The Changing of Cargo Theft and Fraud in a Digital Age

05/24/2024 by Kristin Deno

The Changing of Cargo Theft and Fraud in a Digital Age

Cargo theft and fraud is a common topic in many circles these days. No matter where we look, we see it mentioned in news headlines and see its impacts on price increases on the store shelves. In fact, CargoNet recently shared data showcasing that cargo theft has reached a 10-year high, increasing 59 percent year-over-year (YoY) in the U.S. alone.

While cargo theft and fraud have always been a risk in the world of logistics, the kind of theft and fraud we see today is evolving from what we used to know. Years ago, common cargo fraud involved extortion attempts via loads held hostage as well as t-check scams, where bad actors would book shipments and ask for a fuel advance, take the money, and disappear, often without completing delivery or even picking up the shipment they received the payment advance for.

While these kinds of fraud still occur, they are not as prevalent as they once were. Today’s cargo theft and fraud involve new strategies, and it’s important that companies stay aware of emerging tactics and remain vigilant to protect themselves from unnecessary and tragic losses.

The Evolution of Cargo Theft and Fraud

In the past, cargo theft was commonly known as the act of stealing from a truck or even unlawfully taking cargo from a storage facility. Usually this might occur when the truck driver was asleep or when the parked truck was left unattended in an unsecured lot. Now, cargo theft claims for lost product can be especially difficult to navigate as many insurance carriers have specific language and exclusions written within the pages of cargo policies limiting circumstances under which they will cover cargo payment for cargo theft incidents.

For example, some policies may dictate that the truck must travel within a specific radius only and cannot be left unattended unless in a secured lot. Unfortunately, the definition of “secured lot” is wide-ranging and debatable. Does “secured lot” mean there’s a locked fence, good lighting, cameras, surveillance, or a physical security employee on patrol? There’s simply a lot of confusion and unknowns when it comes to cargo theft in general.

The Federal Trade Commission (FTC) recently reported that the top scam type for 2023 involved imposters. We in logistics and other sectors have been experiencing this concept. Scenarios expand beyond just plain and simple identity theft, at least in the logistics industry. The current phase of cargo theft involving identity misappropriation is very strategic. In fact, CargoNet also shared data that strategic theft has increased 430 percent year-over-year (YoY). As quoted by Scott Cornell of Travelers Insurance, “Strategic theft is when they use various means to trick you into giving them the freight and that’s through methods like identity theft, fictitious pickups, double brokering scams, those methods are where we’re seeing the biggest increase over the last 18 months.”

This strategic cargo theft makes incidents that were already puzzling that much more difficult to solve. This kind of cargo theft often spans over multiple state lines (interstate) as opposed to intrastate. When this occurs, jurisdiction is not given to local or state authorities but may extend to federal jurisdiction. However, to establish a case seeking federal help, not only would more than one state need to be involved, but the cargo value must warrant federal attention to exceed $100,000 and perhaps even $500,000 or more, depending on the states involved. You may have police consider strategic cargo theft a civil matter that will not be taken under investigation.

Further, with these scenarios, there is confusion concerning who takes or issues the theft report Should that be the shipper, the receiver, or the freight broker? Is the report filed with law enforcement jurisdiction at the origin where freight was often last seen, or should reports be filed at the delivery jurisdiction, where the cargo never arrived? The cargo owner may attempt to file a police report where the transfer of goods occurred, which is the location where the driver took possession of the cargo for transport. 

The State of Strategic Cargo Scams

Certain states like California and Texas have become hotspots for these strategic cargo scams, often involving imposter identities. Many of these fraudsters operate outside the U.S., finding and exploiting weaknesses in the system so products may end up outside the country. This further hurts the U.S. economy when items are produced here and those companies don’t get a financial return, thus losing money that should be going back into the economy. There are other additional costs affecting manufacturers to consider, such as lost time, materials, and labor to duplicate the goods that were originally stolen. 

