Industry Talk

Regular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.

Freight Fraud Is a Main Concern for Shippers in 2024: Reaches Bold New Levels

It’s tough to reason with someone bold enough to answer your phone call in the middle of stealing your freight. Typically, thieves prefer to stay elusive, so I was surprised to hear a voice pick up on the other end when I made my last-ditch-effort recovery call.

As a company, we take stringent precautions and don’t experience freight fraud often, but when it does happen, it leaves a pit in my stomach. We knew there was an issue early during transit; the tracking didn’t seem correct, and the communication went stale. The situation quickly escalated to my desk, which is when I made my last attempt at reasoning with the driver.

He calmly explained that, yes, they were stealing this load. It wasn’t personal, but due to the current market conditions, he knew he could sell the load for more than ten times the amount he could make delivering it. I countered, offering them that exact amount to deliver it instead. He said no and told me there was no amount I could pay him to finish the delivery and risk going to jail. He was stealing the freight, and that was that.

Months later, we had another theft attempt. This time, we were able to retain GPS tracking, intercept the load, and recover it before it could be sold outside a yard in Sacramento, CA. Data from Travelers and others has since confirmed that freight fraud is on the rise, stating that freight fraud has hit at least at a ten-year high as of Q1 2024.

According to data from CargoNet at Verisk, 2023 Q4 incidents of freight theft increased a whopping 71.6 percent compared to the year before. CargoNet is a database system that aggregates information and intelligence on stolen goods and shares it with theft victims, insurance agencies, and law enforcement.

“We’re seeing a spike, and it’s due to a lot of different reasons. It’s a spike that we haven’t seen before,” said Keith Lewis, Vice President of Operations at CargoNet. “It’s a spike in traditional cargo theft, and it’s a big spike in fraud and fictitious pickups.”

My own impression based off recent, firsthand experiences with theft is this: freight fraud has become more advanced, and criminals are more emboldened than ever.


The 2023 Uptick

Like many industries, freight has undergone a digital transformation over the last several years. The 2020 pandemic accelerated that transformation as more businesses embraced remote working technologies. With that shift, more of the transactional aspects of booking freight moved online, which opened the industry to new vulnerabilities. That’s when the uptick of fraud started.

“We saw our incident numbers grow from 1500 to 1800 that year and saw another increase the following year,” said Lewis.

As of 2023, traditional theft, fictitious pickups, and fraud experienced the biggest uptick, per data from CargoNet at Verisk. None of these types of theft are new, but with instances of fraud and fictitious pickups, the methods criminals use have become more sophisticated.

If you’re a 3PL or a freight broker, the only solution is to adapt your own processes and invest in technologies to keep up.


Different Methods of Freight Fraud

There are multiple types of fraud that brokers and shippers need to watch out for. Some of these methods are increasing more than others:

Fictitious Pickups – The equivalent of identity theft for carriers. Cybercriminals pose as legitimate carriers to gain access to and steal shipments. According to data from CargoNet at Verisk, incidents of fictitious pickup rose approximately 303 percent in 2023.

How to beat it: Smarter and better vetting processes. Fictitious pickup attacks are most successful against brokers that don’t have the proper technology, process, and continuous training to confirm a carrier’s identity before booking a load.

Trailer/Container Theft – The theft of a trailer, a container, or part of the contents. Thieves break into a trailer and steal freight or steal the entire trailer and sell whatever they find inside.

How to beat it: GPS tracking and effective carrier communication. Trailers that don’t have any sort of GPS tracking make easy targets for thieves. Having clear communication with the carrier goes a long way to ensuring security processes are followed during any planned stops.

Double Brokering: When a shady carrier obtains a load from a broker and then brokers it again to another carrier. Double brokering is illegal and can result in stolen loads and financial losses for carriers, brokers, and shippers.

How to beat it: Again, proper vetting and forming strong relationships with reliable carriers. Fraud starts during the carrier onboarding process, which is why intensive vetting is so important when working with new carriers. Working with a smaller pool of trusted and proven carriers is the better way to go.

Load Partialing: When a carrier adds someone else’s freight to a single-customer truckload (FTL) without breaking the seal. Most customers prefer their loads run FTL, meaning theirs is the only freight on the truck. Shady carriers will sometimes figure out a way to pop the doors off a trailer to add another customer’s freight to the same load to maximize profit.

How to beat it: This all comes down to forming strong, long-term relationships with carriers. Continually working with reliable carriers increases trust and reduces the risk of shady practices for the sake of short-term gain.

Regardless of the type of fraud, prevention is always the best practice. There are three key areas of prevention that should always be in place: vetting, tracking/technology, and relationships. Vetting ensures that you’re working with a legitimate carrier, tracking and technology ensure you’re able to always keep an eye on the load, and established carrier relationships reduce long-term risk and the odds of falling victim to fraud.

