5 Incredible Things You Probably Didn't Know About Carrier Fraud

 1.  It’s easy!

A fraudulent carrier just has to show up at your dock and say, “hey, I’m here to pick up that load going to Texas”. If you don’t have controls in place, he gets loaded, drives away and you never see him again. You’re shipment is stolen and there’s very little you can do about it. Many shippers don’t understand the potential for fraud and their shipping/receiving departments are not properly trained to understand the potential.

2.  It’s not illegal!

A smart fraudster can set up a scam so that it’s not even illegal. Here’s how. A fraudulent party will buy a bankrupt carrier for peanuts. Then, go out and solicit to pick up freight. Let’s say you normally pay $1800 from Chicago to Toronto.

The fraudster calls you and says,
“hey, I really need to get my truck home, I’ll do it for the cost of fuel, how’s $1000 bucks sound?”
You think, “Great, what a deal!”.

The fraudster then faxes you over a license and authorities that have been active for years and they check out. He sends you an insurance certificate that looks good. Everything checks out. You give him the load. So now the fraudster goes to work. He contracts with another carrier to move your load for $2000, which he has no problem doing since the going rate is $1800.

You might be thinking, how does this make sense?
Just wait.

Once the load is picked up and delivered and you’re very happy with your $1000 dollar shipment, the fraudster calls and says,

“Hey, do you guys offer a discount for quick payment?”
“Sure, you say, 5% discount if we pay early.”
“Wow this just keeps getting better!” your thinking.

So you pay the guy $950 bucks. I mean, you have a valid proof of delivery and you can verify everything went smoothly, right? Now here’s where you get stung. 30-60 days later, the carrier that actually moved your shipment comes looking for money. The other guy closed up shop and is long gone. You end up in a really messy situation and may have to pay the other carrier’s freight bill to boot! How is this not illegal? Surprisingly, it’s not. You contracted with the guy to perform a service, he did and you paid him. As long as, he performs work under the contract, it’s not fraud (by definition) it’s a civil matter and you have to sue to get your money back. Good luck!

3.  The Police won’t help you.

Because the scenario doesn’t meet the legal definition of fraud, the police tell you it’s a civil matter and not their problem. When this happened to me once, I was told, it’s my own fault for doing business with the guy. I guess it was, it just hurt to be told so.

4.  It’s very profitable!

Let’s say our fraudster has 2-3 loads a day on the go. Pretty easy for someone to manage. Typically, they don’t go for $1000 loads either. They pick a really good paying one. Toronto to California, or Georgia to Vancouver. Full loads, long miles. They could fetch $5000 – $6000 per transaction x 3 per day x 45 days (before anyone comes looking for money) = about $500,000 for a month and a half’s work. All in cash! 100% profit. No overhead. Sometimes I think, wow! What a great business. It’s totally legal and profitable! As long as you hide the money away and have no assets, no one will bother suing you to get it back. Heck, now a day’s you can even do it from another country with a local Skype number. No one will know the wiser.

5.  It’s super easy to prevent!

The above scenarios are easy to prevent with a little bit of diligence. Listed below are some best practices aimed at reducing the potential for theft and fraud related to transportation

1.  Have a system to give unique pick up and delivery numbers to every shipment. Give this number only to an authorized representative of the transportation company you are dealing with. If a driver does not present a valid number, you shouldn’t load him or unload him.

2.  Know who you are doing business with:

  • Check insurance policies are valid by calling the carriers agent to verify
  • Check online resources like the FMCSA to confirm the carrier is authorized to move freight and has a valid license to do so.
  • Check the phone numbers on the website vs. FMCSA vs. the guy you’re talking to. This will prevent someone posing as a “real” carrier from calling you to solicit freight, only to steal it.
  • Google the carrier’s address. A trucking company is pretty obvious from Google on satellite. If the carrier’s address turns out to be a strip mall, PO box, or a residential area, you may want to ask a few more questions.
  • Call the carrier from the number on their website. Ask for the person you are talking to. This confirms they work there and are a valid representative of the company you think you are speaking with.
  • Ask for references of other customers, and call them! Make sure the references given haven’t just started doing business a couple of weeks ago. This should be a red flag. You’re looking for longtime customers.
  • Do a credit check. Do you really want to give $100,000 worth of your product to someone on the verge of bankruptcy. Probably not. Check! It’s important. Plus, how likely do you think a carrier on the verge or bankruptcy is going to be to pay a claim.
  • Google the carrier. You’d be surprised what you might find out. There are lots of blogs and complaint websites about fraudulent carriers. They may have already committed fraud somewhere else.
  • Develop an in-house “do not use list”. If you’ve disqualified someone once. Don’t give them the opportunity to try and fool you again. Keep a list.

Hopefully, this will help keep the industry safe and clean for everyone. If everyone is a little more diligent we can prevent bad things from happening. If I had one more piece of advice to offer it would be to be extra diligent on that 4pm on a Friday afternoon rush emergency shipment. The fraudsters wait for these. They know when time is of the essence that all the checks and balances sometimes get thrown out the window. Don’t let it happen to you.

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