BSP warns public vs growing prevalence of auto loan scams

MANILA, Philippines—The central bank has warned the public against fraudulent schemes by involving motor vehicles sales, with various modus operandi victimizing both buyers and sellers, and banks that are scammed into granting auto loans to fictitious borrowers.

In a statement on Wednesday (Sept 29), the Bangko Sentral ng Pilipinas (BSP) cautioned the public against an increasingly prevalent racket employed by car theft syndicates.

Perpetrators of the so-called “assume balance” or “pasalo” scheme — also known as“pasalo-benta” — target buyers who are hoping to save money on their vehicle purchases and sellers who need to transfer their loan liabilities to the buyer.

Under this scheme, a syndicate member would buy a vehicle from a seller with an agreement to assume payments for the auto loan. However, the syndicate member has no intention of paying the remaining amortizations and will sell or dispose of the vehicle to an end-buyer for a profit using falsified documents. Because the end-buyer is holding fake documents, he has no rights over the vehicle.

“As a result, the original seller defaults on his auto loan and the car gets repossessed by the financial institution, leaving the end-buyer with nothing,” the central bank explained.

The regulator noted that, in these cases, banks still hold the vehicles’ original certificates of registration from the Land Transportation Office and car dealers, and may still recover them.

This can be done through the assistance of law enforcement agencies that can flag or issue alerts for the vehicles.

“However, the buyer may not recover anything as he or she is holding falsified documents,” the agency said.

The central bank outlined the details of the organized crime through auto loans in a memorandum sent to financial institutions last month.

The BSP memorandum called on financial institutions to prevent these crimes by reinforcing the conduct of customer identification and verification procedures as part of the customer due diligence process.

It also explained other types of car-related illegal activities including the rent-tangay (selling a rented vehicle), rent-sangla (pawning a rented vehicle), loan accommodator or labas-casaschemes (paying a person to take out a car loan and running off with the vehicle).

The central bank noted that the Philippine National Police also recently warned against syndicates that acquire high-end motor vehicles through auto loans under fictitious circumstances.

These crimes are done through fabricated conduction stickers, plate numbers, identities, and falsified documents, like identification cards and employment certificates, to successfully get auto loans.

Car theft syndicates sometimes resort to identity theft by using an actual person’s name, address, and company profile, but with a different photo.

The BSP also reminded banks to strictly observe and strengthen the implementation of anti-money laundering regulations on customer identification and verification procedures; ongoing monitoring of customers and their transactions; suspicious transaction reporting; and continuing anti-laundering training programs including controls relating to partner or accredited car dealers.

Banks were reminded to file suspicious transaction reports, when warranted.

TSB