Compliance is a major concern for auto dealers for a reason, and that reason is the bottom line. A dealership risks losing money in two ways if regular compliance policies aren’t established and followed:




On the one hand, there is the alarmingly rising danger of fraud. Auto loan fraud climbed 260% year over year in 2021, according to Point Predictive’s 2022 Auto Fraud Trends Report. False or phony employment, income, and identification information were fraudulently entered into those buyers’ loan applications, and these inputs were frequently merged to produce a synthetic identity unrelated to a single, genuine person.


One reason identity verification is such a crucial compliance step is because of this. It enables the dealership to verify that the buyer is who they say they are before that individual has the chance to take ownership of a vehicle under false pretenses, in addition to assisting the dealership in complying with the OFAC checks and the FTC’s Red Flag Rule.


Penalties and Fines


OFAC is a prime illustration of the second way that non-compliance can be expensive because doing so can result in severe fines and penalties on both a criminal and civil level. The Office of Foreign Asset Controls, better known by its acronym OFAC, mandates that auto dealers check potential buyers against its list of Specially Designated Nationals and Blocked Persons (SDN) to make sure they aren’t connected to any unlawful activity. Any person on the list is not allowed to make a transaction.


The Trading with the Enemy Act (TWEA), the International Emergency Economic Powers Act (IEEPA), the Antiterrorism and Effective Death Penalty Act (AEDPA), the Foreign Narcotics Kingpin Designation Act (FNKDA), and the Clean Diamond Trade Act (CDTA) are five laws that apply to violations of OFAC SDN rules. The civil penalty for violating each regulation ranges from tens of thousands of dollars to more than $1.5 million. (31 C.F.R., App. A, 501).


Depending on whatever rule was broken, each regulation carries criminal penalties for knowing violations that can result in ten years or more in prison and further fines for the dealership of up to $10 million.


Although OFAC is an extreme example, all of the laws that a dealership’s compliance program handles have sanctions attached to them. The following are some maximums for possible dealership infractions in 2022:


Up to $4,111 per knowing breach of the Red Flags Rule and Risk-Based Pricing Rule

Up to $43,792 per instance for privacy notices and adverse action notices

For a list of the 2023 penalties, download the SimpSocial Compliance Guide and consult the Guide to Penalties (beginning on page 192). To utilize the handbook as a helpful compliance reference throughout the year, keep it on hand.


Do you need assistance ensuring that your dealership maintains compliance? To assist you in maintaining compliance on every deal, SimpSocial Compliance has integrated checkpoints and monitoring from leads through contracts.

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