Out of all those prevention methods, I cannot stress vetting and tracking enough. Ask any broker about carrier vetting, and they’ll probably walk you through a head-spinning process involving several verification websites, platforms, and a series of manual checks. It’s not uncommon to juggle five or more browser tabs and applications during the vetting process, all of which must happen in a few minutes.

Freight brokering is a pressure cooker environment—and without strong relationships, proper training, auditing, and technologies—it’s all too easy to miss minute details. That’s exactly what cyber criminals are counting on.

At ITS, we train new hires in the vetting process until it’s second nature, and we never send a rate confirmation until we have the driver up on our proprietary GPS tracking system, LOOP. Those two things are non-negotiable.

Even with the best vetting processes in place, there’s always room for improvement. Criminals don’t stop innovating, which is why it’s so important to avoid complacency and invest in technologies that reduce the risk of human error.


Embracing Better Vetting Technologies

Michael Caney, Chief Commercial Officer of Highway, describes what his company does as applying long-established cybersecurity principles to the freight industry. Highway is one of the leaders in carrier identity—driving innovation at the prevention and vetting level; empowering freight brokers to spot bad actors during the vetting process; and helping carriers fight against identity theft.

“Fraud needs three things to flourish,” said Caney. “Promise of gain, urgency, and anonymity. There’s value in stealing a load for resale or gaining control of a shipment for the purposes of extortion, and the freight industry has no shortage of urgency. We can’t do anything about those two elements, but we can do something about anonymity. We can force people into the light and allow brokers to make better decisions.”

To deliver on the better decision aspect, Highway evaluates hundreds of thousands of data points to detect patterns and divide the ambiguous world of online carriers into good and bad. By automating compliance, Highway lets brokers enforce an all new standard, raising the water level of carriers that are allowed in their network to run loads for them.

On the carrier side, Highway helps prevent identity theft by alerting carriers of suspicious changes of their information. Caney estimates that in a week, they typically block 300 users from 30 countries trying to access or claim a motor carrier’s profile on Highway.

Having technologies like Highway, RMIS, Carrier Assure, or Carrier 411 in place really strengthens the vetting process, but at the end of the day, the buck always stops with the broker. It’s up to brokers to use resources correctly and make the right decisions that prevent fraud, and it’s up to the company to provide adequate training and continued education to make that possible.


No Such Thing as Too Much Training

Freight is a fast-moving industry with complex parts. Even on a perfect day, it’s a challenging environment to work in. Throw in freight fraud and the constantly evolving sophistication of attacks, and it becomes even harder. It’s not a forgiving industry in terms of mistakes, which is why training, technologies, and processes are so important.

Anyone that’s worked in this industry knows there isn’t time to throw open a protocol manual and run down a list of checks while booking a load. All that knowledge needs to be ingrained before a broker hits the floor. Vetting should feel like second nature, something foundational brokers can fall back on when things get hectic.

That all sounds very aspirational and good, but making it happen takes investment at the front end. For us during our training process, every team member must go through an extensive six-week training program, much of which is spent with top-performing mentors, before being left to independently work and learn as part of multiple teams working with multiple modes of transportation and industries for another two months.

If you’re wondering how much of that training is about freight fraud, it’s a significant piece. We use a four-step system that incorporates systems like Highway, Carrier 411, RMIS, CargoNet, Truckstop, and others—which I won’t go into depth on and leads me to my next point. It’s not a clever idea to officially release too much information on your fraud prevention processes, as it gives criminals a map of existing security measures.

It’s also a good idea to train your brokers to not be overly useful or helpful in onboarding carriers. To paraphrase Highway CCO Michael Caney, “No” can act as a complete sentence when it comes to telling a carrier they’re not a good fit. I don’t mean that brokers should be rude, but they don’t have to explain their entire compliance criteria either.

Aside from training, continuing education, and process adaptation is the last and most important part of prevention. It’s not enough to have a set-it-and-forget-it mindset to freight fraud. Attacks and cyber criminals are always adapting to new systems, and there will always be another and more sophisticated fraud attack. It’s up to the industry to continue to innovate and ensure their training, technology investments, and processes are keeping up.


The Freight Recovery Process

Prevention is always the best practice when it comes to freight fraud and theft, but even with the best-laid plans, the worst can still happen. And if you do happen to find yourself as a victim of freight fraud or theft, it’s important to have a process in place ahead of time to improve the chances of recovery.

Here are some tips on what that process might look like:

  • Put teams in place to take specific roles in the reporting and recovery process and build out SOPs (Standard Operating Procedures).
  • Report incidents to law enforcement agencies and supporting organizations, like CargoNet, as soon as possible. Make sure to include details like the driver’s name and any other available identifiers; truck and trailer information, including VIN numbers if available; and any other available information.
  • Have a recovery plan; even if law enforcement recovers the load, you’ll need a driver and tractor ready to rapidly recover it.