
Freight Fraud Prevention: Building A Playbook
Freight fraud prevention has become a priority for shippers and logistics professionals as scams keep growing more sophisticated. And if you’ve come from a recent blog of ours, then you’re already well aware of the rising risk of becoming a victim to freight fraud. If not, then you should definitely go and read it before continuing back to this one. But in case you’re in a hurry, here’s a quick overview of what we covered previously for those of you that just want quick answers.
We highlighted the scarily fast growing freight fraud statistics in the U.S. logistics industry, spoke in depth about what today’s scams look like and how they have evolved over the years, dare we say gotten smarter 😡. We broke down the most common tactics that fraudsters are using including; identity theft, unlawful brokering, email phishing, fake loads, and even impersonating FMCSA officials and raised awareness on how scammers are pulling off these elaborate scams. The blog was then rounded up giving some advice and letting you know how we are tackling fraud head on and what we’re doing to keep ourselves and our customer’s safe from freight fraud.
So, now that we know the threats, how can shippers protect themselves?
Well, this blog aims to carry on from the previous, because raising awareness to the fraudulant activity hurting our industry is great but it’s not enough, by creating a playbook all about freight fraud prevention, we can help keep our shippers vigilant. It will include actionable tips and checklists, so let’s get into it!
1. Conduct Background Checks 🕵️♂️
This one might sound like we’re suggesting you become a part of the CIA, we’re not, although that would be pretty cool. All that we’re suggesting is that you don’t skip the basics and do thorough checks on the transportation company and the driver. This way you can check they’re who they say they are, check their compliance and their reputation by reading up to date reviews and feedback and we’re sure you will find any “sketchy” details that don’t add up, if it’s there to be found.
These should be your first steps, before assigning a carrier to your load, it will only take 10-15 minutes, but they could expose crucial information:
1. Valid MC Numbers
You can check this through FMCSA, and confirm that they’re valid and active.
2. Carrier Reviews & Testimonials
Thoroughly read any reviews and testimonials left on different websites, like Carrier411, DAT, and Truckstop. Search for any negative reviews from brokers and shippers, then you can make your mind up from there.
3. Verify Insurance
Request insurance details and ask for a copy of the insurance policy.
2. Provide Extra Staff Training 📝
Your staff act as your first line of defense. When you provide and make it mandatory for your staff to undergo extra training on freight fraud prevention, then they’re able to recognize and respond accordingly to potential fraud scenarios. Here’s some steps that businesses could implement:
Business owners could perform regular mock scams, it’s a great way for staff to visually see what a phishing email looks like, how to properly do their due diligence and verify identities and you can also see that they’re following the correct protocols to catch scammy inquiries.
Another proactive idea, is to hold regular meetings to provide staff with the latest fraud tactics. We sound like a broken record here, but awareness really is key in this. the more aware someone is, the more likely they are to catch a scammer.
Lastly, be sure to have a thorough protocol in place for each member of staff to follow, should they think they’re dealing with a scammer. They need to know where to report suspicious activity, and who will follow up with this.
3. Utilize AI, It’s Your Friend 🤖
At PEI, we’ve actually developed an internal tool that uses AI to assess the risk of fraud. Here’s how we did it and this might give you a couple of ideas for bespoke tools that you could implement into your business too:
1. Firstly, we check if the email used from an inquiry is from a free provider, e.g. gmail, yahoo, outlook, etc. This is because most businesses will have their own email domain, with smaller, less reputable ones using a free provider.
2. We then use a domain look up tool to gather data about that domain, e.g. domain age, domain security, in particular searching for an SSL security certificate.
3. Next, our AI tool checks for discrepancies in the email address and domain. Flagging impersonated emails, this works great for when large organizations and companies that are being spoofed, e.g. FMCSA.
3. This is then coupled with our internal data, showing where fraud cases have occurred in the past, e.g. New York, which tends to be a fraudulant hot spot.
4. Our AI tool then takes all of these signals and creates a risk assessment, using a traffic light system:
Red light – High risk
Amber light – Medium risk
Green light – Low risk
This tool does not guarantee anything, it simply highlights red flags, which staff can then treat with a little more caution. If you decide to build your own AI fraud checking tool only ever use it as an additional check, but always do your part and thoroughly check the details personally too.
4. Utilize Available Technologies 💻
There are a ton of really useful technologies and tools out there that can help detect potential fraudulant activity. Here’s some of the more popular ones:
Highway
Highway runs MC numbers to figure out exactly who is behind it and verifies identity against the FMCSA. It’s great for finding and shutting down impersonation scams.
Carrier Assure
This rates carriers based on carrier age, authority, insurance, and patterns of fraud. It helps shippers and freight brokers to make quick decisions when researching carriers.
DAT
DAT only works with reputable, safe, legal, and reliable carriers and has red flag alerts built in. So it’s a good indicator of trustworthy carriers.
My Carrier Packets
This one integrates with different TMS platforms and verifies carrier compliance documents.
