form or another but it presents a special level of risk for those of us who work in the leasing/automotive rental industry. Risk awareness and the management of these risks have become a significant challenge for our industry over the past 20 years. The individual opportunistic criminal has been replaced by well organised gangs, the financially weak customer has been replaced by companies established for the sole objective of fraud, risky drivers have given way to organised accidents, and credit cards, in excess of their credit limits, have been replaced by the most sophisticated card manufacturing operations backed up by identity theft. All of us who work in the industry have been required to significantly increase our awareness of these risks and improve staff awareness at all levels of our organisations. The only sustainable level of long term prevention is to operate rigorous review of credit approval and claims handling and the careful checking of identity and credit status both corporate and individual. The timely exchange of information about fraud and those engaged in fraudulent activities (within the constraints of our data protection laws) is also vital to fraud prevention and to the long term security of our assets. On behalf of the Security Working Group within Leaseurope I welcome this timely and comprehensive review of national prevention activity among the members as a useful step in sharing best practice and I thank the various contributors for their proactive support in its preparation. 6

7 01 Austria The Association of Austrian Leasing Companies VÖL - Verband Österreichischer Leasing-Gesellschaften Capital city Vienna Population 1 8,356,707 GDP 2 in millions of US dollars 413, estimate 2 Source: World Development Indicators database, World Bank,

8 01 Austria The Association of Austrian Leasing Companies Interview with The Association of Austrian Leasing Companies Name of association The Association of Austrian Leasing Companies VÖL - Verband Österreichischer Leasing-Gesellschaften Objectives of association The main goals of the association are to represent the interests of the Austrian leasing industry and to serve as a link to the consumer. Members of association Our core membership consists of leasing companies and banks. Why did your association decide to work on the fight against fraud? Our association s decision to work on the fight against fraud stemmed from a significant Austrian fraud incident in mid The need to prevent such an occurrence from happening again led to the decision to form a fraud prevention group. At the time of writing, ten members of the VÖL participate, and actively work, in this group. What are the most common types of fraud encountered by the leasing (and/or short term vehicle rental) industry in your country? Up until 2008, the main types of fraud encountered by our members were contracts fraudulently concluded by means of fake identification by mainly southern and eastern European private individuals. These individuals had organized themselves into groups actively targeting vehicles that were subsequently transferred to countries of the former Yugoslavia and Eastern bloc. More recently ( ) an increase in duplicate financing of assets has been seen. This has been taking place through the financing of assets either directly or via sale and lease back mechanisms. In these scenarios, machinery and building equipment are most commonly targeted. Phantom financing is also on the rise. This is where financing transactions lack any real asset. The fraud is usually carried out with collusion between an ill-intentioned supplier and an ill-intentioned lessee. 8

9 01 Austria The Association of Austrian Leasing Companies Please describe the concrete action that your association has taken in the fight against fraud: Does your association s initiative in the fight against fraud have a name? The Fraud Prevention Group of VÖL. What are the objectives of your association s initiative The objectives of our initiative are the prevention of fraud and analysis of fraud systems in order to better learn about such systems and gain higher quality information. What types of fraud does your association s initiative aim to prevent? Our focus is on the prevention of external fraud (rather than employee fraud), including personal and corporate fraud, identity fraud, duplicate financing, financing without assets (fictitious transactions). Who participates in your association s initiative Lessors of vehicles and machinery, credit reference agencies and the police all participate in our initiative. What is the working method of your association s initiative We established a fraud prevention group consisting of ten members who meet 2 to 4 times a year. An information system via about new fraud systems, actual fraud cases and information given by the Austrian police has also been established. If not already done, please describe the role that your association/your members play in your association s initiative in the fight against fraud: At association level, we exchange and share information on actual fraud cases without disclosing the names of persons or companies involved. We have also identified signs of fraud which have to then be checked by fraud agents. Did you experience any obstacles when setting up your initiative No notable obstacles were experienced when setting up our project. Do you have any further comments on your association s initiative We firmly believe that fraud is international in scope. Fraudsters simultaneously apply the same fraud techniques in a number of countries. Thus, information on fraud types and systems needs to be exchanged internationally between affected companies. Contact information: Reinhard Würger Head of the department for vehicle machinery and fleet management Raiffeisen Leasing GmbH, Vienna, Austria reinhard.wuerger@rl.co.at Additionally, we hold information seminars with various institutions for fraud prevention. We also provide information papers on fraud and we are currently focusing our efforts on setting up a joint asset register. Are any third parties involved in your association s initiative Police and credit reference agencies are all involved in our work. How is your association s initiative in the fight against fraud financed? Each member company finances itself. There is no joint financing with VÖL. What results have been achieved so far by the initiative taken by your association In terms of concrete results of our project, we have clearly raised awareness within the industry on the types of fraud carried out, how to identify those frauds quickly and efficiently and also how to prevent those frauds. As part of this process, a continuous fraud information system has been implemented and credit reference data on actual cases and types of fraud committed has been/is being gathered. 9

