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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg P and L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well,

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Speaker 1: if real fraud were not enough, how about synthetic identity fraud.

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Speaker 1: Here to tell us what it is is Jeffrey Finstein.

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Speaker 1: He is a vice president of Global Analytics at Alexis

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Speaker 1: Nexus and an expert on synthetic identity fraud. Jeffrey, thank

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Speaker 1: you for being with us. What is it? What is

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Speaker 1: synthetic identity fraud? Hello, I'm glad to be here. Synthetic

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Speaker 1: identity fraud of a really complicated type of fraud that

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Speaker 1: we're seeing emerged since roughly two and twelve, and it

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Speaker 1: requires a great deal of coordination. And what really happens

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Speaker 1: is synthetic identities are these Frankenstein like identities that are

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Speaker 1: created by fraudsters, and these identities don't correspond to real people.

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Speaker 1: They basically create false identities and they register them, register

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Speaker 1: these identities and the credit system with the purpose of

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Speaker 1: stealing from companies. And it's not just banks that they're

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Speaker 1: stealing from the they steal from all sorts of types

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Speaker 1: of companies in particular telecoms, utilities, thin texts, and even

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Speaker 1: the government. So, Jeffrey, just to get a sense of

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Speaker 1: what this would be, uh, if you played it out,

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Speaker 1: a person would create a false identity that they would

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Speaker 1: have no qualms about walking away from, leaving a lot

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Speaker 1: of bills unpaid for services that they took under their

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Speaker 1: real identities. That's exactly right. So what what the fraudster does?

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Speaker 1: They create a new identity that doesn't really correspond to

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Speaker 1: their true identity, and they curate that identity to make

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Speaker 1: them look like better and better customers. So they pay

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Speaker 1: their bills on time, and they let that relationship with

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Speaker 1: their financial institutions evolve so they're sure rating credit and

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Speaker 1: they're becoming good customers. And then what happens is, over

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Speaker 1: a period of weeks or months, or it could even

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Speaker 1: go on as years, they simply poof disappear and that

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Speaker 1: that negative activity doesn't really correspond to a true identity.

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Speaker 1: And in fact, that's the big challenge for financial institutions

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Speaker 1: that there's no true victim so well, except that they

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Speaker 1: are a victim, because that means that there are bills

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Speaker 1: that are unpaid out that are outstanding, presumably at the

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Speaker 1: end uh, that somebody walks away without paying. But I'm wondering, Jeffrey,

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Speaker 1: can you give a sense of what kind of scope

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Speaker 1: we're talking about. How big of a problem is this.

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Speaker 1: It's hard to say for sure, because financial institutions don't

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Speaker 1: always know they've been they've been a victim. So what's

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Speaker 1: really happening is they see a really good customer they

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Speaker 1: just stop paying their bills, and many financial institutions might

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Speaker 1: assume that that's just a consumer that's fell on hard times. Uh.

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Speaker 1: And also it's pretty recent, which means we don't have

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Speaker 1: a whole lot of time to look at macrowick and

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Speaker 1: mc trend's. But let me share a couple of numbers

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Speaker 1: with you. For the last ten to fifteen years, around

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Speaker 1: seven million new identities enter into the credit system, and

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Speaker 1: a surprisingly consistent over that ten to fifteen years. The

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Speaker 1: little bit of fluctuation we tend to see is usually

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Speaker 1: related to either fluctuations and birth rate about fifteen years

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Speaker 1: prior or immigration rate, and and so what we see

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Speaker 1: is that stable number. Whoever, since two thousand and twelve

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Speaker 1: to about today, we've seen a ten percent increase in

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Speaker 1: that number that had been historically stable. And in fact,

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Speaker 1: when you start digging into these new identities, we've seen

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Speaker 1: almost an eight increase in the number of suspicious identities,

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Speaker 1: and that is suspicious synthetic identities entering that system. And

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Speaker 1: in fact, just speaking to a risk manager at a bank,

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Speaker 1: uh this was a week or two ago, they actually

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Speaker 1: indicated this was an eight digit problem. That's tens of

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Speaker 1: millions of dollars of meaningful losses to that financial institution. So,

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Speaker 1: is there a situation where you have collection agencies that

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Speaker 1: are trying to collect money that is due a company,

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Speaker 1: whether it's a telco or a bank, they're trying to

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Speaker 1: collect from people who do not exist. That's a that's

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Speaker 1: a really good point and it's part of the problem.

