How to Protect Your Business From Shipping Fraud

Fraud is an industry-wide problem with devastating effects. And while technology has expedited matching carriers and brokers to get freight moved, it’s also opened up new opportunities for savvy fraudsters to intercept goods and payments.

“Minimizing exposure to fraud requires vigilance from shippers, brokers, and carriers. Using transportation technology, such as load boards, that prioritize security helps identify and mitigate any suspicious activity, at scale, before it impacts your bottom line.” Chief Product Officer at Truckstop, Julia Laurin.

Shipping fraud specifically increased nearly 800% worldwide in 2021 with no sign of slowing down. As more and more digital platforms are used to obtain goods and services since the pandemic, fraudsters continue to try to cash in, costing the freight industry hundreds of millions of dollars.

What is shipping fraud?

Shipping fraud occurs when a fraudster uses fake or stolen credentials to pose as a shipping customer in order to steal deliveries or illicit payment intended for the legitimate seller. They digitally intercept a shipment so it’s delivered to their own address and not the address of the original well-intended buyer.

The fraudster does this a number of ways:

• They create a fake online account and change orders to include high-dollar goods.
• They modify orders to re-direct the shipment to a different destination.
• They impersonate a legitimate customer via phone, changing account info, order details, and credit card data.
• They register fake accounts in mass and use them to track and re-route packages and spam legitimate consumers with malicious advertising requesting their data for criminal use.

Ways shipping fraud impacts brokers and carriers

Shipping fraud is a huge financial problem and can wreak havoc on freight businesses, including freight brokers and freight carriers who get caught in the middle. If you unknowingly book a fraudulent shipment, you could get stuck paying for fraudulent credit card charges, or face legal liability.

Shippers of goods rely on the brokers and carriers they hire to get cargo to its intended destination safely. When that doesn’t happen, broker and carrier reputations can suffer, resulting in the loss of long-term business relationships and reliable payment opportunities

Brokers can also be held liable for lost goods, depending on what due diligence was performed to ensure the legitimacy of all parties involved in a particular shipment. For example, if a broker fails to verify credentials and cargo gets stolen or delivered to a fraudulent address, that broker could be held accountable, even if they weren’t directly or intentionally involved in the malicious scheme.

5 tips for avoiding shipping fraud

As fraudsters increase become more strategic in their attempts, the freight industry brokers and carriers need to be vigilant in their efforts to vet every transaction and haul. Awareness is critical, as is arming yourself with tools that help detect inconsistencies.

Here are 5 tips to fend off fraud and mitigate risk to your freight business.

1. Consider location.
   Check the pick-up and delivery locations and addresses against the information you were given. If addresses don’t match or look suspicious, call the original shipper to verify and confirm the legitimacy of the addresses. If the drop-off area is an abandoned building or lot, take notice. Oftentimes, storage units are legitimate drop locations, but sometimes storage units are used for stolen goods obtained by illegal measures. If the drop-off locations seems suspect for any reason, ask for more details.
2. Verify contact information.
   Check names, phone numbers, and email addresses in the contract against your confirmation information to spot inconsistencies. When onboarding a new carrier hire, make sure you have a process in place that quickly identifies the potential of fraudulent activity and alerts you to changes.
3. Watch for communication issues.
   Communication should always be clear, both literally easy to hear and clear in what it’s attempting to communicate. Unstable connections, dropped calls, static, or confusion in communicating should alert you to potential issues. Bad actors use VoIP lines to conceal their location and identity, so you should always check the number that’s calling you against a company’s contact list or other verifiable documentation.
4. Scrutinize suspicious pricing.
   If the pricing seems out of the ordinary or too good to be true, double-check rates in the lane or geographical area. Utilize data to help you understand what a typical rate should be for the type of haul you’re moving. Due diligence can save you time and money.
5. Don’t fall for prepayment schemes.
   There’s absolutely no reason to pay or expect to be paid by anyone until the designated work has been completed. If a customer is offering to pay you, yet you haven’t moved their load, it’s probably too good to be true. Conversely, you should never be asked to pre-pay a carrier for work yet to be done. If a situation requires pre-payment on either side of the transaction, make sure you clearly understand why, ask questions, or just say no.

Protect your business

The best way to protect yourself from fraud is with proactive approach. Ask questions, be aware, and leverage data to help you assess that every load is legitimate. Rely on resources like the FMCSA and your professional network to stay informed on the latest trends, uncover patterns, and incorporate practices to minimize risk.

Be proactive in the fight against fraud

Truckstop RMIS Carrier Onboarding and monitoring helps you identify and mitigate identity theft and suspicious activity before it impacts your bottom line. Get daily status updates, change notifications, and carrier directory sourcing tools to save you time and protect your business.