Trucking Risk and Insurance Podcast

Is Your Transportation Business Safe from Identity Theft_.mp4

• John Farquhar & Chris Harris • Season 2 • Episode 107

Share episode

Send us a text

Combatting Fraud in the Transportation Industry: Insights and Solutions

In this episode of the Trucking Risk and Insurance Podcast, hosts Chris and Johnny dive into the issues of factoring and the alarming rise of fraud in the transportation industry. They speak with Jennifer Lockett, an experienced operations manager from Altline by the Southern Bank, who shares her extensive 18-year knowledge in transportation. 

Jennifer explains what factoring is and offers practical tips for trucking companies to protect themselves against fraud. She discusses various types of fraud like identity theft, collusion, and double brokering. Jennifer also elaborates on methods for detecting and preventing fraud, such as regularly checking FMCSA records and ensuring proper verification procedures. 

This episode is essential for anyone in the transportation industry looking to safeguard their operations.


Jennifer Lockett Contact Info
https://altline.sobanco.com/freight/
Office 205-983-6272
jfink@sobanco.com

Your Hosts:

John Farquhar
National Risk Services Specialist, Transportation, Gallager GGB
https://www.ajg.com/ca/
M: 437-341-0932
John_Farquhar@ajg.com

Chris Harris
CEO, Safety Dawg Inc.
905 973 7056
Chris@SafetyDawg.com
https://safetydawg.com/

00:00 Introduction to Factoring and Fraud in Trucking
00:43 Meet Jennifer Lockett: Industry Expert
02:08 Understanding Factoring in Transportation
03:20 The Rise of Fraud in Freight Factoring
04:36 Real-Life Fraud Scenarios and Red Flags
06:52 Preventing Fraud: Tips and Best Practices
10:41 Collusion and Double Brokering Explained
12:42 Factoring Companies and Their Challenges
24:42 Advice for Trucking Companies
26:10 About Altline and Conclusion

Keeping it Safety Dawg Simple!
#trucksafety #truckinsurance #truckpodcast

Do you need a "Truck Driver Safety Policy?" Get it today! https://safetydawg.com/policy

Chris Harris, Safety Dawg 1:

In this episode, we discuss what factoring is, but we really get into The alarming rise of fraud within the transportation industry. We also explore some practical tips for trucking companies to protect themselves against fraud. And Jennifer is going to share some real life stories that highlight the risks and the challenges faced by carriers. Welcome to another episode of the Trucking Risk and Insurance Podcast. I'm your host, Chris Harris, along with Johnny. Today we have an insightful episode ahead as we dive into the world of transportation factoring and fraud protection. Our special guest is Jennifer Lockett. an experienced operations manager from Altline, which is owned by the Southern Bank, and she's located in Birmingham, Alabama. She has over 18 years of transportation experience. Jennifer brings a wealth of knowledge and first hand experience. Let's get on with the show. Welcome to the Trekking Risk and Insurance Podcast. And Jennifer, welcome to the show. Can you start off by introducing yourself to our viewers and listeners?

Jennifer Lockett:

Thank you so much for having me. I am Jennifer Lockett. I'm in Birmingham, Alabama. I'm an operations manager for Altline by the Southern Bank. I have 18 years in the transportation industry in some fashion. Or another, I began my career in a warehouse in Wyoming, checking drivers in and out of the warehouse. I then became the raw materials purchase order person where I coordinated all the transportation for raw materials in. I worked for a big brokerage for a little bit. Sales was definitely not for me. And I've been in transportation factoring for the last eight years.

Chris Harris, Safety Dawg 1:

And just real quick, what is, for those who may not know, most people I think would know what factoring is, but can you just give us a, and let me just tell our audience that we're going to get into fraud is what the topic is today. But tell us a little bit about factoring.

Jennifer Lockett:

Factoring is a commercial financing option for businesses who may not want to or may not qualify for your traditional loan. And it's funded based off your accounts receivable, so payment is not expected from the carrier, payment comes in from their debtors. So when you're doing the underwriting, the debtor credit is more looked at than the actual carrier credit.

