Page 59 - GIADA-April-2018

FEATURE

Dealer Fines and How to Avoid Them

Compliance guru outlines the simple steps every dealer must take to avoid

violations of federal OFAC, Used Car, Red Flags, and IRS standards — and

the steep fines that accompany them.

By Gil Van Over, Executive Director of Automotive Compliance Education (ACE) & Founder and President of GVO3 & Associates

There are times when I overhear industry Used Car Rule: This rule has been around be out actively auditing businesses for
conference participants moan about a since 1967, yet many still struggle with compliance with the FinCEN 8300 report.
presentation they just attended. “All gloom, the proper disclosures — even with the
doom, and scare tactics, but no solutions.” recently revised Used Car Buyer’s Guide. Dealers may be subject to penalties if
Sometimes that speaker was me. This struggle is not necessarily from a they fail to file a correct and complete
willful desire to defraud a consumer, Form 8300 on time and cannot show that
Because of that, I made a New Year’s but rather a view that this is just one the failure was due to reasonable cause,
resolution to be certain I offer solutions more piece of paper to complete the deal according to the IRS. They may also be
when I point out a potential risk and jacket. Dealers who violate the rule may subject to penalties if they fail to furnish
liability. With that said, below are some of be subject to penalties of up to $40,654 a correct and complete statement to each
the federal regulations dealers are required per violation. person named in a required report in a
to comply with and the potential fines and timely manner.
jail time associated with each regulation. Solution: If a vendor is responsible for
Sticking with my New Year’s resolution, posting the guides, check the guides for “A minimum penalty of $25,000 may
I’ve also include best practices solutions to correctness. Whether posted by a vendor be imposed if the failure is due to an
hopefully avoid those penalties. or a lot porter, conduct regular lot walks intentional or willful disregard of the cash
to ensure a guide is prominently displayed reporting requirements,” the IRS notes.
Office of Foreign Assets Control (OFAC): on each used vehicle and demonstrator
This is the grand poobah of all potential available for sale. Solution: Train all managers on the various
fines. The OFAC is the agency within requirements under the 8300 reporting
the U.S. Treasury that compiles a list of Red Flags Rule: The latest attempt rule. Some dealers have purchased software
Specially Designated Nationals (SDN). at deputizing car dealers in the fight designed to sort through transactions in
All U.S. citizens are required to check the against identity theft has been the law the DMS to identify any potential filing
OFAC list of these suspected despots prior for a few years now. The Federal Trade requirement.
to entering into a business arrangement. Commission (FTC) can seek both
monetary civil penalties and injunctive The lesson here is it truly is all about the
Depending on the program, criminal relief for violations. Currently, the law processes. Dealers must have written
penalties can include fines ranging from sets $3,500 as the maximum civil penalty policies in place that lay out the steps for
$50,000 to $10 million and imprisonment per violation. And each instance in handling each compliance procedure. They
ranging from 10 to 30 years for willful which a company has violated the rule is must also periodically train all employees
violations. Civil penalties range from considered a separate violation. in the approved process. Finally, you must
$250,000 or twice the amount of each have checks and balances in place to be
underlying transaction to $1.075 million for Solution: Contract with your credit bureau sure your employees are properly following
each violation, according to the Treasury. provider’s automated Red Flags solution. the approved policies. These checks and
These offerings will alert the sales and balances include checklists and a monthly
Solution: Arrange with your credit bureau F&I managers to any potential red flags of audit of a sample of deals.
provider to automatically check OFAC with identity theft. Develop and implement a
each credit report. Train your sales and robust identity theft prevention program Without these processes in place, a
F&I managers to confirm the OFAC check as required by law. Train every manager dealer really is taking a huge chance with
is clean or to clear any potential hit. Also on the proper clearing actions of any complying with these regulations.
establish a process to check OFAC on any identified red flags.
third-party contributions to a contract, Good luck and good selling! n
whether it is the trade or down payment Internal Revenue Service (IRS): Ah, the
gifts. venerable IRS. It has been rumored to Email Gil Van Over at gvo@bobit.com.

GIADA Independent Auto Dealer APRIL 2018 | 57