Today’s freight fraudsters are sophisticated, brazen, and coming for your cargo

Rob Hoffman was no rookie when it came to the freight business, and an unlikely mark for dubious brokers and carriers. So, the chief operating officer of Tampa, Fla.-based Dedicated Carriers was as surprised as anyone when he found himself at the center of a double-brokering cargo theft fiasco, which may have cost his company a major customer.

It began when Dedicated posted a load to a loadboard. A legitimate-looking carrier with a seemingly legitimate motor carrier number successfully bid on the load of yogurt, originating from Virginia and destined for Ft. Lauderdale, Fla.

When the load was in transit, Hoffmann received a call from a confused driver who had been assigned the load from the initial trucking carrier but saw Dedicated Carriers’ information on the bill of lading. The driver was confused because the broker who supplied the load asked him to reroute it to Dallas, Penn., without replacing the bill of lading.

“That, of course, got us wondering what was going on,” Hoffman recalled in an interview with Today’s Trucking. Dedicated Carriers contacted the original carrier that took the load, only to learn they were holding it hostage and demanding ransom that was twice the value of the load itself.

“We refused to pay,” Hoffman said. The driver who had the load didn’t know who to accept direction from and abandoned it. “In his defense, I guess it would be difficult for him to know which side was on the up-and-up,” Hoffman said.

Meanwhile, the company holding the load under the presumably fictitious name of GCB Logistics became aggressive in demanding the ransom. Hoffman reported the situation to the original shipper.

“We had talked to the customer, and we knew this was in all likelihood going to become an insurance claim,” Hoffman said. “We weren’t going to pay them. It just wasn’t going to happen.”

Dedicated Carriers turned to law enforcement for help. The FBI, Federal Motor Carrier Safety Administration (FMCSA), and police departments in Dallas, Penn., (where the load was being held), Ft. Lauderdale (where it was supposed to be delivered), Viginia (where it was picked up), and Tampa, where Dedicated Carriers was based, were all contacted. But Dedicated Carriers got the jurisdictional runaround, with neither agency taking action.

“The only ones we got any contact from was our local police department here in Tampa,” Hoffman said. “They said, ‘What do you want us to do? The truck may be in Pennsylvania. You don’t have any idea where it is. It’s really out of our jurisdiction.’”

As if that wasn’t bad enough, the thieves later returned under the guise of another carrier, Sultan Transportation, whose motor carrier number they stole, setting up fake Gmail addresses that included the Sultan name. Under that phony ID they claimed a second load from Dedicated Carriers, owned by the same shipper, and once again disappeared with the trailer, demanding a ransom. Hoffman acknowledges Dedicated Carriers failed in doing its due diligence this time.

In hindsight, Hoffman said, the Gmail account should’ve been a red flag.

“They got another load, and they did the same thing. It was to go from Virginia to Florida and he hired a truck and rerouted it to Texas,” Hoffman said. This time, the threatening calls demanding a ransom were originating from Armenia. Another load was lost. This time, so too was the customer.

“It was a significant amount of business,” Hoffman lamented. “About 1,200 loads a year. So, it did have a significant impact on us.”

Double brokering on steroids

Double brokering refers to scenarios in which a carrier or broker accepts a load and then brokers it out to a third party. In the past it was generally a victimless crime – not even illegal in Canada – that involved inserting a third party into the transaction without the original shipper’s knowledge. But the freight would usually be delivered, and everyone would be paid, albeit with an additional party also taking its cut.

That’s no longer always the case, according to Anne Reinke, president and CEO of the Transportation Intermediaries Association (TIA). As more freight transactions are done online, and with a soft freight market causing increasingly desperate carriers to jump on good-paying loads, this type of fraudulent activity is on the rise.

“While these crimes have always been around, they have escalated over the last two-and-a-half years,” Reinke said. “I think there are a lot of reasons. One is the digitization of freight. It’s easier to spoof. Second, the pandemic brought a lot of new entrants into the marketplace. In the last two-and-a-half years there was a lot of money to be made. Now, we’re in a freight slump. There’s less money to be made but still the same amount of actors, and so yes, there are probably some resorting to bad activities. And the last thing is, it’s become attractive to criminals because there’s no enforcement. It’s the perfect crime if you can make money and nothing’s going to happen to you.”

Since around 2012, U.S. FMCSA regulations under MAP-21 legislation have defined what a broker is, and placed requirements around a broker’s ability to enter the business, effectively making it illegal to broker loads without an authority to do so. But a national consumer complaint database set up by FMCSA to report such activity has received more than 80,000 complaints that Reinke said “have never been investigated or acted upon.”

Brent Hutto, chief relationship officer with U.S. loadboard Truckstop, also believes the soft freight market is making it easier to victimize desperate carriers. His company has seen a 400% increase in complaints about suspicious activities.

“In today’s market, getting a high-paying load is not normal,” Hutto explained. “It’s abnormal because the marketplace presently favors shippers. So now, [carriers] overlook the standard blocking and tackling they would do.”

