It’s time for massive load board players to take responsibility for fraud

1. Double brokering. 
2. Load phishing. 

Double brokering has been around for years, while load phishing is relatively new. 

How load boards are supposed to work

Before diving into the two types of fraud, we should take a look at how load boards are intended to work. 

A broker with a load posts an opportunity on a public load board, looking for a carrier to haul it.

Trucking companies will identify the loads they desire to haul based on the origin and destination, service requirements and commodity being hauled. Often, the price the broker is willing to pay is not posted alongside the transaction. 

Load boards work more like Craigslist than Amazon in that the load board will list potential jobs for truckers, but the transaction is executed outside the load board platform, often through email or on the phone.

With more than 16,000 freight brokerage firms and 400,000 registered motor carriers in the U.S., the chances are very high that the carrier and broker have never done business together. In many ways, it’s a bit of a Wild West and shockingly analog, despite investments toward digitization in FreightTech that have taken place over the past decade. 

When the trucking carrier reaches out, a process of negotiation takes place between the broker and carrier. Often, the broker can be talking to dozens of carriers about the same load with the intention of finding the cheapest carrier that can meet the service requirements. 

In a legitimate load, after a price has been negotiated between the broker and carrier, a rate confirmation sheet is transmitted to the carrier, along with the shipment details. The carrier will then go and pick up the load, transport it to its destination and notify the broker that the load has been handled with a signed proof of delivery. After that, the carrier bills the broker and the broker pays the carrier. 

What happens in double brokering

In a double-brokered load, the outcome is very different. 

The load is sourced on a load board by a “carrier” that isn’t what it pretends to be. In fact, the “carrier” may not be a trucking company at all. It is likely a third party that pretends to be a trucking company using fake documents and may not have any real trucks.

The fake carrier agrees to the broker’s service terms and price offer and then turns around and brokers the load out to a legitimate trucking company. The original broker has no clue who the carrier is on the load. 

The legitimate trucking company picks up the load, unaware that the load that it has received has been double brokered. The trucking company transports the load and delivers it, all the while expecting to get paid. 

This is where the fraud takes place. 

The original broker pays the illegitimate carrier (the one that double brokered it) for the load service. Since the double-brokering fraudster didn’t have any real expense in moving the load, the transaction is pure profit. It doesn’t intend to pay the carrier that actually took the load. 

The carrier that actually did the load service attempts to get paid from the double-brokering fraudster. The problem is that the business isn’t legitimate and doesn’t pay. By the time the carrier realizes it has been had, the double-brokering fraudster disappears. The carrier has hauled the load and performed the service, never to get paid. 

The legit broker risks having to pay twice — once to the fraudster and once to the legit carrier. While the legit broker may not know initially who the carrier is on the load, if it doesn’t get paid, there is a risk that the carrier attempts to collect payment directly from the shipper, hiring a law firm or collection agency to demand payment.

Cargo theft an even bigger problem for double-brokered loads 

In a double-brokering transaction, the load can be stolen altogether. This is because the original broker has zero clue who is actually hauling the load to begin with, and without any information on the carrier, there is no way for the original broker to know the whereabouts of the cargo. 

Because the trucker received the original load from a broker (the double-brokering fraudster) it matched with on a load board, it believes the broker is legit. After the load is picked up, the trucker is contacted by the broker and told that the delivery destination has changed. 

Naively, the trucker delivers the cargo to a compromised warehouse, completely unaware that the cargo will be stolen. The trailer is stripped and the cargo is stolen, to be sold on the black market. 

Load phishing emerging as major load board fraud risk 

An emerging version of load board fraud is designed to steal cargo. It works a lot like wire transfer phishing.

Load phishing starts out with a broker posting a load opportunity on a load board, along with an email address. The broker receives an email from a carrier that wishes to match with the load opportunity. A negotiation between the broker and the carrier takes place and the broker awards the load to the carrier. 

The problem is the person on the other end of the email isn’t legitimate. He or she is using a look-alike email address or claiming to be a carrier. These fraudsters are using legitimate trucking companies’ information and credentials but have zero association with the companies they are pretending to represent. The email will look legitimate, but the address may be a letter off or it could come from a Gmail address pretending to be a carrier. 

Once the load has been booked by the fraudulent carrier, a driver picks up the load and the cargo disappears.  

The risk of criminal prosecution is small  

In many cases, the criminals who commit this form of fraud are getting smarter and more sophisticated with their efforts, as all successful criminal enterprises tend to get over time.

Make no mistake, load board fraud is not a small-time crime. Those who perpetuate it are incredibly organized and sophisticated and have found a very lucrative way to make a lot of money very quickly and with little risk of prosecution. 

Load board fraud criminals often work from overseas, and with the proliferation of offshore brokerage call centers and service centers, it has become increasingly difficult to differentiate between a legitimate offshore brokerage or carrier staffing center and a fraudulent one. 

As has always been the case, the trucking industry gets little support from federal agencies or police departments that are responsible for investigating these types of crimes. When incidents are reported, the victims of such crimes — which can be everyone along the transactional chain, including shippers, carriers and brokerages — get very little assistance from authorities.

Because load board fraud is often committed via the internet and may cross multiple jurisdictions, including international borders as well as involving interstate commerce, investigation of these crimes should be the responsibility of the FBI. However, while the aggregate amount of these crimes is huge, the individual fraudulent transactions are usually quite small — less than a few thousand dollars — an amount too low for a federal investigative agency that has much bigger crimes to deal with. 

Plus, load board fraud isn’t well understood, even by a sophisticated investigator, much less a jury if it were to ever end up in the court system. After all, who would expect the massive $800 billion truckload industry to still transact a sizable amount of commerce on a Craigslist-like posting board?

With shippers increasingly becoming the victims of stolen cargo propagated through load boards, we can expect that there will be an increasing level of pressure to move freight off the public load boards and onto private 3PL networks with prevetted parties. 

If the load boards want to protect their business models, they will need to step up their regulation of their marketplaces and invest in fraud prevention tools.