Fraud and misdirection schemes drive cargo theft surge

Fraud and misdirection schemes drive cargo theft surge

Fraud and misdirection schemes drive cargo theft surge – Cargo theft using fraud is on the rise in the U.S. and Canada, according to a report released by Verisk’s CargoNet on Tuesday. The report found a 700% increase in shipment misdirection schemes, as well as a 60% increase in fake pickups, from the same quarter last year to the same quarter in 2023.

According to Keith Lewis (Vice President of Operations at CargoNet), there has never been such a large number of such incidents in the history of the company. “This is an emerging trend we noticed in the last couple of months of 2022.”

Traditional cargo theft incidents increased 57% from 582 in the same quarter in 2022 to 582 in 2023, CargoNet reported in July. The total value of stolen shipments was over $44 million.

The average shipment value per event also increased nearly $100,000 to $260,703 per theft as cargo thieves focused on high-value shipments, CargoNet reported.

Shipping misdirection schemes on the rise

Speaking to Insurance Business, Lewis revealed that fraud schemes have become a global problem since the pandemic.

During the pandemic, we discovered that we could operate anywhere in the world, so what was once a crime in the US and Canada has now become a global crime. We see a lot of high-level, organized fraud in the U.S. and other countries,” Lewis said. “Shipping misdirection tactics take advantage of legitimate processes, such as load boards, to fraudulently obtain cargo. Attackers pose as motor carriers or logistics brokers to get their target shipment, then use a legitimate driver to redirect it.”

Freight moves like online dating, Lewis said. You match your equipment to the type of load searching for a destination. With one click, the load is assigned to you if you match the broker’s criteria.

The frauds occur when the load is picked up. Distribution centers aren’t the problem, it’s the way the loads move.
CargoNet noted a significant increase in extortion and theft through conversion schemes, especially among organized groups in the states of Illinois and California.

These groups target shipments from logistics brokers, tacking on exorbitant fees for various manufactured reasons like overweight tickets or previous rate penalties charged to non-affiliated motor carriers. Criminal enforcement for these cases remains complex and rare, emboldening criminals.

What do energy drinks, solar panels, and vehicle parts have in common?

According to CargoNet, fictitious pickup groups stole shipments from 39 different product categories in the second quarter of 2023, but primarily focused their efforts on smaller groupings of freight.

Food and beverage products, including alcoholic beverages and non-alcoholic beverages such as soda and energy drinks, emerged as the top targets for thieves hijacking the supply chain.

Solar power generation equipment and vehicle parts and supplies including fluids, oils, and tires are also popular stolen commodities.

Cargo and vehicle thefts – what’s the link?

Car shortages during the pandemic have made vehicle parts more appealing to organized crime groups, Lewis said, and have also played a role in the spike in vehicle theft in Canada since the start of the pandemic.

“The shortage of cars, along with parts, rebuilt engines and even motor oil, has made those products more attractive to organized crime groups,” Lewis said. “Unfortunately, stolen freight often slips through customs checks at ports because of a lack of enforcement.”

According to the Equite Association, an organization dedicated to fighting insurance crime, cargo losses in Canada increased by almost 30% in 2022 over the previous year. A Canadian police officer told Lewis that they ship out around 15,000 containers daily from one port, “but they just don’t have the manpower to inspect the containers,” he said. “That’s why there are so many stolen vehicles in Canada right now.”

Mitigating cargo theft risk

To help prevent fake cargo pickups, logistics brokers and shippers should carefully verify shipping bids, especially the motor carrier’s and driver’s names that match the shipment they were tendered to.

“One of the biggest issues we face is the speed at which we move freight,” Lewis said. “We move goods at high velocity because when we slow down the speed of goods, we increase the cost and delay the movement to the final consumer.”

CargoNet recommended motor carriers to be cautious of new customers that ask for a blind shipment to be delivered to an unknown address.

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Finally, Lewis urged freight companies to be aware of “cargo theft threats” and use industry intelligence to safeguard their shipments.

“The bad actors will always get away with the initial one or two loads,” he said, “but then someone will report it to us and we’ll send out a notice or alert to the industry to look out for suspicious activity on the part of that carrier. It’s about using the information we provide to prevent theft.”


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