Freight Fraud Trends: Warning Signs and Insurance Insights

Truckstop Fraud Prevention Friday looks at the most common methods of freight fraud, warning signs to watch for, and ways to safeguard your business

Freight fraud is on everyone’s radar as it only continues to be more prevalent in the trucking industry. And while prevention measures increase, it’s still causing havoc for brokers, truckers, and shippers financially. Data from a 2023 study by the Transportation Intermediaries Association (TIA) shows that the trucking industry experiences an alarming annual loss of over $1 billion due to fraudulent activities. 

This staggering statistic emphasizes how serious the problem is and the importance of extra vigilance and effective countermeasures. As fraudsters continue to find new ways to commit theft, both physically and virtually, it is crucial for everyone involved to establish strong protective measures and work together to reduce the impact of bad actors. 

We sat down with Chad Eichelberger, President at Reliance Partners, to look at the most common methods of freight fraud, warning signs to watch for, and ways to safeguard your business from significant losses.

The Most Common Fraud Methods in 2023

Freight fraud tactics have evolved and become more sophisticated. While stealing physical cargo is still common, many of the most popular scams take place behind a computer screen. 

Here are the most common fraud methods in trucking today.

Double-brokering 

Double-brokering is the illegal transfer of a load contract without the shipper’s knowledge or consent. This scheme continues to be a persistent issue.

In double brokering scams, fraudulent players often receive a fuel advance from a freight broker on a double-brokered load and never pay the actual carrier. They accomplish this by impersonating an existing carrier to avoid detection.

Identity theft and impersonation 

Identity theft in trucking refers to the fraudulent use of personal information to gain unauthorized access to their accounts, haul details, or financial information. It typically involves stealing the identity of a carrier to exploit their credentials for financial gain or to conduct illegal activities.

To do this, scammers may change one letter in an email address of a legitimate broker or carrier to communicate with shipping companies and steal information. 

Fraudulent actors may hack into your online load board account, find an attractive load, impersonate you, and carry out a fictitious pickup. This allows them to secure entire loads of stolen cargo that they can resell or discard.

Authority Purchases in Bulk

Scammers are obtaining trucking authority and MC (motor carrier) numbers in bulk in order to carry out multiple schemes at the same time. 

Sometimes a bad actor will use these MC numbers to operate for a time as a legitimate business, then suddenly take on a lot of loads at once with multiple freight brokers before disappearing.

Red Flags to Watch For

Fraudulent players in the freight industry often go undetected until it’s too late, making it crucial for brokers and carriers to be vigilant. When looking for loads and brokering deals, watch out for common red flags that could indicate fraud: 

• 3rd Party Payment App RequestsSometimes scammers will reference actual loads or personal details in order to hook you, and then offer a large sum of payment via a 3rd party app like Cash App or Venmo. They may ask for your login credentials in order to “complete the payment,” but this should always stand out as a red flag. Legitimate partners don’t need your credentials and will pay you through professional channels. 
• Load Confirmations Another red flag to watch for is suspicious load confirmation emails. If you receive a load confirmation under your name that you didn’t authorize, call your broker right away. If the broker doesn’t answer or is dismissive, they could be involved in the scheme. Contact the shipper and try to stop the process as soon as you can. 
• Rates Too Good to be TrueIf a high fulfillment rate seems too good to be true, it usually is. This is a common trap bad actors use to get brokers and carriers to agree to fraudulent contracts. It can also work in the inverse—fraudulent carriers or brokers might advertise a rate well under market value to entice shippers.
• Gmail and Hotmail AccountsAnother current red flag is the use of Hotmail and Gmail accounts. Most reputable freight brokers have their own email domain name, so watch out for generic accounts. Always double-check email addresses and other contact details when communicating with partners to look for misspellings that could indicate suspicious activity.

How Does Insurance Play a Role in Fraud Protection?

Insurance can be a very beneficial tool when dealing with fraud, but you should not count on an insurance policy to cover any and all losses. 

Understand your coverage

There are several instances in which insurance won’t be able to help recoup your losses. For example, if a load goes missing, contingent cargo is often not covered by broker insurance. Advance money is also not covered by insurance. Find out what your current policy does and does not cover to avoid surprise payments amidst acts of fraud.

Carriers who deal with fraudulent brokers will also be looking for repayment based on the too-good-to-be-true rate they were promised, and that often comes out of a broker’s pocket. 

Deductible payments

It’s important to know your insurance deductible and when you’ll hit that threshold. Often, you’ll have to pay thousands of dollars in order to reach your deductible before coverage kicks in. If you’re hit multiple times in a row by a scammer, you could end up paying a large sum out of pocket before cyber insurance is activated. 

How To Protect Your Business

For carriers, fraud can result in unpaid labor that takes months to recoup and a damaged reputation if you’ve been flagged due to impersonation. 

Brokers who get hit by bad actors repeatedly could find themselves hemorrhaging money trying to pay back carriers and cover your losses. 

There are several ways to protect your business against fraud, and it’s crucial to pay close attention to catch scammers in the act. 

1. Always set up multi-factor identification on any website you subscribe to. 
2. Use strong passwords and change them regularly. 
3. Watch for red flags and report any suspicious activity immediately.
4. Read contracts carefully—it can be easy to skim through contracts on autopilot, but small missed details could come back to haunt you later.
5. Pay attention at the pump—use your fleet card, and watch for card skimmers and other signs of tampering.

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