How to Avoid Fraud and Double Brokering

When you choose a carrier to transport goods for your company, you assume freight will be safe. After all, you'll use a reputable broker, and the carrier will place a legitimate bid for the load, so everything will feel like it's going according to plan.

However, statistics suggest falling victim to cargo theft or a double brokering scam is likelier than ever. Bad actors infiltrating the industry cause problems for reputable carriers, brokers, and their clients. Double brokering has always been a problem for shippers and brokers, but it's become more common, and your freight could be at risk.

Estimates suggest double brokering costs the U.S. trucking industry over $500 million annually. Here's an in-depth look at theft, fraud, and double brokering in commercial transport, and how to protect your freight.

Understanding Cargo Theft

Cargo theft presents a significant concern for shippers and carriers. Both can fall victim to theft, with criminals using more sophisticated methods, like strategic cargo theft, than ever before.

Current statistics suggest a notable rise in cargo theft levels. In Q3 of 2023, $29.05M worth of goods went missing from carriers, a up 62% from Q3 2022 and 16% higher over Q2 2023. These numbers are alarming because they know criminals find vulnerabilities in the transport industry and exploit them regularly.

Strategic cargo theft causes most of these issues. Simply put, criminals assume the identities of legitimate carriers by stealing or forging credentials. They bid on and win jobs on freight boards and redirect stolen loads to Southern California. Legitimate carriers have no idea they've fallen victim, and the shipper doesn't discover it until it's too late.

Some fraudulent carriers push the envelope further, stealing loads by opening their trailer doors without breaching the seal and unloading goods before they reach their destinations. They also alter the bill of lading or proof of delivery they present to the receiver. The company doesn't realize anything is missing for several weeks. When the receiver notices something missing, they'll usually send a chargeback to the shipper, and the carrier succeeds with the fraud.

These more sophisticated thefts strain resources and relationships as shippers move their goods around the country and reputable carriers attempt to complete deliveries safely. The result is a troubling time in the commercial transport industry.

Information on Double Brokering and Carrier Vetting

Double brokering is a multi-step scam where a fraudulent carrier bids on a load posted by a legitimate broker. When this carrier wins the bid, it rebrokers the load to a second carrier. This second carrier delivers the load to its destination and awaits payment from the second broker.

However, since the original broker and the second carrier are unaware of the double brokering, the shipper pays the broker, who sends money to the fraudulent carrier. This bad actor then takes off with the money, and the delivering carrier doesn't receive payment.

In some scenarios, the fraudulent carrier can send the load to a different location than the shipper intended. From there, this criminal can hold the load hostage and demand payment for its release or sell the cargo.

Whenever double brokering happens, shippers, brokers, and carriers are left dealing with issues. The shipper could have missed freight to recover, while the broker has to answer questions about how a scammer gained access to the system. In many cases, criminals gain access through fraudulent or stolen credentials.

The final carrier also has issues to sort out because they've lost money for the delivery. Smaller carriers and brokers could find recovery nearly impossible because they're always relying on the next load to make ends meet. Increasingly, small carriers can’t survive after falling victim to a scam.

It's also worth noting that liability can be a factor in this scenario. Insurance doesn't cover double-brokered loads, so if the carrier suffers an accident before delivery, the damaged cargo won't be covered.

Double brokering scams impact everyone in the industry because they increase costs, harm reputations, and lead to customers losing trust. Proper carrier identification is essential but isn't as easy as it sounds.

The Challenges of Carrier Identification

On the surface, identifying the carrier you're using and its credentials is straightforward. However, these bad actors know you're trying to vet them and have ways around the system. These carriers often use fraudulently obtained credentials. They'll either steal credentials from a reputable carrier or create counterfeit documents, fooling shippers, brokers, and other carriers.

Another trick they'll use is naming their company something similar to an existing, reputable carrier. This small change is sometimes enough to get past an employee not paying attention, letting them into the brokerage system and causing problems throughout the supply chain.

When a fraudulent carrier passes the vetting process, it can expose multiple parties to theft and fraud. Failure to identify the carrier is perhaps the most significant problem in this entire process.

Technology-Based Solutions

Proactive shippers and brokers have new steps to track their loads using technology. Placing tracking devices in the cargo ensures parties know where a load is, minimizing the opportunities for criminals to seize it. GPS and electronic logging devices ensure the assigned carrier has the load, preventing unauthorized assignments.

AI technology is a useful fraud-prevention tool. Specific AI applications analyze massive amounts of data to identify scenarios with double brokering risk. They can notify all stakeholders when there's a double brokering attempt and point out potential repeat offenders.

Using technology could be the next vital step in this process as carriers, brokers, and shippers develop new ways to stay ahead of criminals. Other mitigation strategies, such as strict cargo handling and safety education for drivers help brokers to maintain positive relationships with shippers.

Potential Mitigation Strategies

Developing and implementing mitigation strategies is critical as brokers attempt to identify fraudulent carriers and prevent them from penetrating their networks. Using technology to determine if a carrier's identity has been compromised is part of the process, but manual work is also necessary.

Brokers will have to put significant effort into procurement, which involves reviewing their accounts daily and putting loads on hold if a potential issue arises. By manually verifying every load, these brokers can maintain customer relationships and remain a trustworthy partner. Developing policies for drivers helps prevent theft. The stealing of loaded trailers is an issue in many parts of the country, so telling drivers to avoid stopping within 200 miles of the shipper is a good start. It limits the chances of someone following them. Telling drivers to only park in well-lit, secure areas as well as telling them to back their trailer to a building, can also help them avoid pilfering.

Stay away from cargo theft hot spots whenever possible. These locations include Southern California, Memphis, Chicago, Atlanta, and Dallas/Fort Worth. Avoiding these parts of the country entirely might be impossible, but choose routes that bypass these parts of the country could help mitigate theft moving forward.

Develop a mitigation strategy is vital when protecting your freight. Shippers should speak directly to their chosen brokers to learn the steps they're taking.

Why Collaboration and Communication Are Vital

The commercial transport industry can be incredibly segmented, but it doesn't have to be that way. When shippers, brokers, and carriers communicate and collaborate, they can reduce risks and mitigate cargo theft.

This communication is particularly crucial for carriers and brokers. One way shippers or brokerages find carriers is load boards. However, rather than posting loads on a board and awarding the job to the lowest bidder, brokers should form relationships with carriers and communicate with them throughout the process. Developing these relationships creates a less risky environment and can reduce double brokering and freight theft, which benefits everyone.

Working With Reputable Freight Brokerages

Shippers and carriers can minimize risk is to work exclusively with reputable freight brokerages. Trustworthy brokerages can protect against fraud because they vet every carrier carefully and develop relationships with them, reducing instances of double brokering.

A collaborative approach where carriers and brokers know each other is always the best path forward. Trustworthy brokerages can protect against fraud because they vet every carrier carefully using technology-based solutions, develop relationships with the carriers and minimize use of load boards to identify new carriers, thereby reducing instances of double brokering. These relationships ensure the broker is only working with carriers it has identified and vetted, so there's less risk for the shipper and better outcomes as freight moves from shipper to receiver.