10 02 Belgium Renta Car-Pass Sagora Estonian Leasing Association Capital city Brussels Population 1 10,827,519 GDP 2 in millions of US dollars 504, estimate 2 Source: World Development Indicators database, World Bank,

11 02 Belgium Renta Interview with Renta Name of association Renta - Fédération Belge des Loueurs de Véhicules / De Belgische Federatie van Voertuigen Verhuurders Objectives of association We represent and promote the interests of the long term as well as short term vehicle and truck rental sector. Members of association We have 70 members including leasing companies, car rental companies and truck rental companies. Why did your association decide to work on the fight against fraud? Renta has been involved in the fight against fraud for a long time. As such our work on fraud prevention is an ongoing effort for the benefit of our industry. What are the most common types of fraud encountered by the leasing (and/or short term vehicle rental) industry in your country? In our experience, the most common frauds/vehicle crimes are car-jacking, theft from the home, converting stolen vehicles and falsifying company papers that are then used in rental/leasing transactions. Please describe the concrete action that your association has taken in the fight against fraud: Does your association s initiative in the fight against fraud have a name? DNR (Do Not Rent). What are the objectives of your association s initiative We aim to raise attention to specific frauds and help the police to fight against fraudsters. What types of fraud does your association s initiative aim to prevent? We aim to prevent all types of fraud common in our industry. Vehicle theft is the most prevalent type of fraud that we aim to prevent. 11

12 02 Belgium Renta Who participates in your association s initiative All of our short term automotive rental members participate in our fraud prevention initiative. What is the working method of your association s initiative The Secretary General of Renta coordinates the project. The project works as a monitoring system. The Secretary General of Renta receives fraud warnings/incident reports from his short term vehicle rental members. These warnings are then passed on to the short term vehicle rental membership of Renta and a copy of this information is sent to the police. Another facet to the system is that Renta can respond to police requests for information on suspected fraudulent activity/fraudsters by using its member network. Are any third parties involved in your association s initiative The third parties involved in the Renta project include the police, the judiciary and government officials. Insurers are currently not involved in the project. How is your association s initiative in the fight against fraud financed? DNR is financed through the association. What results have been achieved so far by the initiative taken by your association Through our projects our member companies have increased their awareness of the frauds committed on their assets. Furthermore, the close cooperation with the Belgian Government has raised awareness of the issues faced by our industry in fighting fraud at a political level. Did you experience any obstacles when setting up your initiative Privacy law in Belgium is very severe. It can prevent certain data exchanges that could facilitate our fight against fraud. Do you have any further comments on your association s initiative Our DNR project is long term. We have been continuously refining the project over the last eight years. We also work on other fraud prevention projects. Renta is continuously working to develop an effective legal framework to combat fraud. One such step is to ensure the validity of documents. Currently this is done by credit card companies but we would like to make this system more efficient as it contains certain limitations. Another project that we take part in is called Mobivis which is a project to produce a vehicle database that can be used in fighting fraud. We work on this topic with the so-called Ministry of Registration in Belgium. The aim of this project is to improve the traceability of all cars. Finally, we are also an active member of a group called NOA created by the Belgian authorities to facilitate fraud prevention. Contact information: Jacques Mollet General Secretary Renta jmollet@renta.be 12

