Freight, Fraud, and Theft

Cargo theft numbers skyrocketed in 2023, and the key growing threat is shipment misdirection by fraudulent means. In the third quarter alone, theft prevention and recovery network CargoNet reported a 59% increase in the number of thefts in the United States and Canada compared to a year ago.

Because many incidents go unreported, the true numbers are likely higher.

Much of the increase is due to shipment misdirection, where bad actors use stolen motor carrier and logistics broker identities to obtain freight and misdirect it from the intended receiver so they can steal it.

CargoNet reports an estimated $31 million in stolen shipments in the third quarter.

Pandemic Surge

During the early months of the COVID-19 pandemic, there was a surge in cargo theft, says Keith Lewis, vice president of operations at CargoNet.

Anne Reinke, president and CEO of the Transportation Intermediaries Association, also tracks the start of the current theft upswing to pandemic times.

Because people could not as easily venture out and spend money on services, they began ordering items and the freight market exploded. Reinke says a lot of new criminals were lured into the freight market since it was so lucrative at the time.

Yet even as fears of COVID-19 subsided and life returned to normal, the fraudsters did not recede from the freight market.

“Last year, things just kind of exploded,” Lewis says.

Traditional cargo theft rose by 63% in the first half of 2023 alone, according to CargoNet — thefts that happen when someone steals a tractor-trailer or a trailer, or they break into a trailer and steal part or all of the shipment.

But the bigger problem is cargo theft achieved through deception, which is growing exponentially.

“If you look at the right snapshot, you'll see it up between 600 to 700%, depending on which month you're comparing to from this year to last year,” Lewis says. 

In the latter part of 2022, digital freight marketplace provider Truckstop noticed a lot more complaints coming into its assurance department, which works to find a resolution between two parties who have a difference about freight that was hauled, a payment, or other issues.

“We saw in October last year the amount of complaints started increasing dramatically, and I don’t mean like 10% or 20%,” says Brent Hutto, Truckstop chief relationship officer. “I mean like 100% more than normal. And then 200%, and then 300%, and then 400%, more than normal the number of complaints of payments not getting paid, loads not getting delivered. It hit a really high point about February or March of 2023 and kind of stayed at the super high level in the market.”

Truckstop dug into its historical data and found the last time a similar surge in complaints happened was in 2008 and 2009, when there was a recession and the marketplace moved from a good, normal market to a depressed marketplace for about nine months. During that time, fraudulent activity increased dramatically, but still not as much as it has in 2023.

Hutto points to one key difference between 2008/2009 and now — the proliferation of data and automation.

“When it comes to the movement of information, whether it be the carrier's information, the freight information, or the broker’s information, that is where there are cyber open doors; the bad guys are jumping in,” Hutto says.

Digitization and Strategic Theft

Technology brought automation to load boards and the freight market, making it easier and faster to book loads — not only for valid industry players, but also for the criminal element.

Like Hutto, Reinke sees the digitization of freight as one of the key factors that has enabled the rapid growth of theft and fraud. Before scheduling of freight moved to digital platforms, she says, more relationships were developed among brokers, shippers, and carriers.

“When you have a digital landscape, it unfortunately can be very, very easy to conduct fraud,” Reinke says. Criminals may pretend to be a carrier, broker, or even shipper.

“In some cases, they have a relationship with one of those three entities and are either trying to get into and hack a system for cybercrimes or they're conducting cargo theft,” she adds.

Lewis agrees the automation of freight scheduling via digital platforms left the door open for new methods of theft and fraud.

“When you automate a bad process, you make it just really bad, even faster.”

Lewis explains how a shipment can be hijacked through a series of steps:

1. Thief steals the identity of a shipper or broker using a similar name, email, or web address.
2. Thief books a load from a load board under the false identity then reposts it.
3. The driver picks up the shipment, but thief directs the driver to take it to a different location than the original load.
4. The load is cross-docked and gets a new bill of lading.
5. Next it moves to another cross-dock and again new paperwork is issued.
6. At some point, the thief schedules a driver to pick it up at a cross-dock and now has possession of the cargo and can route it to anywhere.
7. Each time that load was cross-docked, he explains, it was like laundering money. As bills of lading changed, for instance cargo that began as electronics can lose its identity and become freight of all kinds (FAK).

That in its basic essence is now commonly called strategic theft.

So, what can be done?

“Well, if you’ve got an answer for that, you’re going to be a bazillionaire,” Lewis quips.

Often, according to Hutto, the crooks know just when to stop.

“Usually, they’re going after things where they don't run into barriers,” he says. “What they'll do is get to the information and if nothing stands in their way, they keep moving forward. They won't steal the cargo unless they can get past all the freight and bill payments and carrier identity things,” Hutto explains. 

“They don't want their information being available to anybody, so they'll stop at a certain point to avoid being captured.”

