Supply Chain Security: Combating Theft and Fraud | Ep 26
On today's episode on Veritas Vantage, Supply Chain Leaders Brian Hastings and Justin Maines delve into the challenges faced by the logistics industry due to escalating theft and fraud. Our discussion covers various crime rings operating in California and beyond, focusing on high-value commodities and the tactics criminals use to exploit logistics systems. They explore real-life scenarios, including double brokering and identity theft, and offer practical advice for brokers and logistics professionals to recover stolen shipments and protect themselves from fraud.
The Logistics & Leadership Podcast, powered by Veritas Logistics, redefines logistics and personal growth. Hosted by industry veterans and supply chain leaders Brian Hastings and Justin Maines, it shares their journey from humble beginnings to a $50 million company. Discover invaluable lessons in logistics, mental toughness, and embracing the entrepreneurial spirit. The show delves into personal and professional development, routine, and the power of betting on oneself. From inspiring stories to practical insights, this podcast is a must for aspiring entrepreneurs, logistics professionals, and anyone seeking to push limits and achieve success.
Timestamps:
(00:00) - Introduction to Crime Rings in California
(00:25) - Nightmare Scenarios in Logistics
(00:53) - Rising Fraud and Theft in 2023
(01:12) - Types of Scams in Logistics
(02:22) - Combating Fraud in Logistics
(02:54) - Tips for Recovering Stolen Shipments
(04:09) - How Scammers Operate
(09:54) - Hotspots for Theft
(11:24) - Preventative Measures and Carrier Selection
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Transcript
There are several crime rings that are operating in California.
Speaker A:And once they target a specific shipper or a lane or like they know there's high value commodities coming out of a certain distribution center.
Speaker B:Yeah.
Speaker A:They are looking for those types of shipments.
Speaker C:What is one of your worst nightmares in logistics?
Speaker C:Your customer calls you, says a load of expensive electronics never got delivered and they were supposed to be delivered seven days ago.
Speaker C:What do you do next, man?
Speaker A:You throw up.
Speaker C:Yeah, okay.
Speaker A:Unfortunately, electronics has never happened, but it does happen often.
Speaker A:Yeah, we have had a few instances with our company where we've had those calls.
Speaker C:Yeah.
Speaker A:And that might be one of the worst calls you can get.
Speaker C:Fraud and theft in logistics is a real thing.
Speaker C:You know, I, I think 20, 23 was the, it was up, I forget the stat, but almost triple digits.
Speaker D:Right.
Speaker C:From the previous year.
Speaker C:And what, you know, what does that mean, man?
Speaker C:Like, is it people like stealing a pallet of, you know, fruit snacks from the back of a truck or what is it, man?
Speaker A:Well, you look at crimes in general, there's a very wide.
Speaker A:Not, I'm not, I'm not, you know, an expert here, but there's a lot of crimes and, and industry specific to logistics.
Speaker A:There's all kinds of scams.
Speaker E:Sure.
Speaker A:You know, we talk about, you know, actual theft, that's one thing.
Speaker A:And there's a number of scams around actual theft.
Speaker A:You know, there's also, you know, double brokering, identity theft.
Speaker A:And you know, now there's, there's some criminals posing as shippers.
Speaker C:Right.
Speaker A:And acting like they're tendering shipments to brokers.
Speaker A:So that's a new one.
Speaker A:And, and what is, what's happened was, you know, if you're in our industry, if you're not, it doesn't really matter.
Speaker A:But if you're in our industry, you can understand the rates and how tight the market got during COVID You know, it was pure chaos.
Speaker A:Rates were through the roof.
Speaker A:I think we're paying 20 grand from Washington to Florida.
Speaker C:Yeah, I mean, freight rates were the highest ever.
Speaker A:And criminals want to go where the low hanging fruit is, where they're going to make the most money.
Speaker A:And so we have all these criminals flood or they're like gnats to light.
Speaker A:You know, they fly to where the money is and they flood the industry.
Speaker A:And now we're still combating it and trying to weed out these bad actors.
Speaker C:Yeah, I think, I mean, I think there's, there's part of that too.
Speaker C:Like, not that it's like, I would never want to wish this upon anyone but it's helping our industry get in a safer place.