Chris Harris, Safety Dawg 1:

There we go. So, and I read on your website, you really don't need, if you're a startup, you can still use factoring because you don't look at the trucking company's credit rating, right?

Jennifer Lockett:

Or even how long they've been in business. So it's great for a startup for your cash flow.

Chris Harris, Safety Dawg 1:

Now let's continuing on that thought kind of, but, um, fraud, what kind of fraud? Now, specifically, if we talked about freight factoring, Um, what types of fraud are we seeing in the freight factoring business

Jennifer Lockett:

as I'm sure everybody knows transportation seen about 18 month recession. So, it has caused freight factoring fraud to increase at an alarming level. Um, we're seeing a lot of identity theft fraud, we're seeing collusion, and we're also seeing double brokering as I'm sure everyone's seen.

Chris Harris, Safety Dawg 1:

Johnny, I was out to see a client this week and they lost. A load of electronics through a double, double brokering situation, you know, like it was only 240, 000 us or some bloody thing. Uh, yeah. Um, so it hurts. Yeah. How? Yes. Jennifer, how does somebody, um, start to commit fraud? Like how do I steal a trucking company's identity?

Jennifer Lockett:

A trucking company's identity, just like all companies information, is online. You pull up Safer Courier 411, you can see their address, their MC, their phone number. And what we're seeing a lot of is the bad actors are changing the longstanding good carriers information with the FMCSA. For example, I had a lead the other day from, from a business partner, so we get leads from them quite a bit. Um, and I pulled them up on Carrier 411, and the first red flag was they had changed the phone number a month ago. So I just kind of kept that in my mind, called him. Um, and when I called him, he had said, you know, I need you to send the application to my new email. And I said, okay, it's not the email on carrier 411. And he said, no, I lost my phone and I don't have access to my email. So that was red flag number two. So we sent him an application and we use a program DocuSign liveness detection. So the whoever's filling out the document will hold up their I. D. and then they'll take a selfie kind of like when you set up your phone or you have to rotate your head and through a I. it tells you if they're. Ideas legitimate and if they match, if they're the same person. Um, and of course he didn't fill his, he didn't do it. Once he got that, he stopped, he knew we were probably onto him, but to make sure we called the phone number that it was changed from a month ago and that, and the real carrier answered, and he said, you're the seventh factoring company to call me in the past two weeks. So what carriers need to make sure is if they get a correspondence that says it's from the FMCSA, make sure it's gov, not hotmail, not anything else.

John Farquhar:

Well, and one of the things that I've noticed, because I think we all get a number of spam emails that come into our inboxes and whatnot. And anything that I question, I click on the email name. And it will open up the address so that you can see the full address. And, you know, so it'll give you that, you know, you know, it should be. gov, but this one says. com or. org or. co or. hotmail or whatever it be. And it's like, that's one way to see right away. If, if you've got a red flag that you need to deal with.

Chris Harris, Safety Dawg 1:

And correct. The other thing I think everybody should be watching out for are the text messages. I got a text message and an email from my bank And it was fraud So and it it took me several minutes before I convinced myself including a phone call to the bank To verify that it was fraud Yeah. And yeah, it was slick. I will tell you. Um, so yeah,

Jennifer Lockett:

yeah.

John Farquhar:

Um, interesting enough, just to kind of add to that, Chris, I received an email, um, from somebody I knew in the industry, but it's not somebody I do business with. And, and it had a link in, in the email, uh, to click on to fill out the RFP, but it gave no information about what the RFP was for yet. I knew this person and I clicked on the email and there was nothing suspicious in the email address, which really threw me off. But what the red flag was. Why would this person send me an RFP? I had no, no reason or no need for an RFP. So I reached out to somebody I know that works at that company and they, they just informed me our email system, our whole email system has been hacked. So that is spam. It's crap. So, but it was, you know, thinking about why would this person send me this? And that was the red flag. So you really have to, like you're saying, Jennifer, you really have to pay attention to what's coming in and going. Is this really real or not? And, and follow a few steps to confirm.

