MODE Global Advisory Sharing the Load of Freight Fraud Prevention

MODE GLOBAL ADVISORY: SHARING THE LOAD OF FREIGHT FRAUD PREVENTION By: Tim Collins Carrier Compliance Manager

©2024 MODE Global, LLC MODE Public

THE EVOLUTION OF FRAUD PREVENTION For years, freight fraud prevention was often viewed solely as a contractual compliance responsibility focused primarily on carrier onboarding and qualification. Today's threat environment has fundamentally changed that approach.

As cargo theft and freight fraud have grown significantly in recent years, prevention tactics continue to evolve. The most successful organizations recognize that fraud prevention can no longer remain the responsibility of a single department. Fighting fraud has become an operational discipline that requires coordination across the entire organization, including operations and carrier engagement, along with accounting, information technology, risk management, leadership and even the shipper.

FRAUD PREVENTION REQUIRES A TEAM EFFORT Modern fraud schemes are increasingly sophisticated. Criminal organizations are leveraging compromised carrier identities, manipulated contact information, spoofed communications and advanced technology to infiltrate supply chains. Because of this, effective prevention requires multiple layers of oversight. Below, we break down the role of each team in the cross-departmental collaboration of fighting fraud: Operations Teams

Accounting and Finance

Operations personnel play an important role during load execution by helping to identify irregularities and support adherence to verification procedures, including time-sensitive situations.

Accounting supports fraud prevention by helping to maintain controls around payment processes, including efforts related to review of payment instructions and flagging unusual requests.

Carrier Compliance and Risk Management

Information Technology

Carrier Compliance and Risk Management teams support carrier qualification, risk evaluation, and ongoing oversight of carrier networks; however, onboarding procedures alone may not be sufficient. A carrier that met qualification standards six months ago may present entirely different risks today. Effective fraud prevention benefits from frequent periodic monitoring, transaction-level verification and the ability to identify changes in carrier information, operating patterns, and risk indicators, ideally before freight is tendered.

Technology teams support fraud prevention through cybersecurity measures and tools that help identify and respond to suspicious activity. As fraudsters increasingly utilize AI-driven tactics and cyber-enabled attacks, IT's role continues to expand.

Leadership Leadership establishes the culture and expectations surrounding fraud prevention. Effective organizations empower employees to slow down, ask questions and follow established procedures, even when doing so may temporarily impact speed or convenience.

Carrier Engagement Carrier Engagement teams play a role in building and maintaining relationships with carriers while supporting operational execution. Strong carrier relationships can improve communication and create opportunities to surface concerns earlier in the process. While technology and monitoring tools provide valuable insights, trusted relationships and direct communication remain important components of an effective fraud prevention strategy.

Shippers Shippers play an integral role in protecting their freight by engaging with service providers who maintain strong carrier compliance, risk management and fraud prevention programs.

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Supply chain security is strongest when all participants share information and work in tandem to address fraud risks.

EXTENDING SECURITY BEYOND THE BOOKING PROCESS One of the most important lessons emerging from today's fraud environment is that security cannot end when a load is booked. Even when a carrier has been properly vetted and verified, organizations should have procedures in place to match the information that was validated during the booking process with what occurs at pickup origin. This requires close collaboration between brokers, carriers and shippers.

Prior to pickup, brokers and carriers should ensure that accurate information regarding the assigned truck, trailer, driver and dispatch contacts is communicated. Shippers should then validate that the information presented at pickup aligns with the information provided prior to arrival.

While specific verification procedures may vary by organization, the objective remains consistent: ensuring the individual taking possession of the freight is the same individual who was expected to arrive. As cargo theft schemes continue to evolve, pickup verification is an increasingly important component of supply chain security.

LEADING PRACTICES IN FRAUD PREVENTION The following practices reflect the direction the industry is moving and are increasingly adopted by organizations committed to protecting their supply chains.

Transaction-level carrier verification Validation of contact information Multi-layer identity verification Continuous carrier monitoring Escalation of anomalies and exceptions Strict adherence to established processes Reporting suspected fraud attempts Organizations that adopt these controls are better positioned to identify and respond to fraud before it impacts their operations.

BALANCING SPEED AND SECURITY One of the industry's greatest challenges is balancing operational efficiency with proper due diligence; however, the reality is that bad actors often exploit urgency. Many fraud incidents occur when individuals are moving quickly and may bypass verification steps because a shipment is time sensitive, a carrier is familiar or operational pressure exists.

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The goal is not to slow down freight movement. The goal is to build workflows that allow organizations to maintain efficiency while upholding appropriate processes and controls.

Technology can help accelerate verification, but technology alone is not enough. Consistent execution and process discipline remain critical, and a point of focus at MODE.

MODE'S APPROACH At MODE, fraud prevention is a shared responsibility across all the aforementioned groups: operations, carrier compliance, carrier engagement, accounting, technology, risk management, leadership and our shippers. By combining our technology tools, process discipline and crossfunctional collaboration, we work to reduce risk while maintaining the speed and service levels our customers expect.

While no organization can eliminate risk entirely, a layered approach to fraud prevention helps strengthen supply chain security and improve the ability to identify and respond to emerging threats.

LOOKING AHEAD Freight fraud continues to grow more organized, more sophisticated and thus more costly to prevent.

When one avenue is thwarted, bad actors find ways to adapt. The companies that will be most successful in protecting their customers and supply chains will be those that view fraud prevention as an enterprise-wide responsibility rather than a single department's function.

Working with a logistics partner that takes an enterprise-wide approach to fraud prevention can make a meaningful difference. Reach out to our team to learn how MODE prioritizes freight fraud prevention.

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