Double Brokering

While not always cargo theft, some in the industry believe double-brokering is contributing to rising freight fraud.

As Truckstop put it in a blog post, “one of the most prevalent scams is double-brokering: the unauthorized transfer of a load from one freight broker to another without the knowledge or consent of the shipper.

“While it can sometimes be a result of negligence or poor communication, in most cases it’s an act of malicious fraud. And the increase in double-brokering scams is staggering. In Q4 of 2022 and Q1 of 2023, Truckstop saw a 400% increase in complaints regarding double-brokering in the industry.”

With double-brokering, a logistics company will take a shipment that’s on a load board, then post it out again as a broker to a carrier at a lower price than what the load is paying, then pocket the difference. Sometimes a scammer disappears with all the proceeds, leaving the motor carrier holding the bag.

The Federal Motor Carrier Safety Administration went through a recent rulemaking process to try to clarify definitions of broker, bona fide agent, and dispatch service. Double brokering was often brought up as part of that discussion, but FMCSA said “double brokering” is not a term defined by statute or regulation and did not address it in this regulation.

Lewis says the deregulation of the trucking industry in 1980 allowed the growth of some of the challenges now related to defining brokers and providing oversight of things like double brokering.

The first time the law defined an authorized broker was in 2012. With that change, those wanting to conduct business as brokers had to apply through the FMCSA to do so. The agency created civil penalties for those who brokered freight without authorization and launched a national consumer complaint database.

Reinke says now, just 11 years later, there are more than 18,000 complaints in the national consumer complaint database of unauthorized brokering or outright fraud. But even with so many complaints, she says, FMCSA has never issued a single civil penalty.

An administrative law judge ruled in 2019 that the FMCSA didn’t have the authority to assess civil penalties for unauthorized brokerage, reported the Wall Street Journal earlier this year. Instead, the agency encourages brokers, carriers and shippers to check the FMCSA registration status of companies they work with.

“There’s always been some element of fraud. But it has expanded,” Reinke says. “And one of the reasons is there is no federal enforcement,” making it attractive for criminals to get into the business “if it seems like it's a crime without punishment.”

Fighting Fraud

“The most important thing is to double-, triple-check everything,” Hutto says.

For a shipper or broker, “If you sign up a carrier to haul the load, make sure you understand where they’re domiciled, how long they've been in business,” he says. “Double and triple check that they’re an actual good player in the marketplace or a valid player in the marketplace.”

The same goes for carriers, who need to verify the brokerage company they’re getting that freight from. Is that the actual location of the brokerage company? How long have they been in business? Where's their security bond from? Are they a TIA member?

“We're going to put an effort towards making sure that people on our system are valid players,” Hutto says. “Are we 100% accurate? Nobody is, because of the size of the marketplace. But make sure who you’re dealing with has been in the marketplace a long time.”

Companies offering digital freight booking, such as Truckstop, Transfix, and DAT, also have been putting in place technology-based solutions to help.

DAT, for instance, has gone from simple security protocols to what it says are some of the most sophisticated technologies available. This includes automatically monitoring user behaviors and blocking risky users before they can log on and using artificial intelligence and machine learning to validate user identities and scrutinize suspicious accounts.

The Best Defense

Brokers, shippers, and motor carriers can all fall prey to those using fraudulent methods to impersonate, misdirect, or steal. But the most effective way to combat the threat is due diligence.

The best answer for now is better vetting of who you are dealing with in any capacity, or as Lewis suggests, “slow the roll.”

J.D. Weisbrot, managing director of Risk Strategies’ commercial surety division, says carriers can check for fraudulent brokers by looking up the name of the company on the Federal Motor Carrier Safety Administration’s website, which has all of the registered information for the freight broker.

With the broker’s motor carrier number, you can find their address, their phone number, what insurance they have on file, if it is active or in cancellation, and previous insurance history. Weisbrot says it would also be wise for any carrier to contact the freight broker directly using the contact information that is published on the FMCSA website, which has already been vetted — not the information they’ve gotten from the broker or load board. Some companies have gone so far as to create fake websites with the name of the broker they’ve appropriated.

This type of fraud and theft is not something that can be eliminated by computer security companies. It is not as simple as finding and removing malware, a virus, or such.  It is much more like battling a con artist who is always learning new tricks.

Lewis says logistics companies are going to have to start hiring people from the credit card or banking industry who are familiar with similar scams and frauds and will buy the software needed to look for problems such as fake email addresses and fraudulent attempts.  

He suggests every trucking company should employ a security person who’s working to safeguard against bad actors.

“The problem is we need to start blaming the bad guy, and not the good guy, the carrier or the logistics company,” Lewis says. “We have a problem with bad people doing these things. We all need to work together as a team, figure out how to stop it, and figure out a way to put them in jail.”