Freight fraud and how to safeguard against it

Freight fraud costs businesses time, money, and resources every single day. In the US and Canada alone, cargo theft has increased by 13% within just 12 months — creating an estimated loss of more than $128 million.

If your business relies on shipping freight, or you’re looking to start, protecting yourself against scammers should be a priority. 

But what is freight fraud (also known as cargo fraud) in simple terms? And what can you do to minimize your risk of falling prey to criminals?

In this post, we’ll explain the common types of fraud affecting shippers and the steps you can take to stay safe.

What is freight fraud?

In the shipping and logistics industry, freight fraud involves criminal or deceptive practices that lead to:

• Severe financial loss (especially damaging to small businesses)
• Stolen cargo that incurs replacement costs and delay-related losses
• Broken customer trust that affects reputation and future contracts

Unfortunately, there is no one single type of cargo fraud to watch out for. Perpetrators may employ a range of methods, such as falsified paperwork and fake identities. They may even run organized cargo theft rings that target carriers of all sizes.

But what’s causing the surge in incidents?

• Consumers are increasingly buying goods online, which means demand for freight shipping is also on the rise.
• Decentralized broker networks make it easier for scammers to pose as legitimate service providers.
• Businesses across various industries ship high-value goods domestically and internationally, giving fraudsters the chance to make substantial profits.

However, perpetrators don’t have all the power. Businesses can fight against fraud and protect their reputation and bottom line.

Common cargo fraud scams

Here are some of the most common types of freight fraud scams and telltale signs to watch out for:

• Double-brokering: Freight may be re-brokered without the shipper’s authorization — often leaving businesses with no visibility or control.
• Falsified documents: Fake delivery receipts, pricing confirmations, and insurance certificates are all common in cargo fraud scams.
• Cargo theft: Organized crews may break into storage facilities and yards to steal goods before they’re shipped. Some may even target trucks en route and take cargo at a scheduled stop-off point.
• Identity theft: Scammers may impersonate legitimate carriers or brokers to fool shippers.
• Non-payment/payment fraud: Fraudulent brokers or shippers may arrange transportation of goods and then disappear after the delivery is complete.
• Fictitious pickup/delivery: Criminals may pose as carriers to steal cargo outright, and shippers might have no reason to doubt their credentials.

How to protect your business against freight fraud

Once you know what to watch for, here are some tips to help you protect your business against cargo fraud.

Secure your cargo

You can use security methods like container seals to prevent cargo theft. Attaching one of these simple devices to a container makes stealing the contents more difficult: a broken seal shows that the goods inside have been tampered with.

Verify carriers and brokers

A little due diligence goes a long way. Before you work with any broker or carrier, check their: 

• Insurance
• References 
• Registration with the Federal Motor Carrier Safety Administration (FMCSA)
• Online reputation (e.g., read reviews on Google and social media)

This research can help you identify false claims and reduce the risk of selecting the wrong carrier or broker.

Use tracking tools for enhanced visibility and accountability

The latest logistics technologies can help you fight freight fraud and keep goods safe from cargo theft. Take advantage of tools that let you track shipments from start to finish and set up real-time updates.

Watch out for red flags

If a shipping quote seems too good to be true, it probably is. Fraudsters and thieves may try to lure victims in by promising unrealistic savings or efficiency. 

Unusually low rates, lack of insurance verification, and pressure to move quickly can all indicate an untrustworthy team.

Work with trusted freight partners

Partnering with a reputable third-party logistics (3PL) provider like DTS is the simplest, most effective way to mitigate risk. They can help you find trustworthy shipping solutions perfectly suited to your company’s needs.

Train staff on fraud awareness

Employees can only help you fight freight fraud if they know what it looks like. Professional training can help your shipping and procurement teams recognize key signs of cargo fraud and help stop it before it starts.

Partner with DTS for secure freight management

Cargo fraud is a real threat to businesses, and mitigating risk is essential to avoid revenue loss and reputation damage. When you partner with DTS, you get access to our concierge-level service and our carrier vetting process.

For professional help in building your secure freight strategy, get in touch with DTS today.