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The Future of Carrier Identity: Combating Fraud and Double Brokering

With fraud and double brokering increasing in the freight industry, brokers need a new approach to carrier identity management.

The number of double brokering scams is on the rise, highlighting a weakness in the freight industry that demands attention—effective carrier identity management. With more cases of fraud and double brokering slipping through the vetting processes, brokers must look to technology and better access to comprehensive carrier information to solve this problem and protect their business.

The Prevalence of Fraud and Double Brokering and Their Impact on the Industry 

Double brokering and fraud are growing problems because fraudsters’ tactics are getting more sophisticated. They’re trying new ways to convince brokers that their business is legitimate, only to pull the rug out from under them and hold a load hostage while demanding payment or making off with the cargo with the intention of selling it.

Double brokering can also have costly repercussions for those victims that unknowingly hire a double broker. The original broker believes the party they’ve hired will pick up and deliver the load themselves, when in reality, the double broker hires another company, the actual carrier, to transport the freight. The shipper, original broker, and carrier are all unaware that the load has been brokered twice, leaving a huge opportunity for the double broker to scam the carrier out of their payment. Once the carrier delivers the shipment, the shipper pays the first broker, who then pays the party they believe is the carrier—the double broker—who disappears with the money.

Shippers, brokers, and carriers are left picking up the pieces when this happens. This can have a disproportionate impact on smaller carriers and brokers, who may not have the ability to recover from the financial loss of a scam. There is also a liability risk if there is an accident or a claim due to damaged cargo, as insurance does not cover double-brokered loads. At the same time, repeated instances of fraud and double brokering can hurt the victims' reputations, losing customer trust.

The problem with these scams is that brokers can think they’re working with only reputable and experienced carriers when fraudsters steal other carriers' identities to complete their scams. For the broker, fraud and double brokering are carrier identity issues at its core.

The Challenges of Carrier Identity Verification 

Traditional methods of carrier identity verification in the freight industry often involve a combination of background checks, checking references, and requesting documents. While these methods have been used for years, they come with limitations that make it possible for fraudsters to make it through the verification process.

Background checks rely on accessing publicly available information and databases to verify a carrier's history, safety records, and compliance. These checks may not provide a complete picture, especially if the carrier has recently entered the industry or if relevant information is missing or not up to date. Contacting references, like previous clients, partners, or industry colleagues, carries the risk that the reference is biased, working with incomplete information, or part of the fraud. Documents can be forged, as fraudsters are known to create fake licenses, insurance certificates, and other documentation to appear legitimate. 

Chameleon carriers add another layer of complexity to carrier identity verification. When the Federal Motor Carrier Safety Administration shuts down a carrier due to repeated violations, chameleon carriers reopen the business under a new name. With the same equipment, drivers, and operations, they continue to violate regulations but try to escape their history of violations with the new name. Essentially, to detect chameleon carriers, freight brokers must be extremely thorough in their verification process and cover a number of identifiers, like phone number, fax number, email, and address, even just the city and state.

Unfortunately, the traditional methods of carrier verification aren’t enough to address the problems of fraud, double-brokering, and chameleon carriers. Traditional methods yield limited data, and accessing and cross-referencing information from various databases can be an obstacle. Carriers’ statuses can also change quickly, and carrier verification must be able to provide real-time updates on changes in carrier ownership, operational status, or compliance. More than that, traditional methods simply don’t have the capabilities of detecting sophisticated fraud schemes, which can leave freight brokers vulnerable. More brokers are becoming aware of the importance of equally sophisticated carrier verification processes to protect themselves.

The Role of Technology and Data in Carrier Identity Management

The solution to these challenges must address carrier identity management unlike any other currently available. It must use technology, data, and real-time monitoring for an all-encompassing solution that leaves no gaps in visibility and allows brokers to secure their network before bad actors get in. Like the digital transformation we’re seeing change the freight industry in other ways, digital transformation has the potential to rewrite the guidebook on how brokers approach carrier identity management.

Brokers need access to a range of data, from both public and private data sources. With real-time monitoring, any changes or updates in carrier information should be immediately captured, ensuring accuracy within the verification process. Data analytics can have a critical role in analyzing large volumes of data to identify patterns and anomalies that may be red flags. By automatically tracking and analyzing carrier data, these issues should be identified quickly, even proactively, to allow for timely intervention, minimizing risks to the freight broker. At the same time, brokers can set themselves up for greater efficiency, streamlining their due diligence processes while being more effective.

Carrier identity management supported by this level of technology creates a more robust system that brokers can use to ensure high standards, improve cybersecurity, and foster trust within the industry. Better transparency reduces the potential for fraud and results in a more secure and reliable freight ecosystem.

The Future of Carrier Identity Management and the Freight Industry

Three areas of focus will lead the way for advanced carrier identity management—information, standards, and automation.

Access to information should allow brokers to be proactive rather than reactive. To avoid the consequences of falling victim to a double brokering scheme, they need to catch these situations before those names end up on a DNU list. With data-driven insights, carrier decisions should never be based on a person’s gut feeling but instead entirely rooted in data.

With this kind of data insight, brokers can quickly raise their standards on the carriers they work with. They can enforce a level of compliance that reduces friction and increases security for the rest of their operations.

Automation is the support to make this all possible. With digital transformation enhancing efficiency, this has enormous potential in the carrier identity management and monitoring category. Brokers can think less about these processes and decisions while being more thorough and effective, leaving less room for fraud to affect their business. 

Highway's Solution to Carrier Identity and Fraud Prevention 

By providing advanced access to information, the opportunity for brokers to raise their standards, and the power of automation, Highway enables brokers to take control of their carrier verification and fraud prevention. 

The Carrier Identity Engine facilitates the onboarding process by providing a secure and efficient way to connect with new carriers. Brokers can be sure of who they’re working with, including any dispatch services, to reduce the chances of fraud and eliminate the need for manual processes such as emails, calls, or faxes.

Highway's engine also provides powerful tools to identify the right carrier for each load. Brokers can match millions of data points with different carrier options to the lane’s actual route. 

Highway’s solution automates compliance processes for real-time monitoring of carriers. Brokers reduce their risk exposure and ensure compliance with high standards, and improve the security of their network, benefitting their business and their customers.

How One Logistics Company Reduced Risk with Highway 

When SEL Supply-Chain Solutions sought a solution to strengthen carrier network security, streamline onboarding, and reduce the impact of double brokering on their operations, they implemented Highway’s Carrier Identity Engine to address these challenges.

With Highway, SEL's freight agents could thoroughly vet carriers during onboarding, leveraging real-time verification and dispatch-level validation. The single sign-on feature and user-friendly interface simplified onboarding, facilitating faster and easier integration of carriers into SEL's network. Agents gained access to comprehensive carrier information, including equipment types, preferred lanes, and documents, enabling better decision-making and reducing risk. Highway’s solution mitigated double brokering risks, provided SEL with a higher level of network security, and helped them to scale their processes while ensuring the trustworthiness of their carrier relationships.

End Fraud and Double Brokering with Highway’s Carrier Identity Engine

Having the tools to detect fraud before it occurs is crucial for maintaining trust, security, and efficiency in freight operations. After GIX Logistics implemented Highway’s Carrier Identity Engine, within a few months, they had set up over 5,000 carriers with not a single instance of double brokering.

Highway empowers brokers and logistics companies to make informed decisions and mitigate risks, stamp out fraud and double brokering, and simplify carrier identity management for everyone. Learn more about Highway by contacting us for a demo today.