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Speaker 1: So in true name fraud, what happens is that the

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Speaker 1: consumer victim will raise their hand and work with the

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Speaker 1: bank and essentially that gets wiped from the system as

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Speaker 1: part of their fraud operations. But because these these synthetic

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Speaker 1: or these Frankenstein consumers just disappear and they're treated as

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Speaker 1: credit risk. You will see them all through the life cycle,

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Speaker 1: and we do see them on collection files when we

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Speaker 1: help customers figure out, Hey, why why this collection program

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Speaker 1: not working? It's pretty common to see that there are

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Speaker 1: synthetic identities drifting into those collections programs. Jeffrey, has there

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Speaker 1: been any progress made in identifying the types of people

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Speaker 1: who create these identities? I mean, it seems like it's

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Speaker 1: a relatively sophistic CADD scheme in that people are curating

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Speaker 1: uh their credit worthiness over a particular period of time.

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Speaker 1: This doesn't this takes This takes quite a bit of effort. Yeah,

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Speaker 1: this is definitely a full time job for those fraudsters

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Speaker 1: who are committing these sorts of fraud. And while I

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Speaker 1: can go through it, I don't want to say too

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Speaker 1: much because I also don't want to give instructions over

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Speaker 1: the radio and how to create these identities. But what

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Speaker 1: we see is these fraudsters working in identity factories. It's

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Speaker 1: almost like an assembly line of smoke and mirrors to

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Speaker 1: create these Frankenstein identities. And in fact, we know of

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Speaker 1: one in the state of Pennsylvania that created seven thousand

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Speaker 1: of these fake identities. And what's interesting about that is

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Speaker 1: when you look at your own history, your your identity

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Speaker 1: has really evolved at the speed of life. And what

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Speaker 1: I mean by that is there are key milestones when

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Speaker 1: you register a car, You've got a driver's license, your

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Speaker 1: registered to vote, you got credit and so forth, and

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Speaker 1: that's a relatively slow my grace. In a true identity, however,

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Speaker 1: these identities factories are really scaled for time, and what

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Speaker 1: that means is they don't evolve that quickly. They evolved

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Speaker 1: for a profit motive as opposed to a true life motive.

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Speaker 1: That makes sense, That makes perfect sense. Jeffrey Finestein, thank

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Speaker 1: you so much for joining us. Fascinating synthetic synthetic identity fraud. Uh,

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Speaker 1: definitely an interesting development. Jeffrey Finstein is PhD and Vice

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Speaker 1: president of Global Analytics at Lexis Nexus. We are still

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Speaker 1: digesting all the details of the horrific mass shooting at

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Speaker 1: a country music festival near Las Vegas on October two yesterday.

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Speaker 1: Joining us as Chris Paul Mary who is in Las Vegas.

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Speaker 1: He is the Beera chief for Bloomberg in Los Angeles. Chris,

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Speaker 1: can you just give us first a sense of the

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Speaker 1: mood right now in Las Vegas. I'm sure you've been

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Speaker 1: there before. Has it changed, Yeah, it's it's definitely very somber.

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Speaker 1: This is just coincidentally the start of the Global Gaming Expo,

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Speaker 1: which is the largest trade show for the casino industry.

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Speaker 1: Twenty six thousand people from all around the world coming in.

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Speaker 1: So uh, some speakers had canceled, some spoken were you know,

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Speaker 1: very choked up. There were you know, signs of increased

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Speaker 1: security everywhere. Uh, it's it's definitely had taken a sort

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Speaker 1: of a toll overall, and usually a party city. Chris,

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Speaker 1: what about the increased security measures? We know that for

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Speaker 1: example worldwide sporting events, whether it's the FIFA World Cup,

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Speaker 1: you know, you go to an event like that, you're

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Speaker 1: gonna be scanned and there's gonna be someone with a

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Speaker 1: wand do you see those kinds of products in evidence today?

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Speaker 1: I just saw that for the first on yesterday at

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Speaker 1: the Wind Resort, where anybody that wanted to walk into

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Speaker 1: the hotel had to get their bags checked and and

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Speaker 1: be wanted, you know with the metal detector. Uh, you

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Speaker 1: know that, you know, we're in immediate aftermath the some

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Speaker 1: of the MGM properties were on lockdown. And they were

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Speaker 1: checking ideas of people who wanted to come in to

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Speaker 1: make sure they were guests. But I haven't seen any

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Speaker 1: other patinos he had adopted what Win had done. Steve

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Speaker 1: Win has always been a leader in the industry. Uh.

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Speaker 1: You know, I did speak to some casino as actually

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Speaker 1: said that that very may wear it very well be

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Speaker 1: the future of anybody that comes into building, because that

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Speaker 1: that there was really no other way to prevent the

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Speaker 1: situation with the shooter, with the guns in the hotel room.

