News / US shippers put on high alert over double-brokering fraud

© Thanee Hengpattanapong

Truckers and shippers in the US are on high alert over double brokering, an illegal activity that is hitting the market to the tune of more than $500m in a year.

The practice has been around for a while, but it recently has escalated to alarming dimensions, with a new variation gaining ground.

Essentially, double brokering occurs when an outfit successfully bids for a load posted by a broker or load board and then brokers it to a third party.

In its most benign form, this can involve a trucker winning a load but deciding to offer it to other truckers because of lack of proprietary capacity to move the shipment. These instances often go unreported, as no party in the transaction is harmed, but the practice is nevertheless illegal if the approval of the shipper is not obtained.

Double brokerage can happen because of the sheer numbers of players involved, which means that cargo owners typically do not know the bidders for their freight. There are about 16,000 freight brokerages in the US and around 400,000 registered motor carriers. About 30% of the freight moved on US roads is tendered on the spot market.

Most cases of double brokering that are reported are downright fraudulent. In the simplest form, the rogue carrier obtains a load from a brokerage and tenders it to a carrier, then receives payment from the broker but does not compensate the carrier, who is left holding the bag.

Loads also may be stolen. The fraudulent firm that obtained the load and tendered it again for carriage may contact the carrier and instruct it to deliver the cargo to a different destination, claiming that there has been a change of plan. As the carrier believes it is dealing with a bona fide broker, there is no cause to doubt the legality of this change.

Lately a variant  called ‘load phishing’ has mushroomed. In this scenario a fraudulent ‘carrier’ obtains a load by pretending to be an established trucking firm, complete with fake contact details that may show a variation of the name of the alleged trucker and then disappears altogether with the cargo. Load phishing has rapidly grown into a major form of load board fraud.

Load board fraud has escalated rapidly in recent months. According to the Transportation Intermediaries Association (TIA), it has ballooned into a veritable epidemic since late last year. Others have seen the number of such crimes surge earlier. Truckstop, a load board provider, has reported a 400% increase in fraud between the fourth quarter of 2021 and the same period in 2022.

Jim Blaeser, chief procurement officer of 3PL Omni Logistics, sees double brokering at its worst ever. His company is thwarting 10-20 double brokering attempts every day.

Double brokering and other forms of freight fraud have always been an issue, but the problem is now acute and can drive smaller carriers out of business, Mr Blaeser warned, adding that it is costing the industry millions of dollars.

The TIA estimates that the financial hit on the industry is between $500m and $700m a year.

To the frustration of companies that have been affected, law enforcement is of little help. In a hearing on Capitol Hill earlier this month TIA president and CEO Anne Reinke stated that of 80,000 complaints recorded in a database, none have been investigated, let alone solved.

Law enforcement usually has crimes of larger magnitude to pursue. Individual damages of double brokering are usually relatively minor, but they do add up to huge amounts of losses.

The TIA published a white paper on the issue earlier this year, which lists red flags for brokerages that they may be dealing with an attempt at double brokerage or load phishing.

These red flags include a carrier authority that has recently been activated, multiple address changes, a willingness to accept a rate for a load that is lower than the posted price, and resistance to adopt tracking technology or to provide contact details..

Technology firms have spotted a gap in the market. In April TriumphPay, a payment provider for the transport industry, announced a strategic partnership with Highway, a tech provider for carrier identity management.

“Our partnership with Highway will significantly strengthen our efforts to combat double brokering fraud in the freight industry, which we estimate affects $500m – $700m of freight annually,” commented TriumphPay president Melissa Forman. “By combining our resources and expertise, we’re providing our customers with an invaluable tool for detecting and mitigating fraud while improving the overall payment experience for carriers.”