You’ve probably heard of some of those technologies before, but if you haven’t then definitely check them out. Here’s some other uses of technology that you can implement in your business:
Robust Cybersecurity
Invest in robust cybersecurity measures, it will help to prevent data breeches.
Blockchain Technology
Blockchain technology helps to maintain a record of transactions, which in turn reduces the risks of fraud.
5. Use Secure Payment Methods 💳
Payment scams are prolific in freight fraud, with scammers finding gaps in secure payment methods or using unsecure payment gateways. Reputable carriers will only use secure payment options that not only protect their interests but also the shipper’s too. These secure payment methods can help to reduce risk and give you peace of mind:
- Use an escrow service: Escrow services add a layer of protection by holding payment in escrow with a third party, until predetermined conditions are met. These conditions could be confirmed delivery, signed proof of delivery or verified load completion. Some of these escrow services are specifically designed for the freight industry like PayCargo, and are great options when working with a new freight partner.
- Use a credit card: Paying for a service using a credit card offers you a level of security. If the service is not fulfilled then under section 75 and chargeback protection, your credit card company will try and claim back your money on your behalf.
- Credit checks: Perform thorough credit checks on new freight partners before booking any loads, especially high-value ones. Using commercial credit bureaus these credit checks can bring your attention to any financial instability.
6. Create A Carrier Watchlist 👀
When you find good, trustworthy carriers that you’d be comfortable using then it’s a good idea to add these to a list of “pre-vetted carriers”. This way, if you’re in a crunch to find someone to transport goods quickly, you can consult the list without having to put time into vetting others. It’s equally as important to build a “do not use” carrier list. Any carriers that you come across that you don’t trust or have been told to be wary of, put their name on a red flag list. It’s easier to glance at a list and know who’s good to go and those to avoid that are potentially bad news.
Additionally, make sure that you report any suspicious activity and notify the appropriate authorities or regulatory agencies, like the FMCSA. By doing so, you don’t only protect yourself, but you could also prevent future scams happening to others in the freight industry from this shady character.
7. Don’t Be Afraid To Take Legal Action 👩⚖️
Strong contractual agreements are crucial in todays day and age. With the number of fraudulant activity in recent years having a contract that clearly outlines roles, responsibilities and the consequences of fraudulant activities is super important.
Have a legal strategy ready and if you do fall victim to fraud, don’t be afraid to pursue legal action to protect yourself and again others from these scammers.
8. Insure Your Freight 📑
Although, insurances cannot prevent fraud from happening, it is the best way to mitigate the impact of fraud. By investing in comprehensive freight insurance policies that offer cover against cargo theft and fraud you’re setting up a last line of defense for cover after an incident takes place. Here’s some insurances that you should look into for this type of cover:
Cargo Insurance: This type of insurance covers the value of your goods being shipped against things that happen during transit like loss, theft, and damages.
Theft Insurance: These are theft specific policies that offer broader protection than other insurance policies. This one is particularly necessary in high risk areas.
Fraud Insurance: This is the policy that businesses want to properly cover themselves against fraud schemes. It covers when you become the victim of false contracts, non-payments and other fraudulant activities.
Shipper’s Interest Cargo Insurance: Another way that shipper’s can protect themselves is by buying their own interest cargo insurance policy, specifically covering them against theft and fraudulant activity from “carriers” and other third parties.
It is important to note that these policies alone do not cover your freight against every outcome, and they work better when used in conjunction with each other or as an add on to other insurances.
What To Do If You’re Ever Scammed? 🤔
Freight fraud prevention sadly is not always possible, because these fraudulant scams are growing increasingly complex and believable, as you might already know from our previous blog. So here’s a step by step guide to handling the aftermath:
- First things first, report the fraud to any appropriate local authorities, the FMCSA, and your insurance provider.
- Document everything, exactly what happened, and communications between yourself, the scammer and your insurance provider.
- Assess your internal processes. What went wrong? was it email verification? a missing background check? where was the weak point that the scammer managed to infiltrate?
- Once you’ve determined how this one slipped through the net, fix the gap, whether it’s investing in more technology, or retraining staff to stay vigilant.
- Stay aware.
Conclusion & Freight Fraud Prevention Roundup 💭
The best approach to freight fraud prevention is by combining various strategies, vigilance, technology and data. Hopefully you can take these actionable tips on board, and implement them in your workplace to significantly reduce the risk of freight fraud to your business and make yourself a much harder target.
At PEI, we’re implementing strategies, to actively tackle freight fraud head on. We’re being proactive instead of reactive after the fact. That means, vetting new carriers, investing in up to date technologies, utilizing the power of AI by building internal tools to catch potential scammers before shipping with them, and continuously training our team to recognize red flags a mile off.
Fraud might be evolving fast, but so are we, because when it comes to our customer’s cargo there is no room for error. When we work closely with our customers and partners, together we can battle cargo theft and fraud from every angle. We hope this playbook to freight fraud prevention has been useful. To chat more about how we protect our shipments, speak to one of our experts on: Phone: 888-SHIP-911 or use the link below to get in touch.
Let’s beat the scammers together and begin to put an end to freight fraud once and for all!🤝
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