3 Strategies for Shippers to Combat Rising Freight Fraud

As supply chains go digital, bad actors are evolving their fraudulent tactics. 

The COVID-19 pandemic accelerated remote work and digital transformation across industries — driving efficiencies but also leaving vulnerabilities. In logistics, those vulnerabilities are particularly glaring given how quickly the industry had to transition to online processes. Fraudsters have adapted their tactics to take advantage.

Gone are the days of cargo hijacking. Instead, we’re seeing a rise in social engineering tactics, such as identity cloning and phishing scams. Strategic theft by fraud jumped by 430% in the past year alone, and an estimated $223 million worth of goods have been stolen. These numbers are likely only part of the story. Fraud tends to be underreported because it reflects badly on a business, making it difficult to understand the true scale of the fraud challenges in the industry.

I’ve been fighting fraud my entire career — from FedEx, to the FBI, and now at Uber Freight. I know that reducing the fraud challenge will require a cohesive, industry-wide collaboration to close some of the gaps in process and communication that bad actors are exploiting. In the meantime, shippers can make immediate changes to protect their cargo. The first step is understanding the threats. The second: take full advantage of technology and tactics to build a more resilient transportation system. 

Freight’s most common fraud tactics: identity theft and pilferage

Almost anyone with a phone or an email address has had a brush with a potential fraud scheme today. They’re on the rise across industries. In freight, we’re seeing two specific types of fraud on a regular basis: 

The first is identity theft. Social engineering tactics, powered by the rise of artificial intelligence, are making it easier than ever for bad actors to build a convincing website and forge credentials to trick unsuspecting logistics teams into hiring a fake carrier. Common information-gathering tactics like phishing and phone flooding are difficult to avoid in an industry where taking calls from unfamiliar numbers and responding to emails from a variety of domains is part of the job. Identity theft has also led to the manipulation of electronic records — such as the changing of destination details and delivery schedules, or even submitting fictitious orders — giving criminals the ability to misdirect shipments, facilitate unauthorized stops, and take some (if not all) of the cargo for monetary gain.

The second tactic is pilferage — the theft of individual pallets or partial truckloads. Posing as credible carriers, criminal groups are using aliases and digitally altered documents to steal portions of cargo during transit. This tactic is often difficult to detect. If a bad actor intercepts a bill of lading (BOL) and changes the size of a shipment from eight to six pallets, the shipper may sign off on the delivery without realizing two of their pallets had gone missing. 

The nature of these attacks means information is key in combating them. The more businesses can paint a full picture of the individuals in their network — both internal and external — the better equipped they’ll be to spot and prevent suspicious behavior.

Technology and tactics to stop fraud in its tracks

Fraud defense requires employing the right vetting, monitoring, and reporting mechanisms. These mechanisms leverage technology tools to gather as much accurate information as possible but also empower individuals to make a difference, too.

  1. Verify carrier identity: More carrier options are available digitally than ever before, but with these options comes a higher risk of fraud. Safeguarding against scams requires verifying the carrier’s operating authority and licensing and evaluating their safety records. Consider their years of experience in the industry as well as their track record with similar shipments. Third-party providers like Highway can offer in-depth carrier vetting services, while TIA Watchdog flags carrier behavior that is suspicious or risky. Ensure that any third-party marketplaces you use for fulfillment are vetting any and all carriers before they’re able to accept loads on the platform.
  1. Track cargo and user behavior: Real-time insights into the location, status, and condition of shipments enables businesses to apply more targeted monitoring measures and respond swiftly to suspicious behavior. Say a pharmaceutical company is transporting medication from a manufacturing facility to distribution centers across the country. GPS devices can be installed on the shipping containers, enabling operators to keep a close eye on each of their loads. Tamper-evident sensors can be used to detect open or damaged seals in real time, ensuring the medication’s integrity. By establishing geofences along approved routes, automated alerts can be triggered if deviations do occur, keeping the products safe from theft or unauthorized diversions. 
  1. Empower teams to identify and flag risks: While arming existing processes with AI and monitoring technologies is crucial, human oversight adds a layer of vigilance, critical thinking, and adaptability to address the dynamic nature of modern fraud. Logistics teams with years of experience on the frontlines can help identify irregular patterns or behaviors that automated systems may not recognize. Activities in the supply chain move fast; giving teams time to do things like double-check the validity of the transaction will result in cost-savings that far outweigh any time lost. 

Industry-wide collaboration helps everyone (except the fraudsters) win

Over the long term, industry-wide collaboration will be key to fraud prevention and reducing the incidences of fraud. The logistics industry can be competitive and opaque by nature. When it comes to fraud, however, we need to adopt a one team, one fight mentality. 

My team and I regularly leverage public load boards and share information with connections in the industry. We’re working to create an intelligence network that will help identify areas of immediate concern — like a market where fraud incidents are spiking — and predict future schemes. Already, this information-sharing has helped proactively alert shippers and carriers to risks and suspicious behavior. 

As fraud becomes more prevalent and increasingly harder to track, we need to individually and collectively put measures in place to be one step ahead of the bad actors. 

Bill McDermott is Senior Investigator at Uber Freight.