2024 TIA Framework To Combat Fraud

As we saw at TIA’s 2024 Capital Ideas conference in April, as well as through innumerable interactions with our members, fraud continues to plague the logistics industry. A surge in post-pandemic freight fraud has created powerful riptides undermining trust and siphoning funds from shippers, brokers and carriers. Freight fraud and double brokering are the main culprits, costing victims an estimated $500 million to $700 million in freight payments annually.

To help members reduce their exposure to the risk of loss, liability and potential fraud, TIA members created the Framework to Combat Fraud in 2014. TIA’s Fraud Taskforce recently updated the Framework to highlight new fraud tactics criminals are using, as well as share recent case studies of how members experienced and dealt with fraud. As the prevalence and sophistication of these crimes increase, the Framework provides industry participants with actionable guidelines and best practices aimed at enhancing security and operational integrity.

“Every day we expose ourselves to many risks in our businesses,” said TIA Fraud Taskforce Chair Dan O’Sullivan with the United States of Freight in Delray Beach, Fla. “We are trusting people that in most cases we have never met to move products around the country that are worth exponentially more than the rates earned for moving those products. How we manage those risks improves our bottom lines and protects our customers.”

O’Sullivan said that because the criminals are coming up with new methods every day, the taskforce updated the Framework to address additional forms of fraud (cybersecurity and internal theft) and to provide additional details to the types from the first edition.

The Problem

According to CargoNet, there is a surge in cargo theft, noting a 600 percent increase between November 2022 and March 2023. Other forms of theft that have been a concern include financial, identity, internal and data. The Framework highlights the shift from traditional theft to more complex strategic theft tactics, where criminals use technology and deceit, such as fictitious pickups and identity theft, to steal goods. High-value items such as electronics, pharmaceuticals, and consumer goods are particularly vulnerable, making strategic cargo theft a significant concern for industry.

Cargo Theft: Cargo theft has reached a 10-year peak, significantly driven by strategic theft tactics where criminals selectively target goods using advanced technologies and deceptive practices like identity theft and fictitious pickups. This trend has led to substantial losses throughout the supply chain, inflating consumer prices, particularly affecting high-theft areas like California, Texas, Illinois, Florida, and cities such as San Bernardino, Calif., Los Angeles, Dallas, and Miami-Dade, Fla. Criminals often impersonate legitimate parties to reroute or “launder” shipments through multiple transfers, exploiting low freight rates to entice carriers into transporting these fraudulent loads. The result is an intricate scheme where stolen goods are difficult to trace and recover, placing substantial financial burdens on small businesses operating with thin profit margins. The TIA Fraud Task Force is focusing on enhancing industry dialogue and developing robust countermeasures to adapt to and counteract these evolving security threats effectively.

Financial Theft: Financial theft is a method of fraud that frequently offers a low-risk, high-reward proposition for potential criminals. Methods of financial theft are varied, but strategies which have been identified by transportation experts include: Comcheck or T-Chek cash-advance schemes, fraudulent or altered paperwork, extorting receivers by holding loads hostage, double brokering, check fraud and false factoring or invoicing.

Identity Theft: In this world of fewer face-to-face interactions, it is often difficult to verify the identity and credentials of the people with whom one does business. The reputations and financial well-being of brokers, reliable shippers and carriers, employees, and customers are at stake in any identity theft situation. Because of these risks, brokers must be diligent about safeguarding their own information and verifying facts with shippers and carriers.

Internal Theft: One of the biggest betrayals a business owner can experience is when someone who is trusted and paid to do a job uses that position to harm the company.

Data Theft: The importance and value of a company’s information and data is constantly increasing, as is the need to protect it. Cybercrime refers to a broad array of criminal activities performed via computers, including the theft of a company’s employee, customer, carrier and other stakeholder information. There are many methods a bad actor may use to access valuable company data, including black hat hacking, social engineering (e.g., phishing email), and installing ransomware.

The Potential Solution

There is the old adage that says, “An ounce of prevention is worth a pound of cure.” That is true in today’s transportation industry. The Framework provides a detailed guide on various potential solutions:

• Fraud & Theft Prevention Best Practices
• Thoroughly Vet & Maintain Your Carrier Network
• Collaborate with Shippers
• Member Suggested Post-Theft Recommendations
• Long-Term Post-Theft Planning

It stresses the importance of thorough vetting processes for carriers and maintaining diligent communication with shipping partners. The Framework recommends using advanced technological tools like GPS tracking and geofencing to monitor shipments, and it advises on contractual and insurance considerations to protect against potential liabilities.

In the event of theft or fraud, the Framework outlines procedures for immediate and effective response. It includes practical steps such as how to report incidents to authorities and engage with legal and insurance resources to mitigate losses.

The Resources

Looking beyond immediate prevention and response, the Framework advocates for a strategic approach to managing risks associated with freight theft. It includes resources such as contact information for law enforcement and suggestions for collaborating with industry partners to foster a secure and vigilant trade environment.

The Framework is clear in its intention not to serve as a legal advice resource but as a guide. It encourages members to seek personalized legal counsel to ensure compliance with applicable laws and regulations, particularly when implementing the suggested measures within their operations.

Conclusion

The TIA Framework to Combat Fraud serves as an essential tool for industry professionals aiming to protect their operations from the increasingly sophisticated threats of cargo theft and fraud. By offering a mix of tactical advice, best practices, and regulatory guidance, the Framework equips TIA members with the knowledge to not only address current security challenges but also to anticipate and prepare for future risks.

This document, endorsed by industry experts and supported by real-world case studies, underscores the commitment of TIA to leading the charge against cargo theft and fraud, promoting a safer and more secure environment for transportation intermediaries nationwide. As a TIA member you have access to the Framework through the Member Resource Library. For any questions, contact advocacy@tianet.org.

The purpose of this Framework is to assist TIA members in developing and implementing their own policies and procedures to reduce potential for theft and/or fraud. The ideas, information, and suggestions in this document are only one set of tools for TIA members. It is the Committee’s hope that this framework will encourage TIA members to take advantage of additional resources to reduce their exposure to the risk of loss, liability, and/or potential fraud. This framework is understood by TIA to be a “working draft” and evolving document.

The Framework is not designed, intended, or recommended to be a checklist or industry “standard.” It is neither a characterization or summary of industry standards, nor a collection of “minimum thresholds” for motor carrier selection. All suggested tasks and acts may not be appropriate for every circumstance, and no single company or individual on the TIA Committee performs, recommends performing, or intends to perform most or all of the tasks or areas suggested for review.

Nothing in this Framework is intended nor should be used as legal advice or as a substitute for legal advice which each member should obtain from qualified counsel familiar with the member’s business and laws applicable to it. The Framework is not intended to define or prove compliance or non-compliance with any legal standard of care or diligence, and it should not be used or relied upon by anyone for any such purposes.