13 02 Car-Pass Article Car-Pass The Belgian Approach to Mileage Fraud Article by: Michel Peelman CEO Car-Pass asbl Brussels, Belgium Mileage fraud is a widespread problem in the sale of used cars. A consumer who pays too high a price for his vehicle is obviously the first victim, but in addition to this the automobile sector, including leasing companies remarketing their end of contract vehicles, suffers from the effects of unfair competition and the damage done to its image as a result of cases of mileage tampering and manipulation. Of course, no official statistics are available on this subject but insiders estimate that in the nineties 1 in 4 used cars sold in Belgium had a tampered odometer. We are talking about approximately cars and an economic damage of several The view of one company hundred millions of euro a year. There is no reason to believe that the situation in other Western European countries is considerably different. How CAR-PASS works In order to adopt an efficient approach to this problem, the authorities and the automobile sector in Belgium have joined forces and developed the CAR-PASS system. This has led to legislation that is unique in Europe. Whenever repair or maintenance work is done on a car or a light commercial vehicle, the professional in question is obliged under Belgian law to report the mileage and the chassis number to a central database. Not only dealers and independent garages fall under the scope of the legislation but also tyre centres, fast fitters, the periodical technical inspection, etc. In order to ensure the reliability of the system, it is very important to collect sufficient data from independent sources. This data is inputted into a database managed by the non-profit-making organisation CAR-PASS. Anyone selling a used car in Belgium, both professional salesman and private person, is legally obliged to give the buyer a certificate which contains an overview of the reported mileages. This allows a buyer to ascertain what the vehicle s real mileage is. If the seller fails to deliver the CAR- PASS certificate, the sale is void. In 2009 CAR-PASS received 13,7 million odometer readings, this is on average 2,36 readings per registered vehicle. 97,8% of the data transfer is done electronically by file transfer or via the CAR-PASS website. The remaining data is received by fax or even by mail. More than different companies provide the data. On average, the database contains 9,2 readings per vehicle. The system has proven to be effective and mileage fraud has decreased substantially below 1% of the used cars sold (approximately 1400 cases in 2009). Cross-border frauds Of course fraud does not stop at the Belgian border. Second-hand vehicles imported from abroad fall outside the CAR-PASS system, as no mileage information will have been recorded in the database relating to the period when the car was outside the country. Evidence has shown that the incidence of fraud on imported vehicles is much higher (over 10%) than the above-quoted figure. On the other hand, research carried out in cooperation with the French authorities has shown that high mileage Belgian vehicles are being exported. In 40% of cases, the odometer had been tampered with. The only solution is a European approach that facilitates the exchange of mileage recordings between the Member States. 13

14 02 Car-Pass Article For this reason, the Belgian Presidency of the European Union will host an international conference on mileage fraud in Brussels on 18 November The purpose of this one day event is to exchange views among all stakeholders (including leasing companies) and share best practices in the fight against mileage fraud within the European Union. At the conference, the results of an assessment on the economic impact of mileage fraud will be presented in detail. Participants will be invited to reflect together with the European Commission on ways of dealing with this problem more efficiently and effectively in the future. The leasing and rental industry is most welcome to attend, and participate in, this conference. More information is available at Screenshots of cars2010 website 14

15 02 Sagora Article Sagora Do Leasing Companies Rely on Appropriate Risk Taxonomy? Lesson for fraud management Article by: Mathias Schmit CEO Sagora Lease and Risk Management Brussels, Belgium Although it was supposed to be well defined by the Basel Committee, risk delimitation remains a puzzle for a financial institution. Indeed, one main problem is the definition of the boundaries between the types of risk and their interactions. In that respect, the current taxonomy proposed by the Basel Accord suffers from shortcomings. Indeed, in paragraph 452 (BCBS, 2006a), the definition of default with regard to a particular obligor should rely on two types of events: unlikeliness to pay and past due status for more than 90 days on a material credit obligation. The result of a strict application of the definition is that the treatment of such an exposure is automatically treated as a credit risk exposure whatever the cause is. This The view of one company shortcoming is reinforced by paragraph 673 of the Basel Accord which states: under AMA operational risk losses related to credit risk have been historically included in banks credit risk databases (e.g. fraud) and will continue to be considered as credit risk for the purpose of calculating minimum regulatory capital even if they should be flagged separately within the bank s internal operational database. Such losses will not be subject to the operational risk capital charge. flagged in the credit risk database because the counterparties have an overdue of 90 days. They are primarily viewed as credit risk events instead of being registered as operational risk events even if they relate to operational risk like fraud. Many examples in the leasing industry can be found of incorrectly classifying events as either a market or a credit risk because of the exposure it creates, although their origins are operational, and thus sometimes due to fraud (internal or external). For instance, disputes on the exercise of guarantees can induce a higher level of Loss Given Default and thus credit risk exposures, although the cause can be operational resulting sometimes from fraudulent behaviour. Figure 1: From an event to a cause-effect driven approach Classification Source Causes Classification Credit People Cause 1 Credit Source People Moreover, including data regarding losses due to operational factors (e.g. fraud, mismanagement of collateral) in a database to build a credit risk model can bias its results and as a consequence adversely affect its performance. Ultimately, it may lead to a disregard of adequate corrective actions to mitigate the risk. This can be the case for instance when the credit procedures are misused or not respected, which may generate excessive losses and blindness towards fraud. These losses are EVENT Operational Market Other Process System External EVENT e.g. Default Fraud Cause i... Cause n Operational Market Other Process System External 15