Jennifer Lockett:

Yeah. And like you guys did call them. If you're not sure, it's better to be safe and call them.

Chris Harris, Safety Dawg 1:

Yes. Well, I'm not sure FMCSA is going to pick up, or DOT is going to pick up my call. They're not going to want to talk to us. But there are ways, and if you're, I mean, really, if you're not expecting an email from DOT, Uh, like how often do you get emails from DOT? Not frequently because you are to keep your, uh, information up to date. And as long as you're doing that, and quite honestly, somebody should be on the DOT site regularly, like once a month to verify, um, well, specifically the safety scores, you should be looking at them on a frequent basis. We'll look at the name and the address and the phone number that's there. Yeah,

Jennifer Lockett:

your own company. It's it's crazy that we're at that point. But yeah, one of the best things carriers can do is check the FMCSA and make sure there's no changes made that they did not make.

Chris Harris, Safety Dawg 1:

Right, right. So how else are people managing to defraud the industry?

Jennifer Lockett:

So recently, we've seen a lot of what they're calling collusion. Right. And so that is when a carrier and someone at the broker's office or a shipper work together. So the carrier will finish his load, turn it into the factoring company, and then we'll call that shipper or broker to confirm the load. And whoever we're talking to confirms it, confirms it's completed, no damages, it's this rate. So they get away with that until the factoring company follows up on their aging, and then they talk to normally an actual AP person, and they're like, I don't show these loads. Um, so one of the best ways we've found is you don't get your contact information from the carrier or, or even the rate con you. What I do is I look on the website, the companies, the broker, the shipper, make sure the email domains match, call there and ask for that person and see. See if they'll answer. And then you also do your verifications with more than one person. You do it with maybe a shipping manager and then you also check with AP.

Chris Harris, Safety Dawg 1:

All good ideas. Because nowadays, who's responsible if a theft happens? Who's paying or who's out the money?

Jennifer Lockett:

The factoring company's out the money. Because they've paid that carrier. And your shipper, your broker, they're not going to pay because they're not legitimate loads. So the factoring companies out the money, I mean, they have a contract, they could, they could go to court, but y'all know what the fees to go to court is,

John Farquhar:

so you

Jennifer Lockett:

have to see if it's worth it.

John Farquhar:

Yeah. So, so what I'm hearing right away here is this is creating more of a work, um, an additional workload on the factoring companies to be able to verify, double check, chase down money that, you know, may be fraudulent and whatnot. So the only thing that I can think is when, when we create more work for somebody. We need to start charging a little bit more.

Jennifer Lockett:

Yes, it would be nice. But the, you know, people don't see it that way. So

John Farquhar:

right, right. Yeah, but it's going to come to a point.

Jennifer Lockett:

Yeah,

John Farquhar:

yeah. Because I was gonna say more. If more and more factoring companies are having this issue, you know, they're going to be going, look, we have to raise our rates because this is creating and and we've got to have backups, you know, whether it be even insurance on certain loads. There are certain amounts of money, we're going to expect to lose so much per year. We have to account for that in our pricing model.

Jennifer Lockett:

Yes, correct.

Chris Harris, Safety Dawg 1:

And so the other thing I want to point out that I heard you say, I want to make sure that I, I mean, I heard it, but I want to make sure I understood because we all know that, um, you say things and people go, no, I didn't say that. But this is what I understood you to say, that you don't claw back a non payment from the trucking company. Is that, like, no recourse?

Jennifer Lockett:

So, in this case, we could, yes. But normally what happens is they factor these fraudulent loads. And once they're caught, they quit sending in loans. So then you, you can't hold from their future fundings. If you reverse ACH, they've moved all the money out of that account that you have. So you get nothing out of it.

Chris Harris, Safety Dawg 1:

Right, right, right. No, but the trucking company, you're not, if I was a trucking company and I gave you an invoice for a load and you accepted it. Um, because you did your background checks and all that kind of stuff that you would normally do, then, and that turned out to be, um, fraudulent, you're not coming after me for that missing money.