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Speaker 1: He wasn't attending the concert. Yeah, well, I mean, Chris

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Speaker 1: that that was sort of what struck me is how

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Speaker 1: does a person how many guns did he have? Eighteen?

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Speaker 1: How many he had? A whole arsenal that he brought

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Speaker 1: up to a high floor of a hotel and and

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Speaker 1: from that perch uh massacred fifty nine people. I mean,

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Speaker 1: that's it's sort of amazing, frankly, that that could happen

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Speaker 1: at all, amazing amount of planning to on his end. Uh.

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Speaker 1: You know, I think he checked in on Thursday. You know,

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Speaker 1: he had more gear than just all those guns, and

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Speaker 1: he hit some sort of hammer that he could break

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Speaker 1: those windows which are very thick. Uh. He had a

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Speaker 1: stand that he could rest the weapons on to get

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Speaker 1: a better shot. Just you know, amazing and it's diabolical nature. So, Chris,

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Speaker 1: are we getting any more details behind the motivation? I

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Speaker 1: have read a number of stories saying that he was

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Speaker 1: not connected with anybody else, that the threat has come down.

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Speaker 1: But are there any more details behind what actually transpired? Yes? Um,

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Speaker 1: it's um it's a big, you know question mark because

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Speaker 1: you know, I spoke to security people and there were uh,

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Speaker 1: you know, no signs really uh, you know, typically on

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Speaker 1: these active shooters of them, if some sort of warning

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Speaker 1: speak this body leave the manifesto whatever. Uh, this guy

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Speaker 1: seemingly came out of nowhere. Chris, Uh is Nevada is

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Speaker 1: an open carry state? Correct? I think the thirty one

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Speaker 1: states that allow open carrying of handguns. And this was

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Speaker 1: not a handgun, of course. Uh, there was a measure

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Speaker 1: just recently trying to get the background checks in tighter

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Speaker 1: gun control. Everyone here are sort of focus on the

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Speaker 1: morning and the events and immediate security. But I would

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Speaker 1: imagine if the days come and president visits will be

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Speaker 1: a much greater focus on on gun control. I wonder

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Speaker 1: what the mood is among some of the casino operators.

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Speaker 1: I mean, this has to be a huge blow for them.

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Speaker 1: I mean, on a personal level, it's always just devastating

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Speaker 1: to see this type of death toll. But aside from that,

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Speaker 1: going forward, I would imagine that people would rethink some

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Speaker 1: of their plans to Las Vegas unless there's some very

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Speaker 1: clear measures to prevent this type of thing from happening again. No, uh,

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Speaker 1: you know, I it's it's to school intern analyzed. I

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Speaker 1: said that that it happened during the start of this convention,

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Speaker 1: but I think it definitely sends a message because you know, executives,

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Speaker 1: you know what's happened before, because you knows there's been

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Speaker 1: a massive shift here in Las Vegas to create you know,

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Speaker 1: you used to be they try to keep people in

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Speaker 1: the casinos. Now they're opening the doors literally with events, concerts, uh,

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Speaker 1: you know, creating a pedestrian friendly areas in front of

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Speaker 1: the hotels. So as they focused on you know, these

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Speaker 1: more experiential as they call them, you know, experiences that

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Speaker 1: you know, they've got to take consecurity a lot more

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Speaker 1: into consideration. They've got to look at things from all

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Speaker 1: angles and act like the Secret Service and think about

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Speaker 1: you know, tall buildings, and constant vigilance during events, and

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Speaker 1: it's going to be a different world. You know, Chris

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Speaker 1: as l a bureau chief. You go from California where

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Speaker 1: they have a strict uncontrol rules and regulations, but you know,

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Speaker 1: firearms are allowed, and to uh Las Vegas, which is

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Speaker 1: really an international tourist destination. Is there any conversation or

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Speaker 1: any debate that you've heard about limiting the access of

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Speaker 1: people who carry firearms legally to various private properties. Not immediately,

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Speaker 1: but you're just a little color. I went yesterday to

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Speaker 1: this place called Battlefield, Vegas, which is one of these places,

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Speaker 1: and they are quite a number of them, very close

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Speaker 1: to the strip where you can go fire machine guns,

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Speaker 1: and in this particular place looked like a natural guard arsenal.

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Speaker 1: I mean they had tanks and the employees were wearing

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Speaker 1: fatigues and there were people there. There were there was

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Speaker 1: I was, I don't know what the regular day is like,

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Speaker 1: but you know, I talked to some guys who said, hey,

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Speaker 1: we scheduled this before you know, they're walking out with

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Speaker 1: these targets that are full of machine gun bullet holes. Uh.

