Freight fraud is plaguing the trucking industry. Fraud and theft of trucked and brokered freight hauling takes many forms. Fraud perpetrators and criminal enterprises against trucking and brokerage account for an estimated 3,500 instances annually—a figure that understates actual occurrences.

Freight fraud schemes range from simply stealing freight loads to bait-and-switch tactics such as “double brokering.” Identity theft also hits an increasingly digitized industry.* Other forms of fraud include fuel-advance fraud, broker impersonation, and cybercrimes like phishing emails, spoofing of legitimate logistics and trucking company email addresses, and malware.**

Examples of Freight Fraud Crimes
The industry publication Truckstop reports that incidents of cargo theft have risen markedly since the beginning of the pandemic. In one case, two different major brokers hired crooked brokers for the transportation of eight similar shipments. Small carriers were hired from the common load board. All loads were reconsigned by brokers to a Chicago warehouse. The stolen freight—$2.5 million worth of copper wire—was not recovered. There was no chain of custody verifying the legitimate pickup carriers.

In “double brokering,”  the broker hires one carrier, but a different carrier hauls the load, unbeknownst to the original carrier. For example, a California-based scammer established a new carrier and a different new broker to accept freight and tender it to unsuspecting carriers. After about three months of operation, the scammer double brokered over $1.9 million in freight charges and absconded with the collected proceeds. The scam worked because no chain of custody was followed.

Another example of double brokering is a case out of Tijuana, where a fraudster schemed to defraud interstate carriers and brokers by stealing the identity of a
legitimate interstate carrier. Instead of delivering the cargo, the perpetrator “posed as a shipper and re-brokered the same loads to other carriers who delivered the freight. [He] then collected the payments for the completed deliveries but did not pay the carriers who actually delivered the loads and were unaware that Padilla was running a double-broker scheme," a news release from the U.S. Attorney’s Office in the Southern District
of California said.

Identity theft in trucking has become easy for criminals, who purchase motor carrier (MC) numbers in order to impersonate legitimate trucking companies. The trade magazine Freightwaves details the experience of a small New Jersey company that had its MC numbers stolen, allegedly by criminals submitting fraudulent paperwork to FMCSA’s SAFER site. The schemers posted loads using the legitimate company’s DOT number, received payment, then disappeared.

Adverse Effects on Small Business
While freight fraud affects large motor carriers, small businesses suffer especially hard from these crimes. Fraud brings harmful economic ripples for victimized small truckers, motor carriers, and brokers. Such crimes increase their cost of doing business, due to loss of compensation and equipment, and disruption of operations. Retailers and consumers must pay more for replacement products and other uncompensated costs.

Freight fraudsters can quickly, easily pose as a carrier, a broker, or both, opening under a new DOT number for a short time, bilking small truckers, then closing shop only to reopen under another DOT number. Legitimate owner-operators and small carriers now face skeptical shippers and brokers, who decline to place freight loads with new entrants in business for less than several months.

Solution
The Office of the Inspector General (OIG) at the U.S. Department of Transportation is already authorized and able to monitor supply-chain fraud complaints and to investigate and develop cases, and works with the Justice Department in prosecution of fraudulent activity under existing civil and criminal statutes. The industry consensus solution is that OIG establish a permanent task force focused on law enforcement in this area of transportation crimes.

The Federal Motor Carrier Safety Administration (FMCSA) operates a National Consumer Complaint Database hotline to report fraud. However, the database is not maintained closely or timely enough to be effective. Very little enforcement action follows reported incidents, which discourages reporting fraud incidents. FMCSA lacks the authority, the resources, and the mission to pursue fraud leads and develop cases.

* See Liz Young, “Growing Freight Fraud is Peeling Millions From the U.S. Shipping Market,” Wall Street Journal, April 26, 2023; Todd Dills, “Growing broker/carrier identity theft schemes reaping million,” Overdrive, March 9, 2020; and “Cyber Scams and High-Tech Heists: Securing Freight in the Age of Strategic Cargo Theft,” Supply Chain Brain, Nov. 7, 2023, for examples and more information.

** https://www.regulations.gov/comment/FMCSA-2022-0134-0065 See Appendix A of this comment letter for a list of laws applicable to brokers that includes remedies. See Appendix C for examples of intermediary fraud and abuse.