Carrier verification key to fighting freight fraud

Freight fraud in the logistics space is growing rapidly. Cargo theft surged 86% year over year in the fourth quarter of 2023, according to Cargo Net. 2024 is anticipated to have record-high thefts. The schemes range everywhere from tractors picking up shipments and vanishing without a trace to thieves breaking into trailers and more. 

The problem is only getting worse, and it leaves shippers to mitigate risk themselves to combat losses. Some 3PL insurance markets aren’t covering clients’ risk when a load is tendered to one party but a separate party arrives at pickup – meaning that if a shipper incorrectly loads a trailer, it would be a claim for the shipper, not the insurer or the 3PL, to sort out.

From an insurance perspective, someone has to take accountability for the loss of freight. In some instances, insurance companies are looking to have shippers share the blame for fraudulent loads.

This is where shippers mitigating their risk comes into play.

“Shippers should look for correct wrap on the truck,” said Graham Gonzales, executive vice president of sales at Reliance Partners. “If the driver is designated, they should have questions when someone else arrives [and ensure that] BOL information is a match. If there is any suspicion that a document has been altered, shippers should ask the question and verify with the broker.”

What should shippers do when an incorrect carrier arrives? That’s the million-dollar question. There will be some honest mistakes, but for the most part, bad actors are looking for shippers that don’t verify information as a way to abscond with a trailer full of goods.
Officials with the Federal Motor Carrier Safety Administration say there are no specific rules for warehouses or logistics centers requiring them to ask for truck drivers’ information, even if the carrier is supposed to be certified for the Customs Trade Partnership Against Terrorism program.

If a fraudulent carrier is found at pickup, Gonzales says, “Shippers should not load that carrier. Shippers should contact the non-emergency police line to report potential fraud and notify the freight broker who may have placed several loads with this company so they can be diligent in exploring other potential thefts.” 

Shippers should also strengthen internal vetting processes – especially as fraudulent carriers’ tactics are evolving at an alarming rate.

“Many have a network of several fraudulent companies that are affiliated and can easily switch out drivers and equipment,” Gonzales said. Shippers don’t always have the resources necessary to verify this or catch possible repeat offenders that may be coming from a 3PL or freight brokerage.

Shippers that take time to establish a set of protocols for verifying carriers have seen a reduction in fraud. That is particularly important as there is – as yet – no industry-wide verification standard that will be effective against all fraudsters’ ever-changing tactics.

In California, for example, many shippers are now fingerprinting drivers and requesting to view their material insurance cards. Drivers who refuse to participate in these verification processes are often being turned away as the potential for fraud is too high should the names on the card differ from that of the trucking company assigned. 

The industry sits at a crossroads. Bad actors have highlighted the inadequacy of fragmented, company-specific verification methods. But this realization has sparked a growing movement toward industry-wide standardization of verification protocols.

Gonzales said he favors standardized verification protocols for shippers industry-wide, noting that broker partners and technology players are seeking to convince shippers this is important.

“However, pickup locations can vary so widely from a construction site to a secure warehouse to a cross-border transload facility. … It will take time, but shippers can and are being educated on the crucial role they play. Them not verifying leads to theft claims. This leads to higher insurance premiums across the board for brokers and motor carriers. This leads to narrower margins for these companies, and those on the edge of solvency may fail. In an indirect way, not verifying carrier identities may speed up the rate at which some logistics businesses fail.”

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