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Speaker 1: You know, there were tourists from me as you know,

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Speaker 1: getting a picture taken on tanks. Uh uh, you know,

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Speaker 1: the manager I didn't want to talk to me, but

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Speaker 1: you know, there is very much, uh you know, a

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Speaker 1: desire in some communities to have this kind of access.

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Speaker 1: So it's gonna be the tether of work going forward. Well,

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Speaker 1: is that the subject of discussion just among people who

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Speaker 1: you encounter as you walk around Las Vegas. Initially, I

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Speaker 1: think it was really focused on on just the shock

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Speaker 1: and the UH and the and the enhanced security. I

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Speaker 1: did speak to the visit the former Boston Police commissioner

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Speaker 1: you know, he did bring up the subject of gun control.

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Speaker 1: He said he would have thought would been an issue

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Speaker 1: a lot earlier with Sandy Hook and that. And he's

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Speaker 1: actually speaking this morning to the to the convention, so

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Speaker 1: we'll see what he has to say there. But you know,

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Speaker 1: I'm sure it'll be uh more of a conversation as

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Speaker 1: that as the initial shock ward off. Well, apparently, you know,

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Speaker 1: and this's just coming from Greg Jared who says, you know,

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Speaker 1: you cannot carry a firearm into an establishment that has gambling,

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Speaker 1: and most casinos do not allow concealed weapons even if

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Speaker 1: you have a concealed weapons permit, you can be refus

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Speaker 1: used entry because, as I said earlier, it's a private business.

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Speaker 1: I want to thank you very much for joining us.

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Speaker 1: Chris Palmry he is our Los Angeles Bureau chief, reporting

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Speaker 1: from Las Vegas. Well, we want to visit right now

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Speaker 1: with Rebecca LENLN, executive analysts for Cox Automotive, because of

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Speaker 1: course we got many of the sales reports this morning,

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Speaker 1: Toyota GM posting the biggest US sales gains on the

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Speaker 1: post Harvey hurricane demand, and she joins us here in

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Speaker 1: our eleven three oh studios. Rebecca, always a pleasure, Thanks

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Speaker 1: for being with us. What do you make What do

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Speaker 1: you make of this report? I think that we've seen

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Speaker 1: some fantastic sales coming out. They basically have beat all

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Speaker 1: of our analyst estimates. And I think it's a combination

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Speaker 1: of things. It's really pent up demand from the hurricane

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Speaker 1: because a lot of people didn't shop in the last

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Speaker 1: few weeks both of August and September, and so we

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Speaker 1: have some pent up demand there. And then we also

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Speaker 1: have fantastic incentives. We've got great new products coming out,

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Speaker 1: We've got a stock market at record levels, high consumer confidence,

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Speaker 1: there's all sorts of fantastic reasons to go out and

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Speaker 1: buy a car, and there's great new product coming out

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Speaker 1: as well. Well. This is such a shift in tone

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Speaker 1: because just a few months ago, a lot of automakers

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Speaker 1: were talking about how they're expecting to see sales declines.

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Speaker 1: They were seeing sales declines, resale values of cars were

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Speaker 1: going down all of a sudden. Now, is this really

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Speaker 1: a shift in the overall landscape landscape for automakers, or

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Speaker 1: is this really a blip that is due to the hurricanes.

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Speaker 1: It's more of a blip, And I don't think that

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Speaker 1: we're necessarily going to see this continue, you know. So

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Speaker 1: so come as we report in on October sales on

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Speaker 1: November one, I think we could see some decline. But

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Speaker 1: at the same time, people that are getting insurance payouts

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Speaker 1: may still be shopping in October. So I think it's

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Speaker 1: hard to say now the full impact of the hurricanes

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Speaker 1: and how that plays out over the next few months.

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Speaker 1: And again, if we think about product, we've got a

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Speaker 1: new Cameray, We've got a new Honda Chord that I

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Speaker 1: just drove last week. So we've got some really high volume,

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Speaker 1: really good vehicles coming out The difficulty through withen is

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Speaker 1: that because we had a record setting every month, it's

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Speaker 1: gonna you know, it's hard to beat that record. So

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Speaker 1: we're always going to be down a little bit. Yes,

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Speaker 1: although you know you said they're such great incentives. Incentives

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Speaker 1: are great for the buyers, they're not that great for

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Speaker 1: the manufacturers because that means they're expect accepting a lower

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Speaker 1: profit margin. And yes, they are coming off of an

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Speaker 1: exceptionally good year, but they've seen weakness in a lot

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Speaker 1: of areas and their profits have sort of have reflected that. Well,

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Speaker 1: General Motors still making nine billion dollars in profits fair enough.