16 02 Sagora Article As illustrated in figure 1, there is definitely a case for lessors, therefore, to develop an up-to-date risk taxonomy, based on a causality methodology, to distinguish among different types of risks and thus determine at which level of the leasing company fraud should be tackled. The implementation of such a framework by lessors would help them to prevent the use of unsuitable risk assessment and management methods that are based exclusively on the classification of events (effects) with the danger of taking into consideration neither the causes nor the possible misalignment between resources to mitigate risks and their sources. To deal with fraud as other operational risks, it is essential to use a sound and consistent approach to identify and categorise risk exposures in order to establish an integrated framework to risk management. Moreover, a meaningful data structure allowing analysis of the causes and effects of risk exposures should prevent financial institutions from generating inefficiencies. To sum up, in light of daily observations and our comments, lessors should develop a risk taxonomy based on a cause-effect approach to distinguish the different kinds of risk in order to prevent inconsistencies arising due to the fact that losses are currently grouped by events (effects) without considering their causes. Reference: Ayadi, R., Nieto, M., Musch, F. & Schmit, M. (2008). Basel II Implementation: In the Midst of Turbulence. Center for European Studies, pages

17 03 Croatia Adnet Protecting the Leasing Business from External Fraud Article by: Joe Erl Manager Adnet Zagreb, Croatia As long as the music is playing, you ve got to get up and dance Chuck Prince, ex-citigroup. Alas! Accidents happen even to the best of dancers, especially when the dance floor is crowded. We only know how much fraud we have found - we don t know how much we haven t found. I am unaware of independent statistics which would indicate that there has been a significant rise in cases of external fraud in the European leasing industry but a Google search on 24 April returned pages for +leasing +fraud. Just merely informally admitting cases of fraud may have a reputational impact and, The view of one company perhaps, even attract fraudsters keen on easy prey. The industry needs a confidential service that would enable the sharing of best practices in fraud prevention, fraud indicators and, when legal, the hard data. This would in turn help the participants to spot emerging patterns and, sometimes, the culprits. In the meantime, obstacles to the effective detection and prevention of fraud exist. Such obstacles include the facts that: By and large, internal auditors and operational risk managers are ill equipped to combat fraud. Unfortunately, the external auditors are mostly interested in financial statements, but for operational leasing 1 they should check inventories and the existance of fixed assets. Regulators 2 are waking up to the problem of fraud but, for example, in South East Europe regulation is still being developed. Not surprisingly, effective fraud prevention policies are rare. Sometimes, there is a blurring between fraud and credit risk thus blunting the fight against fraud (whilst unnecessarily distorting credit risk measurement). As such we need to: 1- Include detected fraud events under credit risk where appropriate so that risk provisions can be made. 2- Include detected extreme fraud events in operational risk modelling where appropriate thus increasing oprisk capital. 3- Make sure that fraud events generally are not included in both credit and operational risk categories. Specifically, fraud events should be separated out from credit risk defaults. There is the thorny issue of Data Quality. If DQ is poor, then it is easier to commit fraud. Once a fraud has been committed, the same poor DQ makes it hard to detect it. 1. Before Christmas we read about a Financial Institution where 400 financed yachts have gone missing. How did they ever allow the number of missing yachts to go above, say, 40; a correlation should have been clear by then - the object being financed? But there may already have been other correlations: the port from which they are disappearing, the make of yachts, the supplier, the approver? All this could have been found ages ago. The process for funding yachts could have been changed there and then. 2, For example, the German KWG (Banking Act) requires Banks to operate appropriate computer systems and update means by which they are able to identify relationships and individual transactions... of money laundering, terrorist financing and fraud... Credit institutions shall collect personal data, process and utilize it, to the extent necessary to fulfil this duty. Easier said than done! 17

