The tech shield: How to protect factoring from modern freight fraud

The growing threat of freight fraud

Factoring companies face two significant types of fraud. The first is identity theft, in which fraudsters hijack legitimate carrier credentials to obtain loads from shippers and brokers and then present invoices for factoring.

Identity theft often involves obtaining a carrier's USDOT number and login credentials through phishing attacks that direct victims to fake FMCSA portals. Once fraudsters gain access, they manipulate carrier records and falsify insurance policies to inflate fleet sizes, creating a facade of legitimacy.

The second major threat is shadow brokering. This is a more sophisticated ruse than double brokering. Rather than a motor carrier—or an entity pretending to be one—brokers a load to another carrier without the shipper's or original broker's knowledge.

Shadow brokering involves a carrier participating in quasi-brokering or subcontracting arrangements where these operations often disguise themselves as "dispatching services" or "trip leasing" to appear legitimate. These schemes are particularly challenging to detect because they maintain cleaner paperwork than traditional double brokering schemes.

Instant load validation

Factoring companies looking to strengthen their verification procedures have multiple technology options. One solution can instantly validate that a carrier picked up and delivered a load before advancing funds or purchasing invoices.

The Load Connex platform gives factoring companies unprecedented visibility into carrier operations through real-time load tracking and verification. The web-based platform integrates with carriers' electronic logging devices (ELDs) via APIs. It collects extensive load data, including dates, times, locations, truck, driver, trailer, VIN, and driver information.

A factor enters the load's pick-up, delivery dates and locations into Load Connex and the platform instantly verifies whether the load was actually hauled by the carrier or not. This process gives factors indisputable evidence of the load’s legitimacy before advancing funds or purchasing invoices.

Load Connex is developing AI-powered document analysis capabilities to further automate the process. The technology will automatically read bills of lading, flag suspicious documentation, and streamline the verification workflow to identify suspicious patterns and fraud indicators.

The system's carrier validation capabilities extend beyond verification. Load Connex aggregates data from multiple sources to provide comprehensive carrier assessments, including a star rating system that helps factors make educated decisions about carriers beyond just pricing considerations.

The power of integrated financial services

Load Connex's integration with fuel payment systems provides another layer of security. When carriers need fuel advances, the system allows factors to verify load pickup and track progress before releasing funds to a carrier’s fuel card. This integration also enables instant transfers, providing carriers immediate access to necessary funds while maintaining security through verified load tracking.

Essential best practices for fraud prevention

While technology plays a crucial role in fraud prevention, factors must also remain vigilant in their due diligence processes. When onboarding carriers, factors should look for the following signs that warrant additional investigation.

• Applications from carriers who claim to work directly with shippers rather than brokers.  Direct shipper relationships should raise red flags since 75% of freight for small carriers moves through brokers.
• When a carrier has not filed UCCs. Trucking companies without records for financing equipment and other assets are unlikely to be legitimate.
• Unwillingness to submit visual evidence. Many factors now require video calls during onboarding, photos of company owners holding their driver's licenses, and pictures of trucks with DOT numbers. These simple visual verification steps can significantly reduce fraudulent applications.

Beyond onboarding, factors should encourage carriers to check their FMCSA information regularly and stay vigilant about communication security. Reminding carriers that legitimate FMCSA communications will only come from .gov email addresses is crucial. Ongoing communications with carriers should also raise awareness of fraud schemes and emphasize secure information handling.

Looking to the future

Factoring companies must offer more than financial services to stay relevant in today’s freight market, which is under attack by fraudsters. Combatting this evolving risk is a persistent challenge that requires advanced fraud prevention technology and strategies.

The Load Connex platform combats emerging threats while improving factors’ abilities to retain customers by offering value-added services like fuel discounts and integrated payment systems. The instant tracking and verification system efficiently roots out fraud while supporting carriers with faster access to funds to pay for fuel and over-the-road expenses.

Discover how the Load Connex platform can help grow your business and strengthen fraud prevention today!