Informant Vol 10 No 2 - 2013 Spring - National White Collar Crime ...

The Salvage Automobile and the White CollarCrime ConnectionBy Howard Nusbaum, National Salvage Vehicle Reporting Program AdministratorUsed and salvaged vehicles are underappreciatedfor their capacity to serve as instruments forcriminal enterprises. Sales of these vehicles allowfor transferring large sums of money, yet require onlya very small footprint that is hard to trace. The businessof salvage vehicles has historically been poorly regulatedand monitored. Increasingly, transactions take place overthe Internet and on a global scale, making use of brokers,agents and fictitious entities to mask identities of the partiesengaged in the commerce.Improper titling, brandingand corruption in thesalvage car business createsan environment in which itis easy for criminals to exploitthis multi-billion-dollarmarket. Illicit ventures rangefrom consumer fraud anddomestic organized crimeto international organizedcrime and trade-based moneylaundering.Traditional vehicle monitoringfocuses on the theft,recovery and identificationof the vehicles, rather thanon trade-based money launderingand the identificationof the parties engagedin salvage vehicle auction fraud. A new course offered byNW3C educates law enforcement professionals about howto identify and fight this type of crime.Online auctions allow criminals to easily purchase carsand use titles and VIN numbers on stolen vehicles thatmatch the make of the salvaged car.What is online auto salvage fraud?When a wrecked, flooded or otherwise damaged vehicleis deemed a total loss by an insurance company, thecompany determines that it is more economical, to theinsurer, to pay off the claim (less the deductible) and sellthe vehicle in its unrepaired state. The next decision comeswhen the insurance company disposes of the vehicle. Inmost cases, insurance companies sell the vehicles theyhave acquired through total loss pay-offs at salvage autoauctions.Salvage auto auctions sell approximately 3.5 millionvehicles each year in the United States. Insurance companiesprovide approximately 80 percent of the vehicles soldat auction, but the salvage auctions also acquire vehiclesfrom banks and financial institutions, charities, car dealerships,fleet operators, vehicle rental companies and privateparties. Increasingly, these salvage auctions are doing theirbusiness online.Salvage vehicles have value beyond the sum of theirreusable parts when they can be sold with unbranded –or “clean” – titles or with “underbranded” titles that allowflood-damaged, badly burnt or otherwise significantlydamaged vehicles to be classifiedas repairable, meaningthey can legally be put backon the road.In some cases, unethicalintermediate buyers maypurchase these vehicles forresale. Because of the extentof the damage, bringing thevehicle back to safe operatingcondition is not profitableand resellers are likely tomake only minor repairs beforeoffering these extremelydamaged, and likely unsafe,vehicles for resale. In othercases, clean title and underbranded,badly damagedvehicles are purchased bycriminal groups for their paper work in order to “cover”subsequent thefts of other vehicles.The National Salvage Vehicle Reporting Program (NS-VRP), is a not-for-profit law enforcement support organizationdedicated to reducing auto theft, title fraud andabuse. NSVRP regularly monitors online auctions, trackingvehicles that are erroneously and sometimes illegallyoffered for sale with unbranded or clean titles, vehicleswhose titles are “skipped” when sellers avoid reporting requirementsillegally or through state and federal loopholesand vehicles whose titles are “washed” using interstatetransfers.NSVRP’s monitoring shows that underbranding resultingfrom improper and, in some cases, fraudulent initialassessment of the extent of the damage by insurers andother owners, who offer these badly damaged cars for sale,14INFORMANT: SPRING/SUMMER 2013