The Federal Motor Carrier Safety Administration (FMCSA) system, originally designed to verify motor carrier legitimacy, has become a target. Phishing scams and other methods have targeted carriers with a motive to change a carrier’s contact information and use their MC authority for nefarious purposes. Bad actors have been caught posing as valid, reputable carrier companies. They often go as far as creating web domains similar to those of established carriers or caught purchasing MC numbers from those going out of business or wishing to exit, especially with the recent market slowdown, with the new buyer updating that company’s contact information. They look and “run” as the previous motor carrier, using that previous authority and reputation to run their scams. This facade allows them to gain possession of or intercept the cargo and divert it to a pre-arranged location for a quick disappearance. The FMCSA is aware of these trending cargo theft scams and is actively looking to improve their vetting and even get rid of MC numbers for carriers.

There’s also a prevalence in double brokering. This is when an unauthorized carrier accepts a shipment or assigns it to another carrier lacking the proper authority to broker it in the first place. It can also involve the re-brokering of shipments without authorization to legitimate entities with broker authority. This creates a chain of uncertainty and lack of control over carrier selection while increasing the likelihood of unpaid delivering carriers, and double payments required from freight brokers and shippers, paying more than agreed for delivery services. 

Load boards, while usually valuable tools for shippers and freight brokers to connect with available carriers, are also now breeding grounds for fraud. Fake postings and compromised information have created a haven for scam artists. The more information presented on a load posting, such as commodity, value, or even location, the more opportunity for these scammers to successfully replicate fake loads and even steal rate confirmations from legitimate actors. Detailed information provided on load boards make loads easier targets for those with motive to engage in strategic theft and double brokering. 

Cargo fraud involving identity theft is not limited to carrier companies. Scammers also pose as shipper companies. These shipping requests will often come in as inbound leads rather than relationship leads. Scammers create fake web domains and use reputable companies to gain credit access, then use that access to pose as both a shipper and carrier. They’ll orchestrate this fake shipment of theirs, make it look as if it has been delivered with forged paperwork, and collect payment before being found out.

A lot of these shipments involving strategic cargo theft end up being diverted to alternate warehouses. In these cases, it is common for the carrier booked to be legitimate but for a bad actor to somehow get in the middle and divert the driver to deliver to a different location altogether, promising an increase in money. Once the freight arrives at the alternate location, there’s a truck en route or waiting to whisk away the freight quickly. Diverted items do not stay in one place for long, making it difficult to track and recover the cargo.  

How to Be Proactive and Prevent Cargo Theft and Fraud

Trust, But Verify

Whether dealing with a shipper company or carrier, thorough verification is needed.

For shippers requests, use sources like ZoomInfo, LinkedIn, and Google. Research the company along with the contact who reached out. Remember that most shipper scams involve inbound leads as opposed to solicited new business or existing relationships. Before agreeing to arrange or transport the movement of goods, use Google Maps to ensure the requested pickup and delivery locations are legitimate.

For example, if the shipping company is a well-known business but Google Maps Street View shows you a location that doesn’t look like one of theirs, something might be off. Another red flag could be if the commodity to be shipped doesn’t line up with their standard business, such as an electronics company trying to ship lumber or rice.

For carrier requests, first vet that they have authority to operate with the FMCSA. View their safety rating and be cognizant of shipper or load-specific requirements, such as drivers who have TWIC cards, and commodity specifics, like cargo type and value. Confirm the carrier has adequate insurance coverage for the shipment they are booking, such as reefer breakdown coverage, if they are to haul a temperature-controlled shipment. Cross-check any other shipment requirements, such as interstate authority or hazmat certifications.

Review relationship and load history if they have a shipment history with you and ensure the new request lines up with previous hauls. Be aware of MC misappropriating. Check if the FMCSA information or profile has recently been updated. Some things to look out for are contact, address, or email address changes. Double-check that the carrier company is not associated with any known bad actors and adhere to your company’s own internal vetting standards.

There are various informational and vetting applications like Highway and Truckstop to further qualify carriers. Ensure the equipment the carrier owns lines up with the equipment required for the shipment. For example, it wouldn’t make sense if a carrier books a temperature-controlled shipment when the carrier owns no refrigerated trailers.

