Attack of the Clones

Insurance carriers can be victimized twice when criminals “clone” a vehicle identification number (VIN): once when a vehicle is stolen and again with a cloned VIN, if both owners make claims.

Although there appears to be no tool specifically designed to detect such a crime, experts suggest risk to consumers and their auto insurers can be reduced if prospective buyers check the histories of vehicles, especially when buying through online advertising services.

A VIN is a series of 17 letters and numbers that identifies each individual vehicle in North America and is placed on the dashboard and other areas of a vehicle, notes information from Insurance Bureau of Canada (IBC). A criminal may take a VIN “from a wrecked vehicle and place it on a stolen vehicle to mask its identity.”

Some criminals also “look into the windshield of a car, copy the VIN number from the dashboard and reprint that number on an engine and clone that VIN,” reports Mario Silvestre, vice president of analytics and operations at Canadian National Insurance Crime Services (CANATICS), a non-profit organization that uses data analytics tools to identify suspicious claims and facilitate investigations by insurance companies.

By cloning an existing vehicle’s VIN, “a criminal may be able to sell a vehicle that was stolen or has serious hidden damage,” IBC notes. “An unsuspecting consumer who purchases a stolen vehicle may have it permanently seized by the police.”

INVENTIVE FRAUDSTERS

VIN cloning is “one of the main ways that thieves are changing the identity of the vehicles in order to sell them or ship them out” of Canada, says Constable Matt Pelissier of the commercial auto crime bureau at Peel Regional Police, whose jurisdiction includes the cities of Brampton and Mississauga, west of Toronto. Pelissier’s duties include identifying re-VINed vehicles.

The Royal Canadian Mounted Police does not keep nation-wide statistics on the extent of the problem, although Statistics Canada notes in a paper that was published last July that the total rate of police-reported vehicle theft in the country dropped about 62% from 2003 to 2013.

“From a size and scope perspective, it’s pretty hard to get a handle as to how big of a problem it is right across the country,” Garry Robertson, national director of investigations at IBC, says of VIN cloning.

But police in Canada “are starting to see an increase in the number of vehicles being stolen and re-VINed as clones to legitimate vehicles or with false (VINs),” says Bob Lucas, a former police officer who is now an investigator for the Ontario Motor Vehicle Industry Council, which administers the provincial Motor Vehicle Dealers Act.

“The stronger American dollar and global market makes the sale of these vehicles more profitable,” Lucas points out. The Canadian dollar has dropped, from US$0.91 in April 2014 to US$0.82 in late April 2015, against the U.S. dollar.

“On a domestic level, we’ll soon see a greater demand for our vehicles by American consumers as a result of the savings created by the buying power of their currency,” Lucas predicts.

Robertson agrees the lower Canadian dollar is a factor. In the past, he suggests stolen motorcycles were having cloned VINs installed “and then put back on the road and sold through Kijiji” and other similar online advertising services.

TOUGH TO PINPOINT

“Today in the industry, there is really no tool that is specifically designed to prevent or catch VIN cloning,” reports Silvestre, adding that a vehicle with a cloned VIN could be sold to an unsuspecting victim.

“That person insures the vehicle and pays the premium for it,” he says. “This is really a sophisticated crime.”

An insurer must respond to a claim if the vehicle owner “shows they bought the vehicle in good faith,” such as having paperwork confirming the purchase and showing that they paid fair market value, explains Kevin McConkey, director of casualty claims at Allstate Insurance Company of Canada.

“All the innocent parties are the victims,” of VIN cloning, McConkey warns.

“This could be multiple parties, including the person who’s VIN got stolen, the person who bought the car with the cloned VIN and the insurance company. Sometimes other parties are involved, too – like car dealerships that can get in the middle of car sales,” he says.

Pelissier notes that, in many cases, consumers are not aware that they are buying cloned vehicles. “Maybe they are getting a bit of a deal,” he says of consumers who buy vehicles with false VIN plates.

“Obviously, in some cases, they have some knowledge that there’s something up with the vehicle,” Pelissier adds.

Insurance companies are affected by VIN cloning “when they become involved in the fraud and have to pay out on claims,” notes McConkey. “Sometimes, insurers could even end up paying twice – once on the stolen car and then again on the car with the cloned VIN if both owners make a claim.”

STOLEN OR WORSE?

There are resources to help consumers. In Ontario, for example, the Ministry of Transportation (MTO) is notified by police when a vehicle is declared stolen. All transactions involving stolen vehicles are blocked on the ministry’s vehicle registration system database.

Consumers may only buy a used vehicle for on-road use if the status of the vehicle is either “rebuilt” or “none.” Vehicles that have been declared a total loss must be assigned a different brand – either “irrepairable” or “salvage” – by the insurer, owner, dealer, auto recycler, salvager or auctioneer.

VIN cloning is “an ongoing issue” in the Greater Toronto Area, says Pelissier, adding that he regularly works with police officers in the neighbouring jurisdictions of Toronto, York and Halton, as well as with IBC, insurance investigators, the Canada Border Services Agency and the MTO.

The Canadian Police Information Centre database lets consumers know if a VIN belongs to a vehicle that has been reported as stolen, Pelissier says, or consumers can also search databases such as Carfax and CarProof. “They are not all fool-proof, but they are of assistance,” he suggests.

In addition, Robertson advises that consumers can use VIN history checks to look for suspicious patterns.

“Especially if you are going through an online auction or something like Kijiji or eBay or anything like that, look at the VIN number and see if there is a history to it,” he recommends. “Especially if the history is out of province, or particularly out of country, then that should make the person look a little bit further at it, and the same holds true with the insurers when they are looking at the underwriting. What’s the history on that vehicle? Do we have a consistent history in Ontario?”

Vehicle makers “are trying to improve VIN tags so they are more tamper-proof,” reports McConkey. “In addition, there are now tools like the National Motor Vehicle Title Information System, which is a registrar of VINs across the U.S.,” he says.

“It’s designed to keep stolen vehicles from being sold and help prevent title fraud. The problem right now is that it only includes U.S. VINs. However, there is talk about bringing Mexico and Canada on board as well to help prevent cross-border cloning,” he points out.

Lucas warns that “changes in the design and manufacturer of (VIN) plates, labels and placards and the advancement in computer technology make it very easy to reproduce public points of identification to mask the true identity of a stolen vehicle.”

The practice of VIN cloning is “getting more sophisticated,” McConkey suggests. “As the industry tries to come up with ways to combat VIN cloning – in hopes to make things better – the perpetrators figure out ways to get around our solutions.”

So, for now, “it is kind of buyer beware,” Pelissier cautions.

“A lot of times when we recover these vehicles, there is not sufficient information provided by the purchaser as to where they got the vehicle. They might
have a name and a cellphone number, they may have met in a parking lot somewhere, but there’s not a lot of information for us to follow it up if we don’t already have an active investigation targeting the sellers.”

Allstate Insurance recommends that consumers check the VIN history of cars before buying, even if they are brand new.

“If a deal seems too good to be true, it probably is,” suggests McConkey. “A consumer should never be pushed, or rushed into a car purchase. If the person selling the vehicle says, ‘the deal is only good today,’ then the buyer should walk away,” he advises.