18 03 Adnet Article Too much emphasis is put on data collection, too little on collaborative, crossprocess evaluation and decision making. Too much effort is devoted to common theft, too little to business survival 3. Serious fraud or money laundering is invariably committed by a network 4, often large, of loosely connected fraudsters, and only very seldom by a single fraudster. In an audit or investigation, missing or misleading network information is the norm, rather than the exception. Thus, whilst some of the criminal network connections could be apparent, the totality of the network may remain obscure, as much as the main purpose, repeated patterns and illegal financial gains. In general, there is very little automation. Yet, identity matching, if implemented, could link 5 the apparently unrelated network parts and/or improve the DQ. We need the abilty to visualise and query that network. But visual research is far more than a depiction of data: it is the process of analytical reasoning facilitated by judicious visualisation. The criminal network can change purpose frequently to increase profitability and security in the future, or there can be several purposes at any one time. The concept of business agility seems to have been invented by the fraudsters (no offense intended for those who coined the phrase). Continuous auditing and monitoring are often lacking. To go at least some way to the stated goal of sharing best prevention practices and fraud indicators, here are some recent examples from our library of 300 fraud indicators: 1- The amount of financing is significantly higher than the contract value agreed between the supplier and lessee; the appraiser faked documents and pocketed the difference. 2- The appraiser is connected to the lessee, supplier or professionals, eg. architects. 3- The appraiser has been consulted at the very end i.e. just before the approval had to be made, and therefore had insufficient time for a thorough appraisal. 4- The lessee is connected to the supplier or professionals, for example the financed object has never been delivered. 5- Supplier behaviour is not in line with an institution s expectations (invoices with incorrect financed object types, or incorrect number of objects). 6- Lessees are considered unconnected but provide collateral to each other, even if the connection is just the bill of exchange or guarantee of one client to the other. 7- Apparently unconnected lessees sharing the same or similar address, or sharing other similarities. 8- Lessee accounts manipulation e.g. steep rises in sales or purchase orders, especially near the reporting year-end. 9- Attempts to avoid higher approval levels by splitting the financing into several contracts, or by regions (branches), to connected lessees, between sister institutions. 10- Real estate differs significantly in value from other real estate in the same area. 11- Checking of the application may have been limited as the fraudster may have been a legitimate customer for some years and had other (legitimate) leases that have been kept within their contractual terms. 12- Lessee is in delay and lease approval is made to the new lessee to close the existing lease, but for the same real estate and the valuation is significantly increased. 13- Collateral is being sold to a 3 rd party without an institution s permission. 14- A lessee s company is sold with the financed object included in the sale; the new owners and the financed object missing. 15- Lessee transfers his company s assets to a new, albeit related, company. This further convolutes the leasing transaction leading to a legal tangle that will take years to resolve. 16- Collateral not linked to any contract (probably an error, increases risk measurements such as RWA (Risk Weighted Asset) and is an opportunity for fraud). We once detected 800Mio of such collateral in a single institution. 17- Making lease payments with dirty money. Conclusion Combating fraud should be a team effort involving internal and external audit, risk managers and regulators. Perhaps the regulators are best placed to facilitate knowledge, data sharing and analytical reasoning. For more information visit: 3. In a Scandinavia institution 92% of losses came from 15% of fraudulent contracts. Similarly, for a South East Europe institution 37% of losses materialised on less than 0.1% of fraud cases. 4.When one peer in the network is deviant, the other peers become increasingly deviant [Hengler]; yet the tradition in psychology has assumed that individuals act in a social vacuum [Traub&Little]. 5. On the diagram below we see that, in spite of suspicions due to numerous similarities, the two main characters in a fraud case are not the same person. However, they are very well connected through a large and complex network: Mate Perkov Born 1955 Flip-Jakov near Biograd Pero Matkov Born 1956 Biograd 18

19 04 Czech Republic The Czech Leasing and Finance Association Capital city Prague Population 1 10,506,813 GDP 2 in millions of US dollars 215, estimate 2 Source: World Development Indicators database, World Bank,

