FINANCE BLOG

What is Freight Fraud?

Freight fraud is a blanket term that describes any number of malicious scams within the trucking industry. Antiquated and decentralized security systems, coupled with increasingly clever fraudsters who continue to develop creative ways to deceive, have led to a 400% increase in fraudulent schemes. The issue now costs the industry nearly $800 million annually, according to a presentation at MATS by John Williamson from SOCRadar, and is a growing concern for truckers and freight professionals. The issue is being closely monitored by the governing bodies that serve to protect freight and is a concern that truckers and brokers should be well aware of. Within this blog are some of the most common and scariest forms of freight fraud, with ways to protect your business from each.

Double Brokering

What is it?

Double Brokering is one of the most common and widespread forms of freight fraud wherein dishonest “brokers” accept a load from a shipping company and broker it to an appropriate carrier. Then secretly rebrokers the haul to another carrier without the first carrier’s knowledge. The first carrier arrives for the freight and finds it is already gone. These actors never intend to pay the initial carrier and, in turn, create financial losses for the afflicted carriers and potential liability issues for the shippers if the freight is damaged or lost.

Combative Tactics

1. Verify Broker and Carrier Credentials – with identity fraud being a common theme that plagues the transportation industry, it is always a good idea to thoroughly vet both brokers and carriers through a trusted source such as Carrier411 or FreightGuard.

2. Written Contracts and Clear Payment Terms – clear and airtight agreements between brokerages and the carriers they partner with is another way to effectively protect your business from double brokering. Demand proof of delivery and proper documentation before payment to help alleviate concerns and reduce the risk of fraud.

3. Track Shipments in Real Time – Electronic Logging Devices (ELDs) or other forms of GPS can help optimize operational efficiency and confirm that the carrier that was originally assigned to the load is the one hauling it.

Cargo Theft

What is it?

Cargo theft describes the act of thieves stealing freight by physically hijacking trucks, breaking into trailers or warehouses or by simply present themselves as a carrier and disappearing with the goods meant to be hauled.

Combative Tactics

1. Verify Carrier and Broker Identities – again, simply verifying the identities of referral sources and drivers can eliminate the ability of many of these threat actors to harm your organization.

2. Secure the Perimeter— implement security systems to protect your freight. These can include security cameras around a warehouse or simply a physical lock on your trailer.

3. Implement Regimented Load Handoff Procedures – modern and digital confirmation methods such as electronic bill of landings ensure transparency and legitimacy, reducing the risk of fraud.

Skimming

What is it?

Our fuel card partner, TCS Fuel, is its own Blog defines the act of card skimming as “the illegal act of placing a small machine, a skimmer, onto the card slot of a fuel pump. The skimmer takes sensitive information – credit card numbers, zip codes, and PIN numbers – that can lead to stolen funds and identity theft.”

Combative Tactics

1. Keystone's Fuel Card’s Dynamic Prompting – when you sign up for a fuel card with Keystone, you can rest assured that we are well aware of the growing concern around skimming and have implemented measures to eliminate the concern for this very issue. Dynamic Prompt, instills a two-factor authentication method to protect authorized card swipers and restrict access to unauthorized scammers.

2. Conduct Regular Invoice Audits – both shippers and carriers should review freight invoices carefully and regularly, ensuring there aren’t any hidden fees, suspicious activity, or unexpected fuel surcharges.

3. Use Load Tracking and Cost-Verification Tools – real-time tracking systems can help to automatically flag purchases that appear to be suspicious.

Phishing Scams

What is it?

Merriam-Webster defines phishing as “the practice of tricking Internet users (as through the use of deceptive email messages or websites) into revealing personal or confidential information which can then be used illicitly”. A popular example is the Nigerian prince phishing scam. As it relates to trucking, common scams could come in the form of fake load notifications, invoice fraud, credential theft emails, wire transfer scams, fuel card scams, and more.

Combative Tactics

1. Employee Training and Awareness – ongoing education of drivers, dispatchers, and office staff on these ever-present scams promotes awareness of their existence and is one of the best way to protect your business against phishing, especially as fraudsters become more clever and harder to identify.

2. Use Multi-Factor Authentication – even if your login credentials protecting sensitive information are compromised, multi-factor authentication can help ensure that your data is safe.

3. Verify Communications and Transactions – its always a good idea to double-check and validate invoices and contact brokers and carriers directly.

4. Look at email addresses closely. Phishing scams often have email addresses with slight variations to more commonly recognizable addresses.

Conclusion

Fraud is a serious and growing problem for the freight industry, truckers, carriers, and consumers. The governing bodies that serve to protect our trucking industry are implementing procedures and regulations to combat the issue. Specifically, the Federal Motor Carrier Safety Administration (FMCSA) is placing emphasis on simplifying and centralizing the ID verification process that goes into securing registrations and USDOT numbers. One large step is the FMCSA’s phase out of MC numbers and consolidating all carrier identification under a single USDOT number. This change is scheduled to take place by October 1, 2025. The solution and adoption of modernization aim to severely hinder the ability of fraudsters to disrupt and harm the trucking industry.

Awareness of the presence of these scams and understanding the steps to mitigate their harmful effect go a long way in safeguarding operations and financial stability. In an ever-changing environment, staying informed and being vigilant will help maintain a secure and efficient supply chain.

If you suspect you or your business has become a victim of freight fraud, immediately file a police report and submit the claim to the FCMSA Contact Center at https://www.fmcsa.dot.gov/contact-us or call 1-800-832-5660. You may also report the incident to the U. S. Department of Transportation's (USDOT) Office of the Inspector General (OIG) Hotline at 1-800-424-9071 or online at https://www.oig.dot.gov/hotline. To learn more visit https://www.fmcsa.dot.gov/mission/help/broker-and-carrier-fraud-and-identity-theft.