Last October marked the nation’s first Freight Fraud Awareness Day. Lawmakers are also working hard to prevent trucking company owners and drivers from being victims of fraud. We hope that the Household Goods Shipping Consumer Protection Act passes this year, to allow the FMCSA to have more power in ending freight fraud.
Freight fraud is on the rise, and politicians are working on passing better laws. One of the more alarming cases involved a seemingly official email requiring companies to complete steps to pass a new FMCSA safety audit by going to a faked FMCSA website and submitting the required documents.
People who fell for it ended up sharing private information like a USDOT PIN and SSN, which enabled the bad player to change company information in the FMCSA’s file. We haven’t heard of anyone falling for this, thanks to multiple warnings on trucking websites. If you have shared information with a fraudulent site, don’t hesitate to report the FMCSA and FBI.
How Serious Is Freight Fraud?
In the U.S., losses from cargo theft are in the $15 to $35 billion range. More than three-quarters of the estimated 24 daily thefts occur during the work week (Monday to Friday). This fraud is making businesses wary of working with a new carrier, and carriers are hesitant to work with a new broker or shipper. Fraud is too prevalent to take risks.
The National Insurance Crime Bureau has tips to help fight freight fraud, including:
- Adding alarms to your vans, trucks, and trailers, buildings and garage bays, and warehouses.
- Having a plan in action for in-transit thefts, such as not leaving engines idling with doors unlocked.
- Holding regular training programs to teach how to identify, handle, and prevent cargo theft.
- Making sure your clients follow the same security measures you use.
- Running background checks on all employees, drivers, and office workers.
- Turning on real-time alerts on your mobile devices.
Finally, before you take on a new client, verify their credibility. You do not want to agree to work with a broker, shipper, or other customer without checking their credit report, researching their contact information online, and reading news stories to ensure they’re legitimate.
It Can Happen to Anyone, Recent Freight Fraud Cases
Freight fraud can happen at any time to any company or driver. It makes brokers and shippers cautious, and that makes it hard to get work. Truckers also need to be aware of common scams. Staying alert is important, and so are rigid verification measures. Take a closer look at some recent cases.
Agility Express
Last summer, a company called Agility Express demanded payments from 22 freight brokerages. Agility Express held 50 loads over just over a week and demanded brokers pay up if they wanted their goods delivered. After calling police, brokers were told it was a civil dispute and that police couldn’t help them. Once the news went public, some carriers were able to recover their freight, but others were unsuccessful.
Agility’s CEO didn’t make a public statement, but others spoke up saying that the company was using blackmail tactics for debt collection. They claim carriers were short changed due to incorrect payments or fees for missing appointment times or missing products, and this was the best way to get that money.
Flycatcher
An English toy company hired several U.S. trucking companies to deliver their toys to distribution centers in Atlanta, Georgia. Scammers were behind the companies, and used double-brokering schemes to steal the merchandise. Two trucks ended up in Los Angeles while a third was never found. The stolen toys ended up for sale online at extensive discounts.
Ye Olde Butcher Shop
Another type of theft is more of the old-fashioned type where thieves broke into a refrigerated trailer and stole merchandise. Security cameras caught a pick-up pulling up to a trailer that was waiting to unload. The thieves used bolt cutters to cut the lock and stole 27 boxes of mixed and assorted meats, a half a hog, and four orders of venison.
Understand the Different Types of Freight Fraud and How Verification Helps
Freight fraud is extensive and occurs in many ways.
- Advance Fee Fraud – A client asks you for an advance payment to cover things like permits, but those permits aren’t necessary.
- Cargo Theft – A fake carrier agrees to haul a load, picks it up, and disappears like happened to that toy company. It also occurs when someone breaks into a trailer or steals a loaded trailer, aka a hook-up-and-go theft.
- Cyberattacks – Cyberattacks, specifically ransomware, lock up a broker, shipper, or carrier’s computer systems and demand payment in exchange for the key needed to restore access.
- Double Brokering – Double brokering occurs when a freight broker agrees to arrange transportation, takes the money, and turns around and gets another broker to make the arrangements without permission from the shipper or payment to that second broker.
- Fuel Fraud – Fake carriers request a fuel advance from the shipper and disappear with that money without ever delivering the items to the correct location.
- Identity Theft: Bad players create fake profiles as a legitimate broker, shipper, or trucker and take jobs asking for advance payment, and disappear once the payment clears. This can also happen when a person poses as a carrier, picks up cargo, and disappears.
- Load Scams – Bad players pretend to be legitimate carriers looking for work. They book loads, ask for a cash advance to cover things like fuel or permits, and disappear.
- Phishing: Like the situation earlier, the bad player poses as someone else, often an official agency or business, and has a fake link that asks for private information like SSN, EINs, account numbers, etc.
These are the most common types of fraud, but there can be others. For example, a new client sends a check that’s more than you quoted. The client then asks you to cash the check anyway and wire the overage back to the client. Do not cash the check. It’s a common scam where the check bounces, and you’re out the money you wired to the client and all bounced check and overdraft fees.
Tips for Avoiding Freight Fraud
Because there are so many kinds of scams, you must be on your toes. Running credit checks helps find legitimate businesses, but it’s not the only thing to look at. Do a search for any phone number you’re given. Does it return to an official business website? If you search the address on maps, does it lead to a legitimate location or an empty lot?
Take the company’s name and search it for news, forum posts, and business listings. If there are a lot of complaints on forums or sites like the Better Business Bureau, it’s better to move on to legitimate offers.
Trust your gut instincts. If a potential client offers rates that seem too good to be true, it could be a scam. If you get emails from an official agency, don’t click any link. Go to the official website and look for information that matches the email. Access the link from the official site.
How Can Freight Factoring Help?
Freight factoring is your first step in avoiding scams. Run credit checks on all new clients. The factor has databases full of broker, shipper, and carrier ratings, which helps you avoid possible scams. Ask for information like this before taking a job.
Saint John Capital provides unlimited free business credit checks. Take the first step and partner with us to get paid quickly. At the same time, you’ll gain a valuable fraud-fighting tool that helps you do your research before agreeing to haul for a new broker or shipper.
