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Saturday, November 9, 2024
Logistics

Fighting double brokering starts with strong partnerships

The logistics industry is plagued by several different types of fraud – from rate manipulation to straight-up cargo theft. The more volatile and opaque market conditions become, the more opportunities scammers have to take advantage of unsuspecting companies. This is especially true when it comes to double brokering. 

Double brokering occurs when an actual carrier, or fraudulent carrier, accepts a load, then re-brokers it to another carrier. In either instance, it is not legal. This type of fraud is particularly insidious because brokers and carriers both lose. 

“When the market is abnormally inflated, scammers feel they can grab loads and double broker at a lesser rate than they accepted the load for, and still make margin.” California Freight Director of Brokerage Ryan Sanders said. “In a down market, such as the present time, we see companies taking loads at abnormally low rates, then reselling them to carriers at very high rates. In this situation, the likely intention is to collect from the broker they took the load from, with zero intent to pay the actual carrier. The fraudulent company is paid by the unsuspecting broker and months down the line, the actual carrier comes looking for payment.”

Legally, however, the actual carrier must be paid, and most brokerage insurance policies do not cover this type of fraud. This would result in either the broker or customer having to double pay the load, causing a large unplanned expenditure they can not recoup. 

“Out of pocket claims are another form of collateral damage due to fraud. Most carrier coverages are auto based policies, meaning the scheduled auto must be on the policy in order to recoup a claim,” Sanders said. “When carriers double broker and a cargo or auto claim occurs, the carrier’s insurance will deny the claim if an unscheduled auto was involved in the accident. If the broker has a good policy, they will likely file on their insurance for coverage; this will cause their premiums to go up the following year. The other scenario would be if the broker’s insurance denies the claim due to limited coverage, and this becomes an out of pocket expense for the broker, or customer.”

The people running these types of schemes tend to be resourceful and resilient. They will continue running the same scams until they are caught, then simply open a new business and continue the same behavior under a new name. This maneuver – combined with lack of knowledge and lax fraud prevention models in the brokerage space – enable double brokering to continue. 

The only way for these scams to be stopped is for every member of the supply chain to become more aware of what is happening, and make every effort to stop it before it starts. For shippers, that means partnering with knowledgeable brokerage firms to move loads. 

“Diligence must be incorporated into your everyday processes to thwart fraud,” Sanders said, “California Freight is an asset-based carrier broker with 13 brokerage terminals, over 250 company tractors, 265 company drivers, and 525,000 sq feet of food grade warehousing. We understand the brokerage end, asset end, and the warehouse end. This knowledge allows us to offer automated services/processes that protect our agents and our customers on a large scale.”

California Freight pays for a broad based insurance policy that leaves them quite protected against these types of scams. A smaller brokerage with low cash flow, on the other hand, may not be able to afford such a broad policy, exposing them to out of pocket claims that could jeopardize their businesses, as well as their customer’s business. 

California Freight has also taken steps to stop fraud before it occurs. The company has partnered with RMIS over the past five years to amp up its fraud prevention offerings. Currently, the company has 33,000 carriers registered with RMIS in its network.

“RMIS is fully integrated with our TMS. It allows us to manage carriers, operations, and liability for our agents, dispatchers, and customers. Over the past year, I have seen RMIS enact many different processes and automation within the sign up and monitoring process that help prevent fraud.  This is a 24/7 system that is very hands off for agents and dispatchers.”

California Freight’s partnership with RMIS has played a major role in the company’s ability to build out a safe, scalable agent program. Agents gain autonomy through technology, and California Freight offers that autonomy through applications such as RMIS, Parade, and others. The company boasts a host of expert, protected agents. 

“Service and profitability rely heavily on a broker’s vetting process and how they monitor for fraud prevention, Sanders said. “If you lose control of the service because of double brokering scams, you will lose the faith your customer has in your ability to perform the service.”

Click here to learn more about California Freight

The post Fighting double brokering starts with strong partnerships appeared first on FreightWaves.

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