VIENNA, Va. — A recent Financial Crimes Enforcement Network study indicates conscientious dealership staff and finance company personnel are greatly helping to squash fraudulent vehicle loans facilitated by identity theft prior to funding.

FinCEN, a part of the U.S Department of Treasury, conducted extensive analysis of suspicious activity reports (SARs) citing identity theft. The network's review shows while suspected cases of identity theft are on the rise since 2004, auto loan fraud has declined significantly.

Study data revealed the percentage of sample SAR filings reporting attempts to use identity theft to facilitate auto loan fraud was about twice as high as for other type of loans such as mortgages and credit cards until 2009. The percentage stood at 5 percent in 2004 but then spiked to 17.5 percent two years later. In 2007, it was 18 percent, and in 2008 it was 19 percent.

However, FinCEN analysis showed the percentage plummeted by almost half last year, dropping down to 10.5 percent.

"The data suggests that filers making loans have had significant success in identifying such fraudulent loans before they are funded," network officials explained.

"Overall, slightly less than 50 percent of the fraudulent auto loans reported in the sample data were detected prior to funding," they continued. "The data suggests that filers making auto loans have had significant success in identifying such fraudulent loans before they are funded."

What likely caused the significant fraud reversal is additional regulation dealers know well — Red Flag Rules. FinCEN recapped the rules in great detail during the study process.

Using the language in the Identity Theft Red Flag Reporting Rules jointly published by the U.S. Treasury, Federal Trade Commission and federal banking agencies, study authors said the two most common red flags reported in sample SAR filings were:

—The financial institution or creditor was notified by a customer, victim of identity theft, a law enforcement authority, or any other person that it has opened a fraudulent account for a person engaged in identity theft. Officials noted this category constituted nearly 75 percent of relevant sample filings.

—The financial institution or creditor was notified of unauthorized charges or transactions in connection with a customer's covered account. Officials pointed out almost 23 percent of relevant sample filings came under this category.

FinCEN noted the penetration of other Red Flags also prevented fraud.

—Social Security number provided on application is assigned to individual other than the applicant: 8 percent.

—The Social Security number has not been issued, or is listed on the Social Security Administration's Death Master File: 6 percent.

—Shortly following the notice of change of address for a covered account, the institution or creditor receives a request for a new, additional, or replacement card or a cell phone, or for the addition of authorized users on the account: 4 percent.

—The customer fails to make the first payment or makes an initial payment but no subsequent payments: 4 percent.

Looking from a broader view, FinCEN officials shared that the study found the number of SARs characterized as identity theft rose 123 percent between 2004 and 2009, out-stripping the rise of total SARs filed by depository institutions which increased 89 percent during the same five years.

Though the study notes that credit card fraud continues to be the most reported type of identity theft-facilitated financial fraud, the network stressed reporting trends for that type are moderately down.

The identity theft study — a first for FinCEN — also found that about 27 percent of sample SAR narratives reported that the victim of identity theft knew the subject of the SAR, who was usually a family member, friend, acquaintance, or employee working in the victim's home.

The report also found that victims reportedly discovered identity theft by reviewing their own account activity in about 28 percent of sample filings. The analysis also revealed that filers credited routine financial institution account monitoring with uncovering identity theft in nearly another 21 percent of SAR filings, and reviews of commercial databases at account initiation in 15 percent of filings.

FinCEN defines identity theft as using identifying information unique to the rightful owner without the rightful owner's permission.

"FinCEN's study of identity theft SARs reveals how important suspicious activity reports can be to deterring illicit activity," explained FinCEN director James Freis Jr.

"In many instances involving identity theft, the vigilance of employees of financial institutions is apparently deterring greater losses when the employees suspect loans are tied to false identities," Freis added.

The entire report titled "Identity Theft — Trends, Patterns, and Typologies Reported in Suspicious Activity Reports (SARs) Filed by Depository Institutions," is available at the network's website, www.fincen.gov.