Speaker A:Yes.
Speaker C:Right.
Speaker C:There are so many things that we are doing today that we didn't start or that we didn't even do.
Speaker C:Hell, 12 months ago, 18 months ago.
Speaker D:Right.
Speaker C:Where, you know, I think even though it sucks and I think there are, you know, a ton of shipments stolen, I think it is helping our industry get to a better place so we can be more aware.
Speaker C:I know that you dealt with it, you know, last summer a little bit.
Speaker C:But what are some of the tips or tricks that other brokers or other logistics professionals can use to recover a shipment or combat the fraud?
Speaker A:Have you heard the.
Speaker A:The show first?
Speaker A:48.
Speaker C:I know, but tell me more.
Speaker C:I'm excited.
Speaker A:You really haven't.
Speaker A:It's about basically like murders.
Speaker C:You have 48 hours.
Speaker A:It's like 48 hours after a crime scene.
Speaker C:I'm more of a cops kind of guy.
Speaker A:That's old.
Speaker C:That's too old for me.
Speaker A:But there is a show, a real show, and I say that because we've worked with a lot of highway patrols in different markets.
Speaker A:And the theme consistently is you have 48 hours.
Speaker A:From the time that your stomach's flipping, you got that pit in your stomach and you know something's off, you have 48 hours.
Speaker A:You have to take immediate action.
Speaker A:Looping the right people, the right parties, communicate with, you know, any.
Speaker A:Anyone involved in this, this transaction in hopes of getting this recovered.
Speaker C:You mean like authorities?
Speaker A:Authorities, shippers, receivers, clients, carriers.
Speaker A:Anyone involved in the process.
Speaker C:Bring me up to speed.
Speaker D:Right.
Speaker C:So if I'm new or if this has never happened to me, if that's true to you, and you're a listener, you know, call yourself blessed, because I think that's, that's.
Speaker C:You do not want to tackle one of these things.
Speaker C:But how.
Speaker C:How do these scammers do it?
Speaker C:How?
Speaker C:Like, what's, what's their process?
Speaker C:What do they do?
Speaker C:Just so we can make our listeners more aware?
Speaker A:There's a few that, that are more common than any, I would say.
Speaker E:Okay.
Speaker A:I would say they all pray and originate from load boards.
Speaker E:Okay.
Speaker A:So I'm a broker.
Speaker A:I'm posting it to a load board.
Speaker C:Like DAT or Truck Stop.
Speaker A:Yes.
Speaker A:If you have a login, you can log in and see a shipment.
Speaker B:Yeah.
Speaker A:Call in or email whoever's posting that shipment.
Speaker E:Okay.
Speaker A:Gain intel on that shipment or information on that shipment.
Speaker A:And that's where the crime begins.
Speaker E:Okay.
Speaker A:So a lot of these, and I'll use California, for example, because that's one.
Speaker C:Of the hottest markets There's a, there's a couple hot spots in the country that are super frequent, you know, theft areas.
Speaker A:Yeah, yeah.
Speaker A:So, so looking at California, there's, you know, they're on the coast, a lot of them.
Speaker A:There's a lot of ports there.
Speaker A:There are several crime rings that, that are operating in California.
Speaker A:And once they target a specific shipper or a lane or like they know there's high value commodities coming out of a certain distribution center, they are looking for those types of shipments.
Speaker C:So they know where the LG TVs are getting made or they know where the Apple iPhones are getting made.
Speaker A:Right, that's exactly it.
Speaker A:Okay, so let's say they're coming out of Burbank, California.
Speaker B:Sure.
Speaker B:Yeah.
Speaker A:I see a posting from Burbank, I know it's going to Dallas.
Speaker A:That's a lane of Apple TVs.
Speaker A:Yeah, yeah, I'm calling that number.
Speaker A:I'm using information that is stolen.
Speaker A:So I'm posing as another carrier.
Speaker C:Got it.
Speaker A:Usually an asset based carrier with a clean mc.
Speaker E:Sure.
Speaker A:I'm getting information on that.
Speaker A:I'm usually going to come in at lower rate.
Speaker A:So let's say the broker offers me 3,000.
Speaker A:I might take it right off the bat, give them my information.