Jennifer Lockett:

As the carrier?

Chris Harris, Safety Dawg 1:

Yes.

Jennifer Lockett:

So, we, we would try.

Chris Harris, Safety Dawg 1:

Okay.

Jennifer Lockett:

We would try to, but normally you disappear after you get caught.

Chris Harris, Safety Dawg 1:

Yeah. Well, no. Sorry. I'm not a fraudulent carrier. I'm a legit carrier, but I got taken in by the fraud as well.

Jennifer Lockett:

So, in this circumstance, the carrier is submitting the, the non existent loads. So our client, the carrier, is the one that's committing the fraud, along with someone at the broker or the shipper.

Chris Harris, Safety Dawg 1:

Okay, so the collusion one is a carrier and an insider working together to defraud. Okay, well, yeah, in that case, I'm closing up my company and running away because I made the money

Jennifer Lockett:

correct. You're taking your money and you run.

John Farquhar:

Yeah, yeah, exactly.

Chris Harris, Safety Dawg 1:

I was thinking of a, uh, a legitimate trucking company, because especially as a startup, I think factoring is a great way. To start out because I need help with my cashflow when I'm first starting. And so I, and I've never owned a trucking company, Johnny, maybe you can, uh, help me here because I know you ran one, but you know, if I factor a load, I give you an invoice. I believe you check out, uh, both myself and the receiver or the shipper, whoever's paying the load. You accept that invoice. You give me my money, my portion of it. Um, and then you wait to collect the revenue from the payee. Isn't that how factoring works?

Jennifer Lockett:

Correct. Yes. So you'll get paid when you turn in the, turn in your finished load and then we invoice. your client, the debtor, and do the collections and apply the payments. So we're, we're also your back office. So if you're just starting your company and you're driving and you have another driver, we're also your back office.

John Farquhar:

Which, which, which can be very helpful because you're going to pay for that back office one way or another, whether you have somebody in house or you use a third party service, like a factoring company.

Jennifer Lockett:

Correct. Some, somebody's got to do it. Yeah, exactly. My spouse is full. And you definitely see that a lot where you'll be talking to your client and. He'll say, you're going to have to call my wife on that.

Chris Harris, Safety Dawg 1:

Yeah, that's what I've been there done that. Well, I mean, and when you're first starting out, that is a lot of, um, most companies do start out as a, whether it's a formal partnership or not, but the spouse and the driver are typically working together. Um, to start the, the company going, I mean, this is how we do things.

Jennifer Lockett:

Correct. And, and one of the spouses is usually working their regular full time job. Exactly. As well as helping the spouse who's driving.

Chris Harris, Safety Dawg 1:

Yeah, um, because typically it's not very profitable in the very beginning. So yeah, you need the incomes.

Jennifer Lockett:

Correct. Yes. And so they're working their day job. They can't do collections when a broker or a shipper is open. So that's where we come in. We do the invoicing. We follow up. If there's an issue, we'll email you, call the carrier and say, Hey, we need a clear copy of this bill of lading. And then when they can get it, they'll send it to us and then we get that to the broker.

Chris Harris, Safety Dawg 1:

Yeah. Well, today with cell phones, the driver should be taking better pictures. man, that's, that's another podcast. That is a whole other podcast. Correct. Okay, so drivers and owners take better pictures, Jennifer's saying, because that would help her out a lot, right?

Jennifer Lockett:

And you know, we need less of the truck. We don't need arms and feet. Steering wheels, just the bill ratings, perfect. Yeah,

Chris Harris, Safety Dawg 1:

I, I don't know, um, I used to have a really good program for scanning documents on my phone, and I know it's changed recently, um, but still, there are good programs. If I was scanning every day, then I would pay the money for a good scanning program so that I could get better pictures, so that I could get paid quicker from my factoring company. Alright,

John Farquhar:

so wonderful enough. iPhone has its own PDF imager on, on the phone. So you open the camera, you'll get the, you'll get the image up, and all of a sudden it'll ask you, do you want to PDF this? And boom, you now turn it into a PDF, the email message, wherever you wanna be. So, yeah, it's, I don't know if Android does that. I'm not an Android guy. I'm an iPhone guy.