20 04 Czech Republic The Czech Leasing and Finance Association Interview with The Czech Leasing and Finance Association Name of association The Czech Leasing and Finance Association Objectives of association Our objectives are to define, coordinate and implement common aims of member companies to ethical standards in non-banking sectors of the financial market, to disseminate respective information and positions and to provide for respective analyses. Members of association Our members are non-banking providers of leasing, consumer credit and factoring products. Why did your association decide to work on the fight against fraud? Fighting fraud and financial crime is a necessary pre-condition for the sound and successful development of our financial market. Our association decided that as one of the means to successfully fight fraud and financial crime we would coordinate the respective efforts of our member companies, to create necessary ties with state authorities and contribute to effectively raising awareness of the fraud issue. What are the most common types of fraud encountered by the leasing (and/or short term vehicle rental) industry in your country? The most commonly encountered frauds in our country include indentity theft/fake ID s, forged documentation, double leasing of the same asset and non-authorised sales of leased assets by lessees. Please describe the concrete action that your association has taken in the fight against fraud: Our association has taken numerous initiatives including: initiatives aimed at the creation of legal conditions suitable for enabling providers of financial services to combat fraud administration of an early-warning system of frauds against member companies immediate exchange of information on financial crime with the police education of police on the particulars of financial products support of non-state registers of bad clients seminars for members aimed at anti-money laundering 20

21 04 Czech Republic The Czech Leasing and Finance Association Does your association s initiative in the fight against fraud have a name? Although no specific name exists, our project can be categorized by early-warning s by the Secretariat. What are the objectives of your association s initiative Our main objectives are awareness raising, creating links with government and ensuring a sound financial market. What types of fraud does your association s initiative aim to prevent? Our project aims to prevent identity theft, forged documents, double leasing and non-authorized asset sales. Who participates in your association s initiative All the CLFA member companies participate in our project. What is the working method of your association s initiative The Board of the CLFA is in charge of strategy i.e. stating general aims and means in the field of fighting fraud. The Legal Committee of the CLFA is authorized to consider initiatives of the CLFA towards the police, the Ministry of Interior, Ministry of Finance (for anti-money laundering) and the Ministry of Justice as well as to consider the experience of our members in fighting financial criminality. Other expert committees exchange information on fraud in their fields of activities. The Secretariat of the CLFA is responsible for implementing respective measures. If not already done, please describe the role that your association/your members play in your association s initiative in the fight against fraud: Most members share their information and/or experiences concerning fraud, financial crime and money laundering through the Secretariat of CLFA. Did you experience any obstacles when setting up your initiative Data protection has proved problematic for our work. Notably, due to restrictions on the use of data, work on a CLFA register of physical entities involved in fraud had to be stopped. Also with regard to data protection, we needed to ensure that the data collected was of the highest accuracy. Contact information: Jiri Pulz Secretary-General Czech Leasing and Finance Association clfa@clfa.cz Are any third parties involved in your association s initiative Third parties are involved in our project. State authorities are kept informed of work carried out and there is also an exchange of information with some interest groupings active in the financial market, such as the Czech Banking Association and the Association of Insurance Companies. How is your association s initiative in the fight against fraud financed? Our initiative is financed in the framework of the CLFA s budget. What results have been achieved so far by the initiative taken by your association Our project has increased awareness of the fraud issue at governmental level. Respective state authorities have been informed of the facts and concrete experiences gained from the respective activities of the CLFA in our fight against fraud. 21

22 05 Denmark Finans og Leasing Estonian Leasing Association Capital city Copenhagen Population 1 5,534,738 GDP 2 in millions of US dollars 341, estimate 2 Source: World Development Indicators database, World Bank,

23 05 Denmark Finans og Leasing Finance and Leasing The Association of Danish Finance Houses Interview with Finans og Leasing Name of association Finans og Leasing Objectives of association We represent our members vis à vis national regulators/other bodies and work to promote the leasing, lending and factoring business in Denmark. Members of association Finans og Leasing (Finance and Leasing, the Association of Danish Finance Houses) consists of members with corporate activity within leasing, lending and factoring. The majority of the members are companies wholly or partly in the leasing business. Why did your association decide to work on the fight against fraud? Our association decided to work on the fight against fraud because of the recent boom in fraud instances arising out of the financial crisis. We felt that it was important in this context to be able to warn about fraudsters and suspicious behaviors. What are the most common types of fraud encountered by the leasing (and/or short term vehicle rental) industry in your country? In Denmark, the most common frauds affecting leasing companies are B2B. Particularly problematic is the financing of an item that does not exist; the financing of an item through more than one leasing company; or the unauthorized sale of a lessor s asset. Please describe the concrete action that your association has taken in the fight against fraud: Does your association s initiative in the fight against fraud have a name? Our project is still to be named. What are the objectives of your association s initiative The main objective is to enable leasing companies to avoid becoming victims of fraud. Additionally, we want to make criminals aware that they will be put under the spotlight if they commit fraud against one of our members. We also aim to better protect our members against fraud by making them aware about fraudsters and their activities. 23

