Emerging cargo fraud threat driven by move online

The global cargo market is being hit by a tidal wave of fraud due to its almost exclusive use of online facilities to process business transactions.

Insurer TT Club has said the use of technology is opening up the sector to “a myriad of fraudulent pursuits to find opportunities within the complexities of the global supply chain”. These include payment fraud that involves existing mandates and impersonation of executives to procurement fraud featuring false invoicing.

Carrier fraud, in which criminals imitate hauliers and other sub-contractors, including drivers with falsified documents, accounted for 84% of TT claims involving fraud or deception in 2022. TT said it felt it was obligated to pinpoint these risks and offer advice to industry on how to not just identify potential fraud but to minimise and avoid losses through them.

“No one,  from freight forwarders, shippers, and carriers to container owners and logistics, ports, warehouse and depot operators, should underestimate how lucrative an industry fraud is. Using sophisticated, low-risk tactics, fraudsters can easily steal large amounts of money or consignments of cargo,” said Mike Yarwood, managing director, Loss Prevention at TT.

“Incidents of fraud that target international supply chains across the globe are not perpetrated by opportunistic criminals working in isolation but in the majority of cases the work of sophisticated organised crime gangs,” he added. “They have well-honed methodologies that are adaptable in the face of detection devices and changes in operating procedures, as the experience of recent disruption to the freight transport system has proved. Our awareness and readiness to protect our businesses must be stepped-up.”

TT has said it is to increase its efforts to assist operators to shield themselves from fraudulent activities as it sees 15% of its cargo theft claims arise from fraud or deception.  Specific examples include the intentional submission of false invoices purportedly from an established supplier but actually generated by a fraudster infiltrating the online payment system and duplicated or inflated invoices. Other cases, falling into the category of mandate fraud, experience criminal deception by manipulation of bank transfer details by a fraudster pretending to be an organisation paid regularly by the operator by hacking into the victim’s email traffic and imitating a genuine supplier alter bank transfer details for payment of a legitimate invoice.

TT found however that carrier fraud dominated its claims of this type last year.  They found numerous instances of fake carriers intercepting haulage instructions from forwarders or shippers and posing as the authentic carrier; also falsifying cargo pick-up or delivery documentation to steal loads.

“One common tactic is where fraudsters pose as a forwarders using a freight exchange site and provide false instructions to a driver,” the club explained. “They match a legitimate haulier to a shipper, facilitating the movement of goods. The fraudster then acts as a ‘middle man’ between these two legitimate companies, arranging the collection and directing the driver. Once the trucker has collected the goods, the fraudster provides new instructions to deliver to an alternative address where the cargo is stolen.”

“A key aspect of this scenario is that the driver and the shipper are not in direct contact with one another,” added Yarwood. “To avoid incidents such as this and other frauds it is crucial to make employees aware of the possibilities, to take extra care to verify documentation and instructions directly with customers and/or trusted partners, especially in pressure situations where carrier options might be in short supply or when there are particular time constraints.”