Use Relationships, Limit Load Boards

While load boards offer convenience, strong relationships with carriers provide a significant advantage. Building trust and gaining a deeper understanding of their business reduces your risk of cargo theft and fraud.

When load boards are needed, be strategic with your postings and focus on the security of the information you share. Scam artists often use load boards as a resource for information to replicate or find their next victim. They often look at the locations, the kind of cargo, and more. Avoid posting detailed descriptions of your cargo. Keep the information you share as simple and minimal as possible. Protect that information until the carrier has been both vetted and confirmed.

Trust Your Gut

If something feels wrong at any time, report it to your Risk Team or dedicated personnel right away. With cargo theft, time is of the essence. The first 48 hours are critical as stolen freight typically doesn’t stay in the same place very long. Your best chance of recovering it is within those early hours of noticing it. 

Your first line of defense to prevent cargo theft and fraud incidents is your pickup location. Those workers have the eyes and, hopefully, surveillance to see if the truck coming in is the right one. They can check that the MC on the truck is correct, that the driver has the right equipment for that shipment’s requirements, that the driver is the one booked, and that they know the correct location they need to deliver to.

Shippers can also be proactive and place trackers in with their freight, which can be beneficial for trip progress tracking as well if the load gets stolen. While many carriers do have trackers these days, it’s best not to rely solely on them. Scam artists have been known to disable trackers or ping them to another cell phone, making the shipment look like it’s traveling where it is supposed to go, while it is, in fact, stopped or delivering to an alternate location.

Shippers can also ensure they use strong seals that are tamper-proof. Ensure your dock workers are informed and proactive in reducing potential incidents. Shippers may also consider investing in extra shipper’s interest for its product, for a first-party insurance policy which provides a layer of extra protection. Develop strong relationships with the freight brokers you work with. Know who the emergency personnel are on the shipper and broker side and be armed with their contact information so you know exactly who to contact at all times of the day should a theft or another emergency occur during shipping.

Knowledge is Power

Stay in the know of what’s going on and trending in cargo theft and fraud by networking with known associations, like CargoNet and the Transport Asset Protection Association (TAPA), as well as the additional connection of the Transportation Intermediaries Association (TIA) for freight brokers. These organizations constantly educate on evolving threats to keep members aware.

Ensure you have an emergency plan in place and educate your team so you can be well prepared for an incident. Develop relationships with law enforcement and investigation agencies who can help you put the word out about your loss and assist in finding your freight or the scam artists involved.

Combatting Cargo Theft is a Shared Responsibility

Combatting cargo theft and fraud requires collaboration from all within the logistics industry. Shippers, brokers, carriers, legislators and law enforcement must work together to create a more transparent environment with strict accountability to make it more difficult for thieves and fraudsters to operate.

Cargo fraud is growing, and tactics are ever-changing. Even with all the right measures in place, fraud may not be 100 percent preventable. That said, though we can’t stop it all, we can implement not only prevention measures but response strategies. By staying vigilant and educated, we can collectively demonstrate to these bad actors that it’s not worth the effort anymore. It is up to us to create a future where the movement of goods is more efficient and secure than it is today.

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About the Author

Kristin Deno currently holds the role of Director of Operational Risk at Trinity Logistics. Deno holds a Certified Cargo Claims Professional certification through the Certified Claims Professional Accreditation Council (CCPAC), with almost 15 years of experience and knowledge in claims, insurance, compliance, and risk. She has a passion for knowledge and servant leadership, always looking to grow professionally and share her expertise to those interested. She’s well known at Trinity for assisting fellow Team Members, Shippers, and Carriers with complex claims and doing all she can to mitigate any potentially concerning scenarios. Deno consistently looks for opportunities to share her knowledge and insight outside of Trinity, having recently attended the TIA’s 2023 Policy Forum in Washington, D.C., Traverl’s and CargoNet’s Cargo Theft and Transportation in Q4 2023, and the TAPA T1 National Cargo Theft Summit in May 2024.