TT Talk - Cyber identity - what you see may not be what you get

The European Commission estimated that the value of cargo stolen in transit was around EUR8.2 billion per annum. The TT Club has seen an increase in the role fraud is playing in such losses. There is a marked trend in organised crime posing as legitimate operators or using internet cargo clearing sites to facilitate the theft of high value cargo. Perhaps most worrying is that this is global.

Scams involving cargo clearing sites

Freight forwarders, and similar freight or truck broking operations, need to be aware that there has been an increase in commercial identity theft, whereby thieves pose as legitimate contractors and make off with millions of dollars of merchandise. Experts say the practice is growing so fast that it will soon become the most common way to steal freight. The internet - on which we all rely heavily - facilitates such scams, enabling thieves to gain easy access to vast amounts of information. Online databases and cargo clearing sites help conmen to assume the identities of existing or plausible contractors and to search for specific commodities they want to steal.

"Ransoms have reportedly then been demanded by the Chinese agent in order to relay the necessary documentation."

In recent weeks there has been an amount of publicity about the frequency of incidents of bogus Chinese forwarders establishing online relationships with agents in the UK and sending container loads of cargo without the necessary bill of lading to secure the release of the container once landed at the UK port. Ransoms have reportedly then been demanded by the Chinese agent in order to relay the necessary documentation. Without this, the UK forwarder can find himself with significant demurrage and storage bills, as well as large legal fees incurred in trying to extricate himself from the situation.

There is an increasing trend in the fraudulent use of internet clearing sites. Operators are particularly exposed on occasions when they need assistance in regions they are unfamiliar with, especially at short notice. In such circumstances operators may be tempted to use unfamiliar subcontractors sourced via such sites.

"There are now documented instances where crime organisations have purchased legitimate but failing transport operators and continued to trade in their name"

There are now documented instances where crime organisations have purchased legitimate but failing transport operators and continued to trade in their name, predominantly on line and in a state of virtual insolvency, waiting for the opportunity to receive a valuable cargo before disappearing. More simply in other cases, fraudulent road hauliers advertise vehicles available for backloads, again hoping for an unsuspecting forwarder, in too much of a hurry to carry out proper checks, and with a high-priced cargo to move.

"The criminals had gained access to the site and submitted fake insurance documents"

A recent case in the US highlights the problem. A truck broker posted a shipment on a clearing website, commonly used by freight forwarders to match up shipments with trucking companies. A trucking company called inquiring about the shipment and were advised to submit proof of insurance. Once the proof of insurance was received, the truck broker and trucking company agreed on a price and the trucker broker issued a dispatch confirmation listing the trucking company and the address where the cargo was to be picked up and delivered. The trucker picked up two truck loads, valued at USD175,000, which never arrived at their intended destination. The criminals had gained access to the site and submitted fake insurance documents. The truck broker eventually called the actual trucking company and discovered that it only hauls freight in Florida, while the shipment was picked up in California.

Mitigating the risks

TT Club advises that such internet risks can be successfully mitigated in a number of ways:

  1. It is essential to have a robust approved subcontractor selection policy. The effective implementation of such a policy, even (and particularly) at times when time-sensitive moves are being arranged, is fundamental in reducing the risks associated with the use of clearing sites. TT Club's Stop Loss Information Sheet on 'Theft Attractive Cargoes' includes a list of questions a freight forwarder or broker should be asking a prospective sub-contractor. There is also a threat of criminal organisations taking over legitimate companies with whom you may have traded previously; take extra care should a past point of contact suddenly change.
  2. Clearing sites often include a disclaimer, denying liability in the event of fraudulent activity on the site. However, operators of such sites do have a duty of care to users. They will often make recommendations for safe usage, list best practice and give loss prevention advice in order to minimise user's exposure to risk. TT Club recommends that such instructions are fully understood and applied wherever possible.
  3. Subcontractors using free mail accounts such as Hotmail, Gmail and Yahoo should arouse suspicion. Similarly correspondence via Skype or other free videoconferencing should be avoided. Perpetrators will use different phone, fax and emails than the actual carrier. Use established means (such as Carrier411 in the US) to perform a quick internet search on the contractor's name; cross-check contact and other given details. Be cautious of end of the day and evening inbound calls where all carrier information may be hard to verify.
  4. When requesting insurance documents always ensure the original certificates are posted. Beware if documents are offered only in electronic format. While this can prove to be a time saver the use of more sophisticated graphics packages are making it easier for fraudsters to create false documents. Always seek to verify the legitimacy of the insurance policy with the insurer. If the insurer is not contactable and/or doesn't have a website with contact details, this could be an indicator of legitimacy issues with the contractor.
  5. Establish signage and license plate information on tractor/trailer and provide this information to the shipper for further confirmation at time of pick up. Require the shipper's warehouse or cargo releasing facility to photocopy the carrier's Driver's Licence and independently verify with the trucking company (whilst the driver waits in his unit). Encourage the use of CCTV to capture clear identification of the driver and cross-checking of truck signage, registration plates etc, with explicit instruction to seek clarification from the forwarder of any variance.

Ultimately thieves will seek to identify the weakest link in any given supply chain and the internet offers much opportunity. Due diligence procedures should be investigative, challenging, analysing, cross-checking and evaluating given information. Adopting a stringent approval procedure, before you entrust a new subcontractor with your customer's cargo and your own reputation, is demonstrably justifiable.

We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.

We look forward to hearing from you.

Peregrine Storrs-Fox

Risk Management Director, TT Club

Staff Author

TT Club