Fuel fraud: The ‘silent epidemic’ facing the trucking industry

Does it feel lately that, every time you turn around, someone’s trying to rip you off? I wouldn’t blame you. I’ve spent enough time lately writing about clever and highly effective ways the criminal element is using technology to target our industry.

Cargo theft isn’t a new issue, but it continues to worsen. Freight fraud brings it to a whole new level, with bad actors posing as legitimate operators to pick up your loads, stealing them outright or holding them hostage for ransom.

Then there’s the increased prevalence of cyberattacks targeting the transportation industry. You can read here about how and why hackers are honing in on the trucking industry. But there’s another form of fraud that’s happening right under your noses, it’s rampant, and it’s not well understood or managed.

I’m talking about fuel fraud. And not just that guy with the hose and a gas can crawling around your yard at 3 a.m. Fuel card and telematics company Motive conducted a third-party survey of fleet managers and found nearly 50% estimate up to 5% of their total fuel spend is fraudulent. In that case a fleet of 200 trucks would hemorrhage about US$500,000 a year in fraudulent fuel purchases. Who can afford that?

And the true costs could be much higher. The company reports that most fleets use disparate systems to track fuel spend and other operating metrics, including fuel consumption. That disconnect means it’s difficult to detect fraudulent fuel purchases and to justify investing in technologies that can help eliminate them.

Low-tech and high-tech fuel fraud

Thieves are becoming increasingly sophisticated in how they conduct fuel fraud. While this activity can be decidedly low-tech — like the driver filling up some jerry cans for personal use while topping up the company truck — fuel theft is increasingly the domain of organized criminals. They use card-skimming to replicate fuel card and pin data, then use those cards to finance other purchases.

Or, they may just collect user information and sell that data on the dark web as part of a burgeoning Fraud-as-a-Service business. (And why wouldn’t Fraud-as-a-Service be a thing, these days?)

The industry is beginning to take notice. Jim Ward, president of the Truckload Carriers Association (TCA) was in Mississauga recently for the TCA’s Bridging Border Barriers conference and he had this stark warning about fuel theft: “It’s cartels,” he said of who is behind the increasingly sophisticated fuel fraud schemes.

“Their level of sophistication is pretty amazing. The amount of theft taking place, possibly from your drivers and fleet cards, is pretty scary. You could be buying fuel up here and by the time the driver pulls out of that plaza, fuel is being purchased in Florida and Texas [using your fuel cards]. It’s big numbers, big gallons, and big dollars.”

It’s an issue Ward said TCA plans to address more aggressively in the near future. And for good reason. Hemant Banavar, vice-president of financial products with Motive describes fuel fraud as a “silent epidemic” plaguing the trucking industry at a time of unprecedented – and still-rising – operating costs.

He said few fleets are proactively addressing the problem, because it’s difficult to detect and pinpoint the true cost of fuel fraud. But ignoring the problem could be much costlier.

While TCA says it’s prepping to tackle the issue of fuel fraud head on, the time couldn’t be better for fleets to take a close look at their own fuel purchasing histories and patterns. Look for suspicious activity. Set up fuel card limits and controls. Scrutinize your fueling network. And try to streamline your accounting and operational software so you can be more quickly alerted to suspicious activity.

Fuel thieves are getting smarter, and our industry must respond in kind.