Fraud and misdirection schemes drive cargo theft surge

Organized crime groups are dominating the landscape

Fraud and misdirection schemes drive cargo theft surge

Motor & Fleet

By Gia Snape

Incidents of cargo theft using fraud have been surging in the United States and Canada over the last few months, Verisk’s CargoNet has warned.

Shipment misdirection schemes and fictitious pickups have risen almost 700% in the second quarter of 2023, compared to the same period last year.

Keith Lewis (pictured), vice president of operations at CargoNet, told Insurance Business there has been “unprecedented amounts” of such incidents.

“It’s an emerging trend that we caught during the last couple months of 2022,” he said.

At the same time, traditional cargo theft incidents in the US and Canada rose 57% to 582 incidents in Q2 2023, according to CargoNet’s second-quarter report released in July. In total, more than $44 million in shipments were stolen during this period.

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 COVID, we learned we could work from anywhere in the world. So, what used to be a US- and Canada-based crime has become a global crime,” he said. “We see a lot of folks committing high-level organized fraud in the United States as well as in other countries.”

Shipping misdirection tactics use legitimate processes such as load boards to fraudulently acquire cargo. Attackers may pose as a motor carrier or logistics brokers to obtain their targeted shipment, then redirect it using a legitimate driver, Lewis explained.

“Freight moves almost like online dating,” he said. “You match your type of equipment up with the type of load looking for a destination, and in one click the load is awarded to you if you meet the broker’s criteria.

“The frauds are committed when they pick up the load. It’s not the distribution centers that are vulnerable; it’s the way the loads are moving.”

CargoNet acknowledged significant growth in extortion and theft by conversion schemes, particularly among organized groups in 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?

The car shortage during the pandemic has made vehicle parts more attractive targets for organized crime groups, according to Lewis, and has also contributed to the alarming rates of vehicle theft in Canada.

“Since COVID, there’s been a shortage of cars, as well as parts, rebuilt engines, and even motor oil. That causes those products to be targeted more,” he said.

Worse, stolen freight often gets past customs checks at ports due to a lack of enforcement. The Equite Association, a Canadian not-for-profit organization against insurance crime, said that cargo losses in the country rose by nearly 30% in 2022 compared to the previous year.

“A police officer in Canada told me that they ship out about 15,000 containers a day from one port, but they just don’t have enough people to inspect the containers,” Lewis said. “There is a high number of vehicles being stolen in Canada right now, and it’s because of the shortage of vehicles and vehicle parts.”

Mitigating cargo theft risk

Logistics brokers and shippers can help prevent fictitious cargo pickups by meticulously verifying shipping bids, particularly the name of the motor carrier and driver matches the shipment was tendered to.

“One of the biggest problems is the speed that we move freight. We move goods at a high velocity because when you slow down the flow of goods, you increase the cost and slow down the movement to the end-consumer,” said Lewis. “Better vetting and slowing down the pace on the front end are important.”

CargoNet also advised motor carriers to be wary of new customers that want a blind shipment delivered to an unfamiliar address.

Finally, Lewis advised freight companies to be vigilant about cargo theft threats and use industry intelligence to protect their shipments.

“The bad actors are always going to get away with the first one or two loads,” he said. “But then somebody is going to report it to us, and we’re going to send out an alert or notice to the industry to be on the lookout for suspicious activity by that carrier. It’s about using the data we provide to prevent thefts.”

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