While You're Focused on FINTRAC… Don't Forget the Other "F-Word"

There's a lot of attention right now from the automotive industry on Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)—and for good reason. On April 1, 2025, amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) brought financing and leasing companies—including automotive leasing entities—into scope as Reporting Entities.

With the April 1, 2026 enforcement deadline approaching, automotive finance and leasing businesses across Canada have been working to understand their obligations, build compliance programs, and ensure they're ready for the new regulations. It's a difficult, but necessary shift for the industry, and one that has many business teams deep in policy development, training, and interpretation.

But in the middle of that work, there's something that shouldn't be overlooked: while FINTRAC is important, the other "f-word" (fraud) isn't waiting.

Fraud doesn't operate on regulatory timelines. It doesn't pause while organizations get their compliance frameworks in place. If anything, it thrives in moments like this—when attention is diverted, priorities are split, and processes are in transition. The idea that a dealership might be "too busy with FINTRAC" to focus on fraud is exactly the kind of gap that bad actors exploit.

Canadian data reflects this reality. According to the Canadian Anti-Fraud Centre, reported fraud losses reached approximately $638 million in 2024, increasing again to roughly $704 million in 2025. These figures are widely understood to represent only a fraction of the true impact, with most fraud going unreported. What's more telling is that identity-related fraud—both stolen and synthetic—now accounts for the largest share of cases.

This trend is particularly relevant to the automotive lease and finance sector. Recent insights from TransUnion Canada reinforce that identity-based fraud—especially synthetic identity—is now one of the fastest-growing drivers of financial losses for businesses, accounting for a significant and increasing share of overall fraud exposure. Fraud is increasingly concentrated at key moments such as application and account creation, which are precisely the points at which auto lending decisions are made.

Layered onto this is a broader industry shift. Insights from the Canadian Lenders Association point to a sharp rise in auto finance fraud, while data from TransUnion Canada shows synthetic identity fraud now accounts for a growing share of losses—highlighting both increasing volume and severity, driven largely by falsified application data rather than obvious identity theft. Even a small percentage of fraudulent applications translates into thousands of compromised transactions across the market.

Even worse, and one of the more concerning developments is not the use of fake identities, but the use of real ones. Increasingly, lenders are seeing what is often referred to as first-party fraud—where real individuals use their legitimate identity to obtain financing with no intention of repayment. In more sophisticated cases, this evolves into what is commonly known as a "bust-out." A borrower builds or leverages a seemingly legitimate credit profile, secures financing, and then deliberately defaults. And these typically occur on an organized basis at scale.

What makes this particularly challenging is that these applications often look entirely credible. The identification is valid, the credit file exists, and the application may pass all traditional checks. In some cases, there is even initial repayment activity before the loan ultimately defaults. The risk is not in the authenticity of the identity, but in the intent (or lack thereof) behind it.

There is also a growing connection between these types of cases and organized criminal activity. Reporting from the RCMP and industry analysis has highlighted schemes where individuals are recruited to obtain financing using their real identities, purchase vehicles, and then quickly transfer or export those vehicles. In some instances, the individual leaves the country shortly afterward, making recovery efforts difficult or impossible. For lenders, this creates a high-severity loss scenario: a legitimate borrower on paper, a fully funded asset, and limited recourse once the vehicle is gone.

Inside the dealership environment, this risk is often difficult to detect. Fraud does not always present as obviously fraudulent. Applicants may appear credible, documentation is real, and nothing immediately signals concern. By the time a deal reaches the finance and insurance office, there is already strong momentum for a deal—both the salesperson and the customer are by this point very aligned toward completing the deal; one of them is going to win, and it isn't the salesperson.

There is a natural tendency to rely on downstream controls, assuming that verification at the point of funding or lender review will identify issues. But in the case of bust-out fraud, there may be nothing to detect at that point. The application is valid, the approval is justified, and the documentation is consistent. The vulnerability lies in something far less visible: intent.

This is where the connection between fraud and compliance becomes important. FINTRAC regulations are designed to identify and report suspicious financial activity, particularly related to money laundering and terrorist financing. Fraud is often the mechanism that enables that activity. Vehicles acquired through legitimate financing channels can quickly become assets used in broader financial crime, particularly when they are resold or moved across borders. Treating fraud and compliance as separate efforts creates gaps; aligning them strengthens both.

At the same time, the nature of fraud continues to evolve. Advances in technology have made it easier to produce convincing documentation and manipulate identity data. The growth of remote and non-face-to-face transactions has added another layer of complexity, increasing reliance on digital identity verification at the earliest stages of the customer journey. As dealerships expand online and hybrid sales models, the effectiveness of these controls becomes increasingly important.

The impact of fraud extends beyond direct financial loss. It contributes to increased charge-offs and repossessions, distorts credit risk assessment, and drives higher operational costs through additional verification and investigation. It also introduces reputational and regulatory considerations, particularly where consumer harm or data misuse is involved.

Against this backdrop, the current focus on FINTRAC presents an opportunity for the automotive industry. As organizations formalize their compliance frameworks, they are also in a position to strengthen how they approach fraud. This includes: (1) rethinking where identity verification occurs, (2) applying greater scrutiny to higher-risk transaction types, and (3) ensuring that frontline teams understand how modern fraud presents in practice, and equipping them with the right tools and technology to mitigate fraud risks.

Ultimately, the objective is not simply to approve transactions, but to approve legitimate ones. That distinction becomes more important as fraud becomes more sophisticated and less visible through traditional checks.

The April 1 FINTRAC deadline will come and go. Compliance frameworks will be implemented, and regulatory expectations will be met. But fraud will continue to evolve, adapting to the same systems and processes designed to manage it.

As you cross the FINTRAC finish line, don't just ask if you're compliant—ask if you're protected. Look closely at where identity is verified in your process, how you're handling remote transactions, and whether your teams are equipped to spot what modern fraud actually looks like.

Because the goal isn't just to meet the new regulations.

It's about stopping the other "f-word": fraud.

Transparency Note: My original insights and data were organized for clarity with the help of AI.

— Anne-Marie Kelly