24 05 Denmark Finans og Leasing What types of fraud does your association s initiative aim to prevent? Our initiative aims to prevent asset theft, identity fraud and phantom leasing. Who participates in your association s initiative Finans og Leasing leasing companies (for the time being we intend to make the system for members only) participate in our initiative. What is the working method of your association s initiative Our initiative operates through Finans og Leasing. Our project is also run in conjunction with industry experts nominated by our member companies. We also work with external organisations active in fighting fraud such as the credit bureau Experian. Are any third parties involved in your association s initiative No other third parties currently are involved in our project. However, in the future, we may involve the police and also insurance companies. How is your association s initiative in the fight against fraud financed? Our members finance our initiative. What results have been achieved so far by the initiative taken by your association It is too early to identify any concrete results as of yet because we are still in the process of setting up our initiative. However we will be closely monitoring the project over the coming months in order to assess its impact. Did you experience any obstacles when setting up your initiative Although it is too early to answer the question in detail, we have had to limit the participants in our initiative to our member companies only due to data protection legislation. Contact information: Christian Brandt CEO Finans og Leasing chb@finansogleasing.dk 24

25 06 Estonia Estonian Leasing Association Capital city Tallinn Population 1 1,340,021 GDP 2 in millions of US dollars 23, estimate 2 Source: World Development Indicators database, World Bank,

26 06 Estonia Estonian Leasing Association EESTI LIISINGÜHINGUTE LIIT Interview with Estonian Leasing Association Name of association Estonian Leasing Association Objectives of association To represent the interests of our members when communicating with the municipal and state authorities To develop relationships between our members and to analyse the leasing market To plan training and advanced training for the employees of member companies To participate in the development of leasing legislation as well as to assist lawmakers with professional suggestions To communicate with the public and media To communicate with Leaseurope, Eurofinance, Europafactoring etc. Members of association Leasing companies form the core of our membership covering over 95% of the total volume of the leasing market in Estonia. Why did your association decide to work on the fight against fraud? Fraud is a problem for the leasing companies in our membership and it was felt that our association is the only possible institution able to protect the mutual interests of all of our members. What are the most common types of fraud encountered by the leasing (and/or short term vehicle rental) industry in your country? Both B2C and B2B transactions have been abused by fraudsters. Regarding cars, there have been several occasions when a car, owned by an Estonian leasing company or bank, has been registered to a foreign person or company by a foreign car registration bureau (regardless of the fact that the person or company has no right to do this as they neither have the necessary proxy nor an original document to prove a purchase or ownership). If the above described situation occurs and a car is registered, then that kind of action concludes with the fact that all relevant legal ownership information from the Estonian Automobile Register (ARK) will be deleted under the so-called EUROINFO basis registration category. Unfortunately, the knowledge of such an action only reaches the vehicle owner (i.e. the leasing company) after a 2 month delay. We are aware that the minimum requirements for these procedures are fixed with Directive 1999/32 art.5, which should be changed as soon as possible to prevent this delay from occurring. 26

