Fraud in Freight Brokerage: How to Identify and Avoid Common Scams
As a freight broker, your busy days are spent servicing multiple customers, carriers and loads. The last thing you want to worry about are dishonest people trying to take advantage of the hectic nature of this business. As the country deals with the COVID-19 pandemic, fraudulent activities are increasing to scam brokers, carriers and customers in order to collect immediate funds.
Armstrong has issued hundreds of advances to carriers for fuel, layovers and lumpers over the last 15 years in the logistics industry. While many carriers really do need funds to keep their trucks rolling, there are several common types of fraud in the freight brokerage industry that you should be aware of.
When issuing funds to a carrier prior to a load being delivered, it is extremely important to verify information and do your due diligence. In this hectic time, it is important to be able to identify these types of fraud, as well as best practices for avoiding them. This can help you to protect your business, saving you time and money.
Common Types of Fraud
Fuel Advance Scam
Scammers steal a legitimate trucking company’s identity (MC number, insurance, etc.), and then they use that information to book loads. By doing this, they are able to request and secure advances from brokerage companies. This tends to be especially prevalent on high dollar loads, where the payday will be large.
The individual committing the fraud will typically ask for a fuel advance. This third party then collects the fuel advance and leaves the actual driver/carrier moving the load high and dry. In some cases, the carrier actually doing the work may threaten to hold the load hostage or dump the load for fear of not getting paid.
Your company and your customer will be left in a big predicament. You might not know where the load is or who is actually moving the freight. Take care and caution to make sure the loads you are brokering are being moved by a legitimate carrier, and that the carrier you booked is the one in possession of the freight.
Double brokering occurs when a customer or broker books a carrier to move a load, and that carrier in turn brokers out the load to a third party. This happens without the customer or brokers knowledge or approval. A variety of issues can arise from a load being double brokered. The most important being lack of a contract and insurance for the carrier in possession of the freight. Additionally, there is a lack of control that can cause billing issues, especially if the person double brokering the load does not pay the carrier who did the work. In these cases, the broker can be on the hook to double pay for the load to be moved.
Fake Repair Shop or Tow Service
It is common for trucks to require repairs or tow service in the course of moving a load. These costs should always be placed back on the trucking company and not paid for by the broker.
The scammer will provide a vehicle number, license plate number and a driver’s name and demand that the broker pay for the repairs or the emergency tow. In some cases, they may go as far as submitting a phony invoice. If the request for payment is denied the scammer may once again threaten to hold the load hostage. **
Fake DOT Inspector/Police
These scammers pretend to be with the Department of Transportation or a police officer on-site during a DOT inspection. They demand immediate payment for a fictitious violation in order to have the truck released.
Best Practices For Avoiding Fraud
Here are some tips to protect your business from scams and fraud:
- Only issue a monetary advance if it is absolutely necessary. EFS checks should never be issued to a carrier unfamiliar to you.
- Call the contact number provided in Safer or Carrier 411 and confirm the carrier is booked on the load in question.
- Never issue a fuel advance to a new carrier on the first load they are running for your business. Armstrong recommends no advances until three shipments have been picked and delivered without incident.
- Compare the information of the person requesting an advance to the carrier’s contact information in Safer or Carrier 411. If the information does not match, do not issue an advance. Contact the carrier at the number listed in their profile.
- Request a picture of the truck at the shipper’s facility to confirm the MC number on the side of the truck.
- Require a copy of the shipper’s Bill of Lading with the carrier's and shipper's name and signature.
- Speak with the driver, not just the dispatcher. Confirm what company the driver works for.
- Don’t issue the total fuel advance at one time. Many companies have a maximum amount of 40%. Have a load going cross country? Issue smaller advances while in transit each day up to the maximum amount allowed by your organization.
**Be suspicious when someone is pressuring you to make an immediate payment. It is rare that a situation is so urgent that you won’t have time to make the necessary verification beforehand.**
If you suspect that someone is trying to commit fraud, do not issue any payments. Immediately, contact the appropriate department within your organization. At Armstrong, we direct all brokers to immediately notify our Claims Department at email@example.com for additional guidance and assistance.