Freight Fraud: What It Is, Examples & Prevention

With so much time and energy that goes into being an owner-operator, the last thing you want is to fall victim to freight fraud.

Prospective and current owner-operators need to be aware of several types of freight scams. Getting caught up in a trucking scam could result in fines, lost revenue, and other negative consequences, even if you aren’t to blame. By understanding common trucking scams to watch out for, you can protect yourself and your business.

What Is Freight Fraud?

Freight fraud is a broad term that describes any kind of theft, misrepresentation, or deception in the shipping process. It can be performed by an individual or even an entire organization and is typically done for unlawful financial gain.

Freight fraud can cause significant financial harm to everyone involved in the shipping process, including shippers, brokers, and carriers. The different types of shipping fraud have become increasingly sophisticated, which requires extra diligence throughout the transportation process by everyone involved.

Examples of Freight Fraud

The following are some of the most common examples of freight fraud you should know when running a trucking business.

Broker Fraud

Freight broker fraud most commonly occurs in the form of double brokering. Double brokering occurs when a broker passes a shipment to a different broker without informing the shipper. This may occur when a broker’s existing schedule is too busy. However, this practice is illegal because the original broker doesn’t inform the shipper or carriers about the arrangement.

When this happens, the load that a carrier was given through the second broker becomes uninsured. The shipment is technically being transported illegally, and as a result, any damage or losses to the truck or load, as well as injuries to the driver, may not be covered in the event of an accident. Carriers might not get paid for the shipment at all and can face fines, criminal charges, and other consequences.

It’s worth noting that double brokering is different from co-brokering. While co-brokering also involves a broker working with a secondary freight brokerage or carrier, the difference is transparency. The original broker makes the shipper aware of the other parties’ involvement, and the shipper agrees to the change. The load remains insured, and the carrier will still get paid.

CDL Scams

Obtaining a CDL is essential for becoming an owner-operator. Unfortunately, there are a variety of several CDL scams designed to take advantage of would-be drivers.

One common scam is for individuals to receive an email or phone call claiming to be from a recruiter at a motor carrier that is linked to a driving school. The driver is promised a position as soon as they graduate from the school with a CDL license but is asked to wire money to the recruiter before they start the course—a quick way for the driver to lose money.

The government has tracked a wide variety of CDL scams over the years, including schemes to alter test scores or sell CDLs without needing to take or pass tests. Fines and other penalties are sure to follow if you knowingly participate in one of these schemes to obtain a CDL in an “easier” manner.

Fuel Advance Fraud

Fuel advance fraud is a type of trucking company fraud that can target brokers or shippers. A fraudulent individual will pose as a legitimate carrier on a freight board. After the fake carrier is able to secure a load, they will request a fuel advance from the broker or shipper to cover their load expenses. In some cases, they may even submit a fake bill of lading indicating that the load was picked up.

Of course, once the broker or shipper sends the fuel advance to the fake trucker, the load won’t get delivered. The scammer takes the money and disappears. For legitimate truckers, if the scammer conducted their freight broker scam while impersonating you or your business, this can lead to reputational harm and potential legal actions.

Freight Payment Fraud

Freight payment fraud includes a variety of methods that a scammer could use to deceive a carrier regarding payments.

For example, a fraudulent broker could manipulate invoices to overbill a shipper or underpay a carrier. Other scammers might send a fake email that looks like it comes from a legitimate broker in an attempt to steal financial information from a shipper or carrier. Scammers might also manipulate payment details on a legitimate invoice so that payments go to them instead of a legitimate broker or carrier.

These and other similar activities result in funds essentially getting stolen from the shipper and may also result in a carrier not getting paid for their work in transporting goods.

Identity Theft

Identity theft involves imposters creating fake identities to impersonate a legitimate carrier or shipper. Most often, identity theft occurs through phishing scams that trick brokers into sharing sensitive information or by intercepting digital data that was not securely transmitted.

In these situations, scammers use a fake identity to secure contracts with brokers. Then, they typically demand an advance payment but fail to pick up the shipment, or they steal the freight after picking it up. Identity theft takes job opportunities away from the actual carrier and can harm their reputation.

Fictitious Pickups (Cargo Theft)

Fictitious pickups are a type of trucking scam that typically stems from identity theft. During a fictitious pickup, a fake carrier will pick up a cargo shipment while posing as a legitimate carrier. Then, they steal the entire load rather than delivering it to its destination.

Another form of cargo theft comes in the form of load pilferage, in which only a small portion of the cargo is stolen. Documents will usually be manipulated to cover up the theft and enable the scammer to keep obtaining loads.

Cargo may also be stolen en route, such as by an imposter providing altered delivery instructions when a carrier picks up the cargo. The carrier thinks they completed the load, but they actually delivered it to a location where the goods will be stolen.

How to Avoid Freight Fraud

Understanding how to avoid trucking scams is essential for protecting your business and your clients. Basic freight fraud prevention efforts can go a long way in ensuring that you don’t fall victim to a scam.

1. Verify Identities

You should always verify the identity of those you do business with, particularly if they reach out to you unsolicited. For example, verifying the legitimacy of a CDL school recruiter could keep you from losing the money a fraudulent recruiter wants you to wire to them.

Similarly, you should make sure you are working with reliable, trustworthy freight brokers. You could check a freight broker’s credit score, ask for references, or verify their credentials through the FMCSA or by using their DOT number.

2. Be Safe Online

Many scammers are able to steal information when you use an unsecured network or input confidential data on an unencrypted site. Avoid browsing load boards or inputting your business information when using a public Wi-Fi network. Double-check the legitimacy and security of the websites you use, and make sure the brokers you do business with also follow these practices.

Also, double-check email addresses if you get a suspicious email—many phishing attempts will use addresses with slight misspellings to trick the recipient.

3. Carefully Review Contracts

Reviewing your contracts before carrying a shipment helps ensure their accuracy and can alert you to potential red flags. For example, an unusually high rate for the load, seeing a different broker’s name on the bill of lading, or a broker requesting that the carrier check-in under a different name are all indicators of double brokering.

4. Audit Your Billing Process

The freight billing process is where many fraud attempts occur, such as overpayment or diverting payments to another account. Invoice verification can help you identify discrepancies between invoices, purchase orders, and other contractual documents—as well as any issues regarding missing or inaccurate payments.

A full-scale freight audit will also account for factors such as freight rate, shipping weight, mileage, insurance, and so on to ensure the accuracy of your billing processes.

How to Report Freight Fraud

If you suspect you have been the victim of freight fraud—or that someone is trying to scam you—there are a few ways you can report the incident. First, you should contact the Office of Inspector General (OIG) hotline through the U.S. Department of Transportation. You can reach the report fraud hotline via phone at (800) 424-9071 or by email at hotline@oig.dot.gov.

You can also file a complaint online with the FMCSA’s National Consumer Complaint Database. If your own identity is being used fraudulently, you should alert load boards, factoring companies, and your insurance company where scammers might try to use your identity. Finally, depending on the nature of the fraud, you should also notify local law enforcement.

In-Summary: Freight Fraud

When you understand the types of scams to watch out for, you can prevent trucking fraud and protect your business. By verifying the identities of those you work with, carefully reviewing contract details, staying safe online, and conducting regular audits, you will reduce your risk of becoming a victim while also increasing trust. By combining freight fraud prevention with other small business accounting best practices, you can keep your trucking business on track for long-term financial success.