Freight Fraud: Why In The Trucking Industry?
Freight fraud is everywhere – just recently, nearly 3,000 Nintendo Switch consoles worth $1.4 million were stolen from a semi-truck at a Bennett, Colorado, truck stop. But it doesn’t stop at trucks; since March, the Sinaloa Cartel has been hijacking railroads in California and Arizona, with $4 million in goods stolen from BNSF trains.
These incidents of fraud are just a few of the hundreds of cases, including Ponzi schemes and conspiracies, that plague the industry. And it’s not just physical cases of fraud, but cases of digital fraud as well.
As technology advances and scammers develop more sophisticated techniques to conduct fraud schemes, the damage to cargo, financial losses, reputational harm to companies, and disruptions to supply chains will become increasingly prevalent.
From fraudulent shippers and identity theft to cargo theft and double brokering, there are countless schemes that can impact the trucking industry. So, why is fraud so endemic, and what can the trucking industry do to stop falling victim to freight fraud?
Why is Fraud So Prevalent In The Freight Industry?
While fraudsters don’t discriminate, the industries that are easiest to penetrate are typically their primary targets – one of them being freight. But why?
The trucking industry’s structure is highly fragmented. In the industry, of course, there are large carriers, but there are also many small carriers and independent owner-operators. The sector involves multiple layers, including brokers, contractors, and carriers. While working with a 3PL can be helpful, most shippers are unsure which driver or carrier will pick up their load.
This lack of oversight leaves the door wide open for fraudulent activity to occur. It’s very easy for scammers to create fake business profiles, falsify documents, and impersonate drivers to steal and disappear with goods or payments without any way to trace them.
Yet, freight fraud can also occur as an inside job. One way in which this can happen is through double brokering. Double brokering is when a freight broker or carrier re-brokers a load to another carrier without the knowledge of the original broker or shipper. While this practice is legal, it can often lead to fraud and theft, especially when the re-brokering party is intentionally deceitful or lacks the proper authority.
However, why would brokers be intentionally deceitful? Another reason why the trucking industry remains an easy target is that it is often a high-cash flow, low-margin industry. Trucking involves large sums of money that change frequently, but profit margins are thin. This creates financial pressure, causing some individuals or companies to commit fraud, such as Ponzi schemes.
Just this month, Sanjay Singh was sentenced to 23 years in federal prison for running a $158 million Ponzi scheme through his trucking company, Royal Bengal Logistics, Inc., based in Coral Springs, Florida.
Additionally, many trucking companies and 3PLs fail to keep pace with evolving tactics and technology, often due to a lack of effective fraud prevention policies in place and insufficient vetting.
In some instances, the lack of policies may be due to companies’ unwillingness to stay informed or to competitive pressures and a focus on profits, leading to corners being cut in fraud prevention.
Whatever it may be, the trucking industry remains a primary target for fraud. So, what can trucking companies do to combat fraud in the future? Let’s find out.
The Future: How Trucking Companies Can Combat Freight Fraud
Freight fraud is only growing in severity, costing the industry hundreds of millions of dollars annually. Companies must protect themselves against becoming yet another statistic and victim of fraud.
It is crucial to vet every carrier, broker, and shipper to ensure they are legitimate and trustworthy. Companies can do this by checking the Department of Transportation (DOT) and Federal Motor Carrier Safety Administration (FMCSA) registrations, vetting platforms, and always watching out for and double-checking new MC numbers.
When partnering with a new carrier, broker, or shipper, utilizing written contracts with clear and concise terms can help prevent any fraudulent activity. Creating a clear mission for each party can foster trusted partnerships between reputable brokers and shippers, mitigating the risk of fraud while also building trust with customers.
Another way trucking companies can combat fraud is by educating and training all employees to spot fake invoices, spoofed emails, or cloned carrier identities. Educating and training cannot only keep everyone aware of current fraud schemes but also create more thorough processes when it comes to vetting every partner.
While fraudsters are utilizing technology to create more advanced ways to carry out scams, trucking companies can actually leverage technology to protect against them.
Many cybersecurity platforms utilize agentic AI and blockchain technology to secure online transactions and sensitive information from being exposed. Trucking companies also utilize Transportation Management Systems (TMS) that feature fraud detection and carrier validation to ensure legitimacy.
Freight fraud is an epidemic that is troubling the trucking industry, reaching record highs last year in 2024. The tactics that scammers utilize continue to evolve, with more sophisticated strategies to steal sensitive information, data, and cargo.
To combat this growing threat, trucking companies must prioritize cybersecurity and vetting processes and invest in employee training to recognize red flags. Additionally, stronger regulatory oversight is needed in the industry to combat freight fraud across all modes of transportation.
Businesses must stay ahead of the curve to protect their assets and maintain a reputation as a trusted partner. After all, in trucking, trust is everything—and so is ensuring shipments don’t fall into the wrong hands.
