There have been numerous reports of sophisticated freight fraud schemes. One common scheme is double-brokering, where a carrier who accepted a load from a broker re-brokers it to another carrier without the original broker’s consent. This leads to payment disputes, delays, and liability issues. Double-brokering can also help fraudulent carriers or brokers steal loads, leaving shippers and logistics providers high and dry when insurance claims are denied.
Retailers are also plagued by organized crime rings throughout their supply chains. The 2023 National Retail Federation Retail Theft study found that retail shrink, or loss of inventory, totaled over $112 billion in 2022, with theft making up two-thirds of that. Solving organized retail crime has become a higher priority for retailers, with 78% noting an increased focus compared to the previous year.
Fraudsters have become more adept at identity theft, using phishing emails to steal business information, take over load board accounts, or create new ones to plot and manage criminal acts. Multiple carriers have reported scammers attempting to steal Department of Transportation (DOT) PINs through new carrier onboarding tools of fraudulent brokers and fake New Entrant Safety Audit emails purportedly from the Federal Motor Carrier Safety Administration (FMCSA).
Fraud is not new, but it has evolved. A seasoned freight professional explained that double-brokering was already a major problem in the 1980s. Today’s digital environment has created a lack of transparency, enabling fraudulent behavior. With high-volume transactions and a desire for speed, there is little general awareness of who is being engaged with, making it easier for fraud to occur.
Over the past few years, identity and validation technologies have been developed to help mitigate these crimes. Companies like Highway, Carrier Assure, Verified Carrier, and FreightValidate offer strategies to help shippers and brokers make educated decisions. However, most industry professionals find that while these technologies can help, they do not solve the problem completely. Adoption of a zero-trust framework has been one approach to de-risking against fraud and other cybersecurity issues.
The FMCSA oversees double-brokering schemes and gained the authority to assess civil penalties of up to $10,000 per incident through the 2012 Motor Carrier Protection Act (MAP-21). However, the 2019 Riojas decision complicated enforcement, as the FMCSA was deemed not to have the legal infrastructure to handle criminal cases, which are instead handled by the Department of Justice (DOJ).
Industry professionals reached out to both the FMCSA and the DOJ for more information on how they plan to increase public outreach on fraud-related issues. The FMCSA noted that it is still assessing the relationship between motor carrier safety and the incidence of unlawful brokerage and lacks data to quantify or confirm a safety impact.
To address these problems, collaboration and transparency at all costs are crucial. Industry professionals suggest that load board providers take a better approach toward verifying users and more quickly removing those who draw complaints. Educating shippers to help verify carriers can also prevent fraud. Until freight fraud becomes less economically attractive to bad actors, it will remain a significant challenge.
At PNG Logistics Co., we are taking all precautions in not tendering loads to other brokers and working directly with verified trucking companies to complete the tasks delegated to us by our customers. By prioritizing direct relationships and thorough verification processes, we aim to mitigate the risks of freight fraud and ensure reliable service for our clients.