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Speaker 1: I mean, I think it's important to remember that this

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Speaker 1: is not the industry of two thousand seven, eight and nine.

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Speaker 1: This is a much more disciplined, much trimmer industry. And

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Speaker 1: so you know, a coming like GM has shed brands,

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Speaker 1: uh Chryslers shed models. So we're in a situation where

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Speaker 1: even if they incentivize, we are still making some really

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Speaker 1: healthy profit numbers. Let me just give you an example,

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Speaker 1: and I want your reaction to this. If you want

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Speaker 1: to buy in camera and you want to finance it,

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Speaker 1: they'll give you five dollars bonus cash zero percent a

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Speaker 1: p R and seventy two months. Yes, So as a

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Speaker 1: former employee of the f D i C, I do

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Speaker 1: look carefully at some of these credits and credit worthiness

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Speaker 1: and such. You know, one of the we own Kelly

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Speaker 1: blue Book Dealer dot com Auto Trader, so we're able

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Speaker 1: to track a lot of different parts of the industry.

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Speaker 1: And the number one thing that I that I caution

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Speaker 1: consumers against is over extending themselves. You do not want

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Speaker 1: to go for a seventy two or eighty four month

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Speaker 1: loan because then when you trade that vehicle in, you

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Speaker 1: probably will owe more than it's worth. So I would

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Speaker 1: just caution people. Let's talk Tesla talk that everyone loves

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Speaker 1: to hate and yet that just won't die. We saw

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Speaker 1: them having manufacturing difficulties, unable to fulfill uh the production

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Speaker 1: amounts that they had expected. Shares are down a bit

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Speaker 1: knocked down as much as money people would like. Um,

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Speaker 1: do you think that they have a chance given the

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Speaker 1: fact that the Detroit automakers are ramping up their electric

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Speaker 1: and automotive car units. So you know, a Lisa, It's

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Speaker 1: Tesla is First of all, I'm a huge fan of

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Speaker 1: Elon Musk. I think that we need people like him

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Speaker 1: to push our industry. So so you said something nice

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Speaker 1: about him, Yes, but I do. I mean, I think

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Speaker 1: his technology is amazing. I think that his and you know,

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Speaker 1: the people that buy into his dream of changing the

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Speaker 1: face of mobility. He has given people a very clear

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Speaker 1: why why does he want to do this? And people

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Speaker 1: have reacted to that, and I think that his products

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Speaker 1: are amazing as well. The challenges that once he goes

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Speaker 1: through those five thousand people that have a deposit on

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Speaker 1: the Model three, is he adding two thousand new deposits,

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Speaker 1: you know, to make to to as that demand gets filled.

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Speaker 1: So I think that that's the challenge, is getting people

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Speaker 1: to buy his electric vehicle, and not just by his dream.

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Speaker 1: Dream is costly, right, because I mean he's not making

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Speaker 1: any money. He is not making any money, but apparently

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Speaker 1: that doesn't matter to Wall Street because they're buying into

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Speaker 1: the dream as well well. And he owns a lot

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Speaker 1: of the shares too, So that's one thing that a

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Speaker 1: lot of short silus will raise because it's hard to

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Speaker 1: uh to borrow very expensively more than a little it.

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Speaker 1: And you know, somebody very much smarter than me had

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Speaker 1: mentioned that they're wondering with auto sales. You know, let's

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Speaker 1: say those five thousand people, those people are kind of

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Speaker 1: out of the market a little bit, like they're waiting,

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Speaker 1: you know, so there's some pent up demand for people

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Speaker 1: that have a deposit on the Model three that are

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Speaker 1: saying I'm not going to buy Maybe I'm not going

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Speaker 1: to buy that Chevy Vault or Bolt because I'm waiting

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Speaker 1: for the Model three. So you know, it could be

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Speaker 1: impacting the market a little bit as well. Rebecca Linlin,

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Speaker 1: thank you so much for joining us. Truly of wonderful

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Speaker 1: to speak with you. Rebecca Linlin is an executive analystic

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Speaker 1: Cox automate of talking about the fantastic sales numbers that

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Speaker 1: we've been getting out. Thanks for listening to the Bloomberg

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Speaker 1: p m L podcast. You can subscribe and listen to

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Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

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Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm

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Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.

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Speaker 1: You can always cat just worldwide on Bloomberg RADIOH