Speaker A:But a lot of times the email is slightly off or they have gained access to the actual carrier's database.
Speaker E:Sure.
Speaker A:Which, which does happen.
Speaker A:And that's the identity, identity theft portion.
Speaker A:So we get access to this, we turn around as the criminal, we broker that back out to an actual carrier.
Speaker A:So now we are double brokering that back out, getting an asset based carrier to go pick up that shipment.
Speaker C:So like a legit trucking company that's valid to run freight in the U.S.
Speaker C:correct.
Speaker D:Yeah.
Speaker E:Okay.
Speaker A:And there's a number of scenarios.
Speaker A:This is one of them.
Speaker A:But we could be sitting overseas.
Speaker B:Yeah.
Speaker A:Running this operation a lot, man.
Speaker A:Yes.
Speaker A:Had this asset based carrier, maybe an owner up, go pick up this load of TVs, we give him a different bill, tell him to drop it in this warehouse in Los Angeles.
Speaker B:Yeah.
Speaker A:And now we have a truckload of Apple TV sitting in a warehouse.
Speaker C:Do you think so with, with that, like do they also have to contract out or like they call a warehouse and they say, hey person at the warehouse, I need to rent some space from you, I got some TVs in here and we'll cut you a piece of it.
Speaker A:Yeah.
Speaker C:Like, is that like.
Speaker A:Yes.
Speaker C:Something where they're cutting people in here and there.
Speaker A:That's exactly what happens.
Speaker A:And a lot of these people are involved.
Speaker A:But there are specific commodities like the facilities that are taking in these types of commodities.
Speaker B:Yeah.
Speaker A:Well, they've learned that this is a highly targeted commodity.
Speaker A:So if you know you're moving oil or nuts or electronics or energy drinks, solar panels, machine like, whatever it may be, there's highly targeted commodities.
Speaker A:So these warehouse facilities aren't accepting these commodities anymore, protecting themselves because all they do is get looped into this scheme.
Speaker D:Yeah.
Speaker C:And if you're listening to this today, I think it's, it's one of those, you know, you have to know your commodity.
Speaker D:Right.
Speaker C:Like if you're, if you're prospecting a specific shipper that moves almonds or walnuts or cashew, like those are high value.
Speaker C:Right.
Speaker C:You go to that, you go to a grocery store and a package of, you know, a six by six package is like 12 bucks.
Speaker D:Right.
Speaker C:Like how many of those can you fit inside of a trailer?
Speaker C:Probably a lot.
Speaker D:Right.
Speaker C:When you think about it, same thing goes with the TVs or the electronics and energy drinks.
Speaker C:Protein shakes or protein powder is another high value commodity.
Speaker A:And real quick.
Speaker A:So yeah, so that's, that's an example of a double brokering scam.
Speaker E:Okay.
Speaker A:That doesn't happen as much.
Speaker A:That's more so to avoid paying that carrier.
Speaker A:So we go rebroker it.
Speaker A:I'm the criminal.
Speaker A:I rebroker that to asset based carrier.
Speaker E:Sure.
Speaker A:I get quick pay.
Speaker C:So it looks like you delivered the load as a scammer, correct?
Speaker A:Yeah, I'm acting as a middleman now.
Speaker A:I'm never paying the carrier that actually.
Speaker C:Ran that load who dumped it in a warehouse or not dumped it, but they put it into a warehouse, Right?
Speaker A:Correct.
Speaker A:Okay, but there's other, you know, scams that, you know, these criminals are operating and, and most of them avoid like using or leasing trailers.
Speaker B:Yeah.
Speaker A:And just taking the commodities themselves or waiting for some of these trailers to be abandoned or at a truck stop and they go and hijack the trailer or just pry open the doors and take the, take the commodities.
Speaker B:Yeah.
Speaker C:And I think like even with some of those, like you mentioned, right.
Speaker C:They target certain shippers and they know exactly where some of the main shippers are and where they're going.
Speaker C:And what they might do is they might follow a specific trailer to a truck stop and know what's inside that trailer, depending on where they picked up and what warehouse they went to.
