Common Types of Freight Fraud and How to Avoid Them

November 27, 2024

Freight fraud is on the rise, putting your business at risk. From stolen cargo to fake deliveries, fraud disrupts your supply chain and hurts your bottom line.  Safeguard your shipments and your revenue by learning how to fight back. 

At Chief Carriers, we’re committed to the safety and security of our partners. That’s why we want to educate you about the risks of freight fraud and provide you with practical tips and strategies for avoiding them.

What is Freight Fraud?

“Freight fraud” refers to any deceptive practice or illegal activity that occurs within the logistics industry. It often involves the manipulation of shipping documents, cargo diversion, identity theft, or other fraudulent schemes to gain financial advantage by stealing or misdirecting shipments. 

Freight fraud is typically committed by impersonating legitimate carriers or shippers to deceive parties involved in the transportation process. The most common types of this fraud include:

Freight Broker Fraud

Broker fraud occurs when a freight broker takes payment for a load but never actually delivers the goods. This can happen when a broker uses a fake identity or disappears after receiving payment. 

To avoid broker fraud, verify the legitimacy of any broker you work with. You can do this by checking their registration with the Federal Motor Carrier Safety Administration (FMCSA) and by looking for reviews and testimonials from other businesses.

Double Brokering Scams

Double brokering is a type of fraud where a broker re-brokers a load to another carrier without the knowledge or consent of the original shipper. This can lead to delays, damaged goods, and even cargo theft. 

Red flags of double brokering include below-market rates and requests for quick payment. To avoid this scam, make sure you have a clear contract with your broker that prohibits double brokering.

Fake Logistics Fraud

In this type of fraud, scammers impersonate legitimate logistics companies to steal money or cargo. They may use phishing emails, fake websites, or even create fake social media profiles. 

To protect yourself, always verify the identity of any logistics provider you’re considering working with. Check their website, contact information, and online reviews.

Load Board Fraud

Load boards can be a valuable resource for finding carriers, but they can also be breeding grounds for scammers. Be wary of listings that offer unusually high rates or require upfront payment. Always do your research on any carrier you find on a load board, and be sure to use a reputable platform.

Cargo Theft

Cargo theft is a major problem, with billions of dollars worth of goods stolen each year by thieves targeting trucks in transit, warehouses, or even distribution centers. To prevent cargo theft, use secure parking facilities, install tracking devices on your vehicles, and implement security measures at your loading docks and warehouses.

Fictitious Pickup/Delivery

This scam involves falsifying pickup or delivery confirmations. The scammer may provide fake documents or even bribe drivers to confirm that a shipment has been picked up or delivered when it hasn’t. To avoid significant financial losses and supply chain disruptions, use a robust tracking system and verify all pickup and delivery information independently.

Short Shipments

Short shipments occur when a shipment arrives with fewer goods than expected due to theft, error, or even deliberate fraud. To prevent short shipments, ensure that all goods are properly counted and documented at both pickup and delivery. Use clear labeling and packaging to make it harder for missing items.

How to Avoid Freight Fraud

As the saying goes, “Forewarned is forearmed.” Knowing the signs of freight fraud can help you spot red flags and take steps to keep your cargo and your business’s finances secure.

Due Diligence

Thorough research and verification are essential for preventing freight fraud–always vet potential brokers and carriers carefully. Use the FMCSA’s SAFER system to check their credentials, registration, insurance, and safety records. 

Shipment Tracking

Use technology to your advantage by implementing a Transportation Management System (TMS) and tracking software. TMS software provides real-time shipment visibility using GPS for accurately tracking locations, estimating arrival times, and monitoring carrier performance. It enhances cargo security by tracking high-value shipments and capturing electronic proof of delivery.

Data Protection

Implement strong cybersecurity measures to protect your company’s data. A combination of secure authentication and access control, network security, data protection, employee training and awareness, software and hardware security, and vendor risk management can reduce the risk of unauthorized access to your company’s data and protect your business from fraud.

Secure Payment Practices

Use secure payment methods and avoid risky practices like paying in cash or wiring money to unknown individuals. Establish clear contracts and agreements with all parties involved in your shipments.

Industry Resources and Best Practices

Stay informed about the latest fraud trends and best practices by consulting industry resources like the FMCSA and the Transportation Intermediaries Association (TIA). These organizations provide valuable information and guidance on how to protect your business from freight fraud.

What to Do if You Experience Freight Fraud

If you find yourself the victim of freight fraud, there are some steps you should take as soon as you suspect fraud may have occurred. Acting quickly can help minimize the damage caused by the fraud, increase your chances of recovering losses, and stop the scammers from striking again.

  • Report the incident with local law enforcement: File a report that provides all the details of the fraudulent activity, including any documentation or communication you have with the scammer.
  • Report to the FMCSA: Report the incident to the FMCSA by filing a complaint with the National Consumer Complaint Database (NCCDB).
  • Report to the USDOT OIG: Contact the U.S. Department of Transportation’s (USDOT) Office of the Inspector General (OIG) Hotline at (800) 424-9071 or online at https://www.oig.dot.gov/hotline.  
  • Contact your insurance company: Contact your insurance company immediately to report the fraud and file a claim if you have relevant coverage.  
  • Alert load boards and factoring companies: Inform any load boards and factoring companies you work with about the fraudulent activity to prevent further scams and protect others in the industry.
  • Notify customers: If the fraud has impacted your ability to fulfill orders or deliver goods, communicate with your customers to explain the situation and provide updates.
  • Contact the carrier: If you’re a broker who has been victimized, try to identify and contact the actual carrier who handled the load. They may also be a victim of the fraud and could be helpful in resolving the situation.
  • Consult an attorney: Consider seeking legal advice from an attorney specializing in transportation law or fraud. They can guide you on your rights and options for recovering losses.

Protecting Your Shipments From Fraud

Don’t let your business become an easy target. Freight fraud is on the rise, but by knowing how to spot the signs and what preventive steps to take, you can protect your company from these costly scams.

As a leading flatbed trucking company, Chief Carriers takes freight fraud seriously. We’re committed to providing our partners with the resources and knowledge they need to navigate the complexities of the trucking industry, including fraud scams. By working with our sister division, Chief Logistics, we help protect your business from freight fraud to ensure the continued success of your operations.

To stay up to date on trucking industry issues, listen to our trucking podcast, Driven Too Far, for tips and stories from truckers on the road.