Freight fraud is becoming an urgent issue for shippers, with a recent report by the Transportation Intermediaries Association (TIA) revealing an average per-load fraud cost of $40,760. These schemes are disrupting supply chains, driving up costs and jeopardizing customer trust. The TIA report showed a 600% increase in cargo theft in less than a year, with electronics, household goods, and solar panels among the most targeted commodities. These high-value goods make shippers an attractive target for increasingly sophisticated criminal operations.

One scam detailed in the report enabled fraudsters to impersonate a trusted logistics partner, rerouting five shipments of high-value goods under false pretenses. Another saw criminals intercept a shipment worth $50,000, holding the cargo hostage, and demanding a $40,000 ransom. With these types of freight fraud becoming more and more common, shippers facing significant financial, operational, and reputational burdens.

With post-COVID demand dropping significantly, fraudsters are exploiting both desperate shippers and trucking providers looking for cost savings or quick solutions. These fraudsters are exploiting the increased pressure to move goods efficiently, fueling the growth of a black market in logistics. In this blog, we’ll uncover the most common types of freight fraud affecting shippers, how to spot red flags, and what proactive steps you can take to secure your supply chain against these growing threats.

What Is Freight Fraud, and How Does It Impact Shippers?

Freight fraud is a collective term used to describe fraudulent activities targeting shipments, involving theft, deception, or misrepresentation. Common types of fraud include:

• Cargo Theft: Stealing goods during transit, often targeting high-value items like electronics or household goods.

• Identity Theft: Criminals impersonating legitimate companies to gain access to shipments.

• Unlawful Brokerage Scams: Fake brokers arranging shipments and disappearing with the cargo or payment.

• Hostage Loads: Criminals intercept shipments and demand ransom for their return.

• Phishing and Cyber Scams: Digital fraud tactics targeting shippers’ sensitive information.

Understanding the risks is just the first step. In the next section, we’ll explore how to identify red flags and safeguard your supply chain from freight fraud.

 

Red Flags for Shippers 🚩🚩

It can be tricky identifying fraudulent activity, with many scams becoming a lot more sophisticated in recent years. However, there are some common red flags you can look out for:

1. Unusually Low Freight Rates: Rates significantly below market value can be an indicator of fraud. Fraudsters often use low rates to lure shippers into quick decisions.

2. Lack of Documentation: Missing or inconsistent paperwork, such as incomplete Bill of Lading (BOL) or shipping manifests. Fraudsters often avoid providing proper documentation to avoid detection.

3. Unverified or Suspicious Carriers: Carriers without a proven track record or proper licensing. Fake MC or DOT numbers that don’t match official databases.

4. Pressure for Quick Decisions: High-pressure tactics urging immediate action or payment. Fraudsters count on urgency to bypass scrutiny.

5. Unprofessional Communication: Email domains that don’t match company names (e.g., Gmail accounts). Vague or inconsistent communication about load details.

6. Gaps in Tracking Information: Missing or inaccurate tracking data. Sudden changes to delivery schedules or locations without proper explanation.

7. Spoofed Identities: Impersonation of existing logistics partners. Requests to redirect payments to new accounts.

Now that you know the warning signs, let’s explore actionable steps to safeguard your supply chain.

 

Consequences of Freight Fraud

Beyond the $40,760 average per-load cost mentioned earlier, additional hidden losses stemming from the ripple effects of stolen goods often lurk beneath the surface. Some are financial, others are intangible, but all have a substantial impact.

• Indirect Costs: Freight fraud leads to substantial indirect expenses, such as increased insurance premiums and investments in fraud prevention tools. According to the TIA Fraud Report, nearly 1 in 5 businesses (19%) spend an entire day each quarter addressing fraud, while 34% dedicate more than two hours daily to prevention efforts. These time commitments translate to rising administrative and staff costs, diverting resources from core operations and growth opportunities.

• Legal and Compliance Costs: Fraud often results in legal disputes, such as contract breaches or liability claims, which require expensive legal representation. Additionally, businesses may need to implement new compliance measures, further increasing costs and complicating operations.

• Delays and Disruptions: Fraud disrupts supply chains by causing shipment delays and missed deadlines. This forces businesses to reroute shipments, allocate extra resources, and manage unhappy customers. The resulting inefficiencies can strain customer relationships and impact future business.

• Inefficiencies: Fraud investigations and recovery efforts consume significant time and resources, pulling focus away from core operations. These inefficiencies ripple through the supply chain, reducing productivity and increasing costs for all parties involved.

• Brand Damage: Fraud incidents can tarnish a company’s reputation, as customers may lose trust in their ability to secure shipments. Negative publicity and damaged relationships make it harder to retain clients or win new business, especially in competitive markets.

• Broader Industry Consequences: Widespread fraud drives up costs across the entire logistics sector, as companies invest more in prevention and mitigation. This fosters mistrust between shippers, carriers, and brokers, undermining the efficiency of the entire supply chain.

• Impact on Consumers: Fraud increases costs throughout the supply chain, leading to higher prices for consumers. Delays caused by fraud reduce product availability, frustrating customers and weakening their confidence in businesses.

P.S. Need more info about insurance and how you can make sure your shipments are protected? Learn all about it in our post: Freight Insurance 101

 

Shipper’s Guide to Avoiding Freight Fraud

Freight fraud isn’t inevitable, with the right precautions, shippers can safeguard their supply chains and minimize risks. In this section, you’ll learn practical steps to identify red flags, strengthen your processes, and keep you protected.

• Work with Trusted Carriers and Brokers: Choose partners with verified credentials, a solid reputation, and a proven track record. Use platforms like FMCSA or SAFER to verify licensing and safety compliance.

• Thorough Vetting: Confirm carrier details such as MC numbers, DOT registration, insurance coverage, and contact information. Use Secretary of State websites to validate company legitimacy.

• Check Documentation: Ensure contracts, rate confirmations, and load documents are complete and accurate. Avoid engaging with carriers that refuse to provide proper paperwork.

• Tracking and Monitoring Tools: Adopt e-signatures and encrypted communication for added security.

• Digital Verification: Validate email domains and phone numbers to avoid phishing attempts.

• Educate Employees: Train staff to identify red flags such as unusually low rates, suspicious communication, or incomplete paperwork. Share recent examples of fraud schemes to keep them informed.

• Create Clear Procedures: Develop a fraud prevention checklist for employees to follow during the shipping process.

• Secure Payment Methods: Avoid upfront payments to unknown carriers. Use verified payment channels to ensure funds reach the correct recipients.

• Audit Regularly: Conduct routine audits of payment records and shipping transactions to detect anomalies.

Fraud prevention requires effort, but the cost of not acting is far greater. By taking these steps, you can protect your shipments, your business, and your reputation.

 

Partner with a Freight Expert

Looking for a reliable freight partner? Fill out the form below, and let’s discuss how we can support your logistics needs.