Speaker C:One thing I heard of years ago is Nike has a pretty cool strategy where they, to avoid theft, they ship all their left footed sneakers in one trailer and all their right footed sneakers in a separate trailer, which is, I mean, pretty cool.
Speaker C:Whoever came up with that and they, those, both those people take different routes to Dallas or wherever so that they don't have an opportunity.
Speaker C:So if you steal that load of sneakers or shoes or whatever, you got a bunch of right footed shoes.
Speaker D:Right.
Speaker C:I mean, that's.
Speaker C:Whoever came up with that idea is.
Speaker C:That's, that's awesome.
Speaker A:Yeah.
Speaker A:I think a lot of them have teams too.
Speaker D:That's right.
Speaker C:Yeah.
Speaker A:If they're driving across country, they'll put two drivers in the truck.
Speaker A:That way they're not stopping and, you know, maybe stop.
Speaker B:Yeah.
Speaker A:Exposing themselves to those types of crimes.
Speaker C:So we mentioned Los Angeles is a huge hotspot.
Speaker C:What are some other hotspots out there that you know, as a broker that we all need to be made aware of?
Speaker A:Yeah, I definitely say New Jersey, a lot of areas around ports, you know, Houston, Dallas.
Speaker A:I know Dallas is not necessarily by.
Speaker C:Port, but big hub, man.
Speaker A:Yeah.
Speaker A:Illinois.
Speaker A:And you know, we see it often where can either put it on rail or get it onto a ship or, you know, quickly sell it out of the warehouse facilities that they're operating out of.
Speaker D:Right.
Speaker A:Because they, they're not trying to leave a trail.
Speaker A:They want to get in, ramp up the theft or the scams that they're doing and then move to somewhere else.
Speaker A:So, you know, they're, they're mostly in these hot spots, but we're, we're seeing them pop up all over the place now.
Speaker C:Yeah, it's crazy.
Speaker C:I mean, I just think like, okay, if I'm a scammer and I get a $50,000 load of, you know, energy drinks or protein powder, I can turn around and flip that for what, 30 grand?
Speaker C:Now I got 30.
Speaker C:30 grand in my pocket and, you know, maybe I'm out a thousand or a couple grand to, you know, lease the truck or, you know, get some, get an MC through the fmcsa.
Speaker C:God's crazy, man.
Speaker C:I.
Speaker C:Go ahead.
Speaker C:You want to say something?
Speaker A:No, no, I was going to say we're able to recover a stolen shipment a couple years back.
Speaker B:Yeah.
Speaker A:And one of the warehouse facilities, the guy who apparently owned it was definitely in on it.
Speaker C:It was super sketchy.
Speaker A:But he had an entire facility filled with stolen products.
Speaker C:Right.
Speaker A:And they were from all kinds of different companies.
Speaker C:Yeah.
Speaker C:Different suppliers.
Speaker A:Yes.
Speaker A:Yeah, yeah.
Speaker C:So let's talk about, you know, three takeaways that we can give the audience advice for not putting themselves in these situations.
Speaker A:Don't wait.
Speaker A:If you have, if you have a feeling that something is wrong, you need to immediately.
Speaker A:And I would start with the shippers, the receivers, you know, the carriers that you contracted that with.
Speaker A:Take action immediately, okay?
Speaker A:Because the last thing you want to do is drag your feet because you have something else going on, because that shipment is going to be gone if you are not recovering that.
Speaker A:And if this is a high priority client that you work with, you better be ready to write a very large check to them to pay for that product that's stolen.
Speaker A:So take action immediately.
Speaker A:Loop in the right parties, know where the hotspots are, where some of those areas that are going to be, you know, more inclined or more prone to these types of activities, criminal activities.
Speaker A:And the last thing I would say, you know, internal carrier utilization, making sure that, you know like the back of your hand how you're screening carriers, what to look for, and relying on the partners that you know are reliable and trusted.
Speaker C:That's great, man.
Speaker C:Well, thanks for, for recapping that.
Speaker C:And that's what we're going to talk about next is carrier selection and how to prevent these types of scenarios.
Speaker C:I also think lack of communication from a carrier, right, if you try to call them, they don't answer.
Speaker C:You try to email, it takes them 30 minutes to respond.
Speaker C:In our industry, that's a long time.