Not in Canada?

Loadboards in the U.S., including Truckstop, have recently taken steps to increase their screening of brokers and carriers in their networks. Fortunately, such sophisticated freight fraud is less prevalent in Canada than in the U.S, according to Claudia Milicevic, president of Canada-run Loadlink Technologies.

However, that’s not to say double brokering doesn’t exist here. A recent white paper titled Double Brokering in the Canadian Trucking Industry, produced by the Canadian International Freight Forwarders Association (CIFFA), indicated it’s a major — and growing — problem.

“The practice of double brokering is now rampant in the industry,” the white paper declared. It raises three “potential perils” of double brokering: the load is diverted and not delivered to its destination; the carrier the load is double brokered to is involved in a crash; or payment may not find its way from the shipper to the carrier that delivered the double-brokered load to its final destination.

“With each added layer in the logistics equation there is increased risk that there will be a failure in payment,” the white paper asserts.

Co-brokering, on the other hand, is accepted in both the U.S. and Canada, and commonly occurs when one carrier or broker works with another to manage excess capacity. Co-brokered loads are shared between multiple entities, with each stakeholder aware of the transaction’s monetary details.

Fighting back

The best way to avoid being caught up in digital freight fraud is to know who you’re dealing with. But steps that must be taken to validate the identity of a broker or carrier may be overlooked when times are tough and carriers become increasingly desperate for freight that pays, or when the opposite is true, and carriers or brokers are too busy handling shipments to do thorough due diligence.

“They know when to attack,” Hutto said of bad actors who’ve infiltrated the freight market. “They attack when people aren’t paying attention or when they’re a little bit more aggressive or desperate in the market.”

“We’ve changed all of our standard operating procedures when it comes to booking a carrier.”

Rob Hoffman, Dedicated Carriers

To begin with, Hutto suggested being extra vigilant when a load pays an abnormal amount. “If it’s a $2,500 lane and somebody advertises a $4,000 load, it’s probably too good to be true,” he reasoned. He also suggested looking into a broker’s history. Normally, longevity is a sign of stability. If they’ve been in business for less than a year, Hutto advised affording them some additional scrutiny. (An FMCSA database will reveal when a brokerage was formed).

Tools such as two-factor authentication are now being offered by some loadboards, and Hutto recommends taking advantage of them.

Lessons learned

Back at Dedicated Carriers, these and other theft prevention initiatives are being more diligently followed in the wake of the two stolen loads.

“In one way it was a blessing in disguise,” Hoffman said of the experience, which led to the company doubling down on security. “We’ve changed all of our standard operating procedures when it comes to booking a carrier.”

Simply verifying a carrier’s email address is a step that should always be taken and could have helped to prevent the second theft that Dedicated Carriers suffered. The company now consults carrier monitoring services such as Carrier 411 and publicly available FMCSA databases to validate potential partners. Contact information within those databases is matched to the paperwork in the company’s own carrier packets.

Drivers are asked to submit pictures of their trucks, trailers and licence plates so Dedicated can verify they actually exist, and that the carrier has the equipment to move the load. Those images are sent through to the receiver to ensure the right entity arrives with the load.

The company has also increased communication with drivers. “We are insisting on getting a driver phone number and talking to that driver before pickup and through the transportation of the load,” Hoffman said. “It’s really simple things, actually, but just by doing those things we have avoided this happening again.”

Internally, the company also prefers dealing with partners it knows.

“I am incentivizing our brokers and sales teams for utilizing carriers multiple times a month,” Hoffman said. “They’re paid an incentive for using a particular carrier at least 10 times a month.”

TIA’s Reinke, who is increasingly frustrated with the lack of enforcement support from the FMCSA and law enforcement agencies, has some advice as well. The group of freight intermediaries has set up a Fraud Task Force to help its members avoid such crime. Her advice also involves developing relationships with partners. If a carrier on Carrier 411 or in the FMCSA records indicates it has a truck, but zero drivers, miles or inspections, beware, she warned.

“We’re looking for carriers that have 10 trucks or more and millions of miles,” she said. “Multiple drivers. If they can’t show that, your radar needs to go up.”

This is common because those looking to double broker loads will often first identify as a carrier. Reinke suggested looking closely at the bill of lading to ensure all contact information matches up with what should be there. Hutto adds details like phone numbers, addresses, and names need to be verified. Be skeptical of random loads offered by email or text, which could be phishing schemes.

Those same precautions hold true in Canada as well, where CIFFA notes, “control in the selection of who the performing carrier will be and in the contractual relationship is critical in managing business risk.”

The TIA is working with the National Association of Small Trucking Companies in the U.S., petitioning the U.S. Department of Transportation to create a fraud task force to investigate this type of crime. Reinke predicts this type of cargo theft totals US$800 million to $1 billion a year.

“It’s an enormous problem,” she said.