It is estimated that at least $800 million of freight payments are being double brokered annually. According to the Wall Street Journal, complaints about fraud, including double brokering, jumped 400% in the fourth quarter of 2022 from the same period the year before to the highest level since 2004.
Last week, the Transportation Intermediaries Association (TIA) voiced its concerns to Congress as Jeffrey Tucker, CEO of Tucker Company Worldwide, testified on TIA's behalf, emphasizing the urgent need for the Federal Motor Carrier Safety Administration (FMCSA) to tackle this rampant issue.
According to Freight Caviar, Tucker's testimony emphasized the surge in fraudulent actors, posing as legitimate carriers or brokers, committing theft, and even holding freight hostage. He criticized the FMCSA for their lack of action on the tens of thousands of fraud complaints, stating, “FMCSA must stop dabbling in non-safety commercial considerations... Instead, focus on safety.”
The logistics industry is facing an escalating challenge with the rise of fraud, especially in the digital age. This phenomenon, long present in the sector, has taken on a new form with the advent of technology, leading to sophisticated methods of cybercrime.
Historically, fraud in logistics involved physical theft and tampering. Today, however, the threat landscape has shifted dramatically. The digitalization of logistics has opened new avenues for fraud, transitioning from physical theft at truck stops to electronic manipulation of freight payments and cargo deliveries. This new face of fraud is characterized by its scale and sophistication, posing significant risks to the integrity and efficiency of supply chains.
As logistics increasingly relies on digital platforms, it becomes more vulnerable to cybercriminals. These perpetrators exploit digital vulnerabilities to divert freight and intercept payments. During Episode 23 of Banyan Technology’s Tire Tracks® podcast, Truckstop’s Chief Relationship Officer Brent Hutto highlights this shift.
“As the industry has become more automated, it has allowed more cybercrime to occur. The scale of fraud is not just physical anymore; it’s electronic, and it's at a bigger scale,” he said.
In response to these growing threats, the industry has begun implementing more robust measures. Education initiatives and awareness campaigns about fraud risks and prevention strategies are becoming more common. Furthermore, logistics companies are increasingly adopting advanced security systems, including dual-factor authentication and rigorous credentialing, to ensure the legitimacy of entities within the logistics chain.
Combating fraud in logistics is an ongoing effort. As security systems become more sophisticated, so do the methods of those committing fraudulent acts. Hutto describes this as a constant effort to “plug one hole, only for another to be drilled.” This ongoing battle requires the industry to remain vigilant, continuously updating and refining security measures.
Reducing fraud in logistics is crucial for maintaining the integrity and efficiency of supply chains. Here are five effective strategies:
Implementing these measures requires a combination of technological investment, employee training, and process management. While it's challenging to completely eliminate fraud, these steps can significantly reduce its likelihood and impact.
Addressing the issue of fraud in the logistics industry requires a multi-faceted approach, including advanced security measures, continuous education, and a proactive stance.
“Staying ahead of fraudsters is not just an option, but a necessity for survival and success in the logistics industry,” said Hutto. Ensuring security in logistics is not just a defensive strategy, but a fundamental component of industry success and longevity.
Banyan Technology, the leading provider of freight execution software for real-time rating and execution of all OTR shipments, not only has comprehensive features in our LIVE Connect® shipping software, but we have the visibility you need to reduce fraud in your shipping operations.
Banyan’s Business Intelligence Suite powered by LIVE Connect’s shipping data adds a robust reporting feature that adds powerful visibility through historical data and offers insight into carrier and lane activity. Shippers, 3PLs and brokers use this data to reduce errors and eliminate the potential for fraud.
More recent features added to the LIVE Connect software include:
Contact Banyan Technology today to learn more about how our software can help you manage freight costs and eliminate risks.