27 06 Estonia Estonian Leasing Association Regarding machinery (forestry, construction) fraud and also yellow goods related frauds, it is difficult to recover our assets once they have been stolen as the stolen assets are often concealed by fraudsters. An additional difficulty is that if we cannot prove that profits are made with those assets then it is very difficult to start a criminal action as the fraud will be classified as civil fraud. Please describe the concrete action that your association has taken in the fight against fraud: Does your association s initiative in the fight against fraud have a name? No, our project does not have a specific name. What are the objectives of your association s initiative The objectives of our project are clear: to prevent and minimize fraud. What types of fraud does your association s initiative aim to prevent? Our project concentrates on preventing asset theft. Who participates in your association s initiative Lessors, officials from state institutions, car and machinery dealers all participate in our association s project. What is the working method of your association s initiative The Estonian leasing association runs and coordinates the project. There are no specialist staff members involved. We get our expertise from a pool of experts based within the leasing companies that we represent. Are any third parties involved in your association s initiative Third parties are very much involved in our project. Police, judiciary, insurers, government officials, the Estonian prosecutor s office and the Estonian car registration bureau (to name but a few) are all involved to a certain extent with our projects. part of the action plan of the association and is therefore included in our budget. What results have been achieved so far by the initiative taken by your association No statistics are available as of yet but achievements have been made such as the strengthening of relationships with our project s third parties (mentioned above) and raising awareness of specific types of fraud such as yellow goods related frauds. Did you experience any obstacles when setting up your initiative No obstacles were encountered. Do you have any further comments on your association s initiative At the moment we use the SIS and EUCARIS system to facilitate fraud detection. A further development is that the Estonian Automobile Register has put a sales prevention mark on leased cars to prevent unauthorised sales but this is not recognised in every jurisdiction. As such we believe that Leaseurope could play a future role in accelerating the process of forming a unified car register system that covers all EU Member States. Contact information: Reet Hääl Managing Director Estonian Leasing Association liising@liisingliit.ee How is your association s initiative in the fight against fraud financed? Our initiative is financed by our association. This is because the initiative is 27

28 07 Finland The Federation of Finnish Financial Services Capital city Helsinki Population 1 5,356,358 GDP 2 in millions of US dollars 272, estimate 2 Source: World Development Indicators database, World Bank,

29 07 Finland The Federation of Finnish Financial Services Interview with The Federation of Finnish Financial Services Name of association The Federation of the Finnish Financial Services Objectives of association FFFS is a trade body that represents its member companies who engage in the financial services industry in Finland. The objective is to secure a benign operating environment, well-functioning financial markets and effective payment systems for the industry as well as to support new opportunities offered to member companies in the future. Members of association FFFS represents banks, insurers, securities dealers, fund management companies as well as finance/leasing companies. Why did your association decide to work on the fight against fraud? There already was a long tradition for a specific security unit in banking and insurance associations before the foundation of the FFFS in Our member companies find this kind of co-operation useful and important. What are the most common types of fraud encountered by the leasing (and/or short term vehicle rental) industry in your country? We have no exact statistics on this but fraud cases are mostly related to car theft and attempts to transfer stolen vehicles abroad, fraudulent insurance claims, attempts to get money from the finance company to finance assets that do not exist and money laundering. Leasing in Finland is mostly B2B while hire purchase is mainly B2C. Please describe the concrete action that your association has taken in the fight against fraud: Does your association s initiative in the fight against fraud have a name? We have no specific project name but in most cases, FFFS Loss Prevention and Security Unit carry out operative work on a daily basis (see below). What are the objectives of your association s initiative Our objective is to carry out prevention work and enhance co-operation with members and various stakeholders in the fight against fraud. 29

30 07 Finland The Federation of Finnish Financial Services What types of fraud does your association s initiative aim to prevent? Concerning leasing/finance companies, we aim to prevent vehicle crime, insurance fraud, asset fraud and money laundering. Who participates in your association s initiative Leasing/finance companies have their own Security and AML working groups within the FFFS. FFFS represents the whole financial sector in Finland, i.e. the banks, insurance companies and leasing/finance companies which gives synergy and operational benefits to ongoing co-operation. What is the working method of your association s initiative The work is carried out by the FFFS, whose Loss Prevention and Security Unit offers a secretariat to its various working groups and committees. FFFS gets the project expertise through its dedicated unit (mentioned above) that consists of FFFS staff and company experts. Are any third parties involved in your association s initiative Insurance companies, banks and finance companies have joint meetings (in addition to their own working groups) within the FFFS to address issues of common interest. Representatives from police authorities are also members of certain FFFS security working groups. How is your association s initiative in the fight against fraud financed? Work is financed via membership fees to the FFFS. What results have been achieved so far by the initiative taken by your association Co-operation in its various forms has prevented/decreased losses to member companies. We have also issued an initiative to endorse MoU s with police authorities in the area of crime prevention (incl. fraud). Did you experience any obstacles when setting up your initiative Finnish data protection legislation sets certain limits on preventive actions (exchange of information etc.) in the fight against fraud that we must adhere to. This impacts upon our ability to fight against fraud. Contact information: Risto Karhunen Head of loss prevention and security Federation of the Finnish Financial Services risto.karhunen@fkl.fi 30