Fraud rates are on the rise, increasing significantly in 2022 and continuing to climb throughout 2023. In fact, the total annual impact of stolen freight came in at a shocking $223,096,368 last year, according to data from CargoNet.
Reports of fraud skyrocketed last year, jumping 400% between 2021 and 2022. Reports then climbed another 57% between the second quarter of 2023 and the same quarter last year.
Chris McLoughlin, Uber Freight’s director of compliance, attributes this staggering increase in cargo fraud to a combination of tumultuous economic conditions and supply chain vulnerabilities.
The ongoing recession has left both companies and individuals in financial turmoil, pushing existing bad actors to increase their fraudulent activities and prompting new fraudsters to enter the arena.
“The freight recession is starting to impact everybody in the supply chain,” McLoughlin said. “We’re seeing bad actors actively targeting companies in financial distress, taking advantage of their desperation. It can range from double brokering at rates well beyond market, which the bad actor has no intention to pay, to buying up operating authorities as the owner exits the space to be used in fraudulent activity.”
These entities have been able to prey on companies that are already struggling, often by exploiting loopholes in their digital security protocols. As the industry — and the world — becomes more connected, opportunities for bad actors to exploit technology for their personal benefit grow.
Phishing, identity cloning and payment fraud are all common examples of fraud that companies within the transportation space may experience. Companies — especially those without a holistic understanding of the digital landscape — are often ill-prepared to ward off these more modern types of fraud.
When bad actors are able to compromise a company’s onboarding protocols, digital or traditional, other types of fraud also become easier to accomplish. Fictitious pickups, shipment diversions and load pilferage are all growing threats. Companies without strong security protocols and protective partnerships in place should act now to protect their organizations and reputations from bad actors.
While the rapid adoption of technology across the industry has created new vulnerabilities, it has also given companies access to new ways to protect themselves. When utilized correctly, technology is an asset in the fight against cargo fraud.
“The digital advantage we have is allowing us to uncover the fraud that exists that most brokers may not have been aware of five to 10 years ago in a less digitized environment,” McLoughlin said. “We can take action a lot earlier than we could before.”
Becoming aware of both successful and attempted fraud is the first step to creating a more secure supply chain, but efforts cannot stop there. Companies should incorporate security processes into every aspect of their operations, keeping in mind that a single layer of security is not enough to keep determined fraudsters out of their systems.
“You have to understand that there is not one single silver bullet that is going to protect you,” McLoughlin said. “It takes multiple processes and multiple layers of control to be able to insulate your supply chain.”
Uber Freight, for example, has more than 20 distinct, independent security processes related to carrier vetting, management and monitoring running in the background at all times. This is because not every process is going to work all the time.
Working with third-party partners in the logistics space is often a crucial part of creating these layered security processes. Companies should not be afraid to collaborate with other industry players and outsource tasks outside their field of expertise.
“Understand what your business is good at and be willing to leverage other entities to give you additional layers of security,” McLoughlin said.
The importance of working with entities outside of the industry, however, should not be overlooked. Outside players, including law enforcement agencies, play a significant role in mitigating the impact of fraud on the supply chain.
“You should be working with law enforcement locally, regionally and federally,” McLoughlin said. “You should be having conversations and supporting those agencies before you have problems. You want to have those relationships early on.”
Uber Freight has in-house specialists devoted to preventing fraud, as well as recovering stolen cargo and solving digital fraud cases when they do occur. For smaller companies that cannot afford to take this approach, however, layers of protection can be found in strategic partnerships. The key is understanding that everyone is in this together.
“Fraud is ever present in the supply chain right now because of the era we are in,” McLoughlin said. “Everybody is exposed to this. No single mode of the supply chain is being attacked, it’s everybody.”
Click here to watch our recent webinar on fraud in the supply chain industry.