TT Talk - Be alert to 'carrier fraud'

Operators in the global supply chain can easily become victims of fraud in conducting day-to-day business. ‘Carrier fraud’ is increasingly prevalent and sophisticated. Today’s digital business environment enables criminals to create fictitious companies, intercept legitimate business transactions and obscure their fraudulent activity, reducing the likelihood of recovering freight or funds and their risk of being brought to justice.

In this fourth and final instalment in our fraud series we consider carrier fraud and explore two common frauds, providing case study examples, explaining how they work and how to avoid becoming a victim.

Fake carriers 

What is it? 

Simply, this is deception through imitation of a genuine carrier. Creating an impersonation of a legitimate haulier is a tactic widely used by criminals responsible for cargo theft. It’s relatively simple to generate email addresses, contact details and documents that are false but appear legitimate. Where sufficient due diligence is not undertaken, supply chain actors can fall victim. 

Where sufficient due diligence is not undertaken, supply chain actors can fall victim.

Inevitably, there are a range of ways that a fraudster will present, often looking for an opportunity where guards are lowered. In offering services, the approach to a legitimate supply chain actor may be in one of the following ways:

  • presenting as an entirely fictitious company;
  • taking on the identity of a legitimate company, fraudulently; or
  • carrying on business as a legitimate company, with fraudulent intentions. 

How it happens – a case-study example

M Clothing Ltd has a cargo of high value coats to ship from Turkey to the UK. The logistics arrangements are entrusted to O Logistics Ltd. O Logistics is unable to position one of their own or approved haulier trucks to collect and deliver the cargo on time, so advertise the shipment on a freight exchange platform. 

24 hours before the deadline for collection Q Haulage Services offers a solution. It has a truck, which has just come available in Turkey, looking for a backload to the UK, and can collect the cargo on time. Q Haulage present a very reasonable freight quotation. Given the tight deadline and the apparent perfect solution, O Logistics Ltd undertake few checks and Q Haulage is awarded the contract. 

Q Haulage arrives at the collection point with a plain vehicle on false licence plates and take the cargo as planned. 

Several days later, O Logistics Ltd are unable to contact Q Haulage, who had only ever provided a mobile phone contact number, which is now switched off. The delivery time and date passes, and the cargo fails to materialise. 

Q Haulage were a fictitious company, the fraudsters had stolen a vehicle and with false licence plates were able to collect and steal the valuable cargo. 

Driver call diverting 

What is it? 

This is where fraudsters provide false instructions to a driver. Using a freight exchange site, a fraudster will pose as a freight forwarder, matching a legitimate haulier to a shipper, facilitating the movement of goods. The fraudster acts as a ‘middle man’ between these two legitimate companies, arranging the collection and directing the driver. One key aspect of this fraud is that the driver and the shipper are not in direct contact with one another. Once the trucker has collected the goods, the fraudster provides new instructions (supposedly from the shipper) to deliver to an alternative address where the cargo is stolen.

One key aspect of this fraud is that the driver and the shipper are not in direct contact with one another.

How it happens – a case-study example

M Clothing Ltd has a cargo of shoes to ship from Russia to France. The shipment is tendered on a freight exchange website. The fraudster purports to represent a freight forwarder based in Russia called O Logistics. The fraudster has been monitoring activity on the freight exchange site, and noted both the shipment requiring collection and a haulier who will become available nearby called Q Haulage.

O Logistics contacts M Clothing and presents a solution, offering a reasonable freight rate and so is awarded the contract. O Logistics then contacts Q Haulage and offers a very attractive freight rate to contract to transport the cargo. O Logistics manages all correspondence, ensuring that all required details are passed to the driver. Q Haulage arrives at the collection point, collects the cargo and set off towards France. 

Once the cargo has been collected, O Logistics contacts Q Haulage and apologetically explains that the planned delivery to France has been cancelled and instead advises that the shipper has provided a new delivery location in Russia. In recognition of the inconvenience, O Logistics agrees to pay Q Haulage the full agreed freight rate in cash upon delivery. This is an attractive proposition and Q Haulage agrees, delivering the cargo to a new delivery address, where it is unloaded and stolen.

Using smoke screens provided by the internet, online freight exchange platforms or locally devised freight distribution channels, fraudsters are able to monitor activity, including volumes, frequency, type of cargo and – importantly – the uptake of cargo by legitimate actors. It is possible to recognise, for example, where a time sensitive delivery remains available for collection, that, as the deadline approaches, it is less likely due diligence will be undertaken in the event that a haulier presents themselves with a solution. 

How to avoid these tactics

  • Be aware of the various carrier frauds and educate employees to be alert to fraudulent carriers, taking care to verify documentation and instructions
  • Have a clear and robust escalation process ensuring that when queries arise, individuals with sufficient authority have responsibility to make informed decisions
  • Recognise that a fraudulent carrier will present themselves at opportune moments, striking when you are most vulnerable. If it seems too good to be true, it probably is
  • Don’t be pressured in to circumventing due diligence procedures. The fraudster will know that you are under pressure, relying on this to avoid detection. If you think a late collection/delivery will upset your customer, try explaining to them that their cargo has been stolen by a fraudulent carrier!

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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

Mike Yarwood

TT Club

Date07/09/2021