Jennifer Lockett:

Me neither.

Chris Harris, Safety Dawg 1:

Well, and I've got an older iPhone. Johnny's a little more hip than I am, you know. I'm all techie. Yeah. Hey, Jennifer, how else are, let me say it this way, how else are factoring companies getting ripped off?

Jennifer Lockett:

We also see the double brokering. Um, you know, where our carrier, they don't even know, so a lot of times they'll send us a load and we'll get it and we'll say it's Raycon is because we look at Raycons every day. So you learn what people's Raycons look like. So we have to call our carrier and say, this isn't the real broker. Um, and in that case, the carrier needs to act quickly. That's, that is the main thing. They need to call the shipper, the receiver, whoever's paying the freight. explain to them what happened because a lot of times they don't realize they're working with a fraudulent broker either. So once they hear the story, the carrier can send them, I did this load, here's the POD. And a lot of times they'll just pay that carrier directly as long as they can get payment. Stopped to the wrong carrier because or to the wrong broker. I apologize because and the broker is going to be trying to get paid fast. They're going to be bugging you for that POV,

Chris Harris, Safety Dawg 1:

right? Right. Which would be a red flag to a company.

Jennifer Lockett:

And even I have carriers, they'll call me and they'll be like, the broker is blowing my phone up for this pod. I'm not really sure why. And sometimes they just need the pod. It is legitimate, but you're right. It is a red flag when they're like, we need to when they want the pod right that second.

John Farquhar:

Do you see, see much, uh, with issue or concerns in what you're doing when you have a double brokering from a carrier to another carrier?

Jennifer Lockett:

We, we do see that. And, and a lot of times that isn't with a fraudulent intent, but, but like you said, it is still double brokering. Right. For example, I had a client, he submitted a load and it was a different carrier, um, um, The bill of lading. So I asked him about it and he was like, oh, that's my neighbor. I was sick, so he did the load for me. I'm just gonna bill it and then I'll pay him. So there was no fraudulent intent there. Right. But there still creates a liability and it still considered double brokering. And the your broker. Going to be mad because they don't know who has their freight rightfully. So, and they don't know if they have the right kind of coverages. So, we do see that and you do also see that with a fraudulent intent. We've seen that as well, but a lot of times. They're not trying to be fraudulent. They're just trying to move this load and they're sick.

John Farquhar:

Sure Yeah, well

Chris Harris, Safety Dawg 1:

I

John Farquhar:

was going to say one of the things we see and chris and I dealing on the insurance side of the world You know between canada and the u. s. We see a lot of people You get too many entities involved with moving that shipment And now we end up with a crash and now the liability starts to spread amongst everybody, even though not everybody had an actual piece of the action, but their name is now involved.

Jennifer Lockett:

Exactly, yeah, the liability is the biggest piece when it comes to that and they're starting to call the carrier to carrier shadow tendering. I don't know if you've heard that yet.

John Farquhar:

No, that's a new word.

Jennifer Lockett:

They, they call the carrier to carrier shadow tendering. So it's kind of separated from double brokering because it has become big.

Chris Harris, Safety Dawg 1:

Right. Yep. All right. As we start to wind this up a little bit, what would you suggest to trucking companies to avoid being a victim?

Jennifer Lockett:

The biggest thing they can do is check the FMCSA, make sure there's no changes to your address, your email, and your phone number. And I would do that regularly, weekly, maybe twice a month at least. Um, because then you're, you're at least gonna catch it quickly. If you do become a victim that way, another thing is when it comes to knowing who you're actually working with, like, Check the company's website. Make sure the email domains match up. Call the phone numbers on the website instead of the phone numbers on your Raycon. You can also, there's a free service you can Google online. You can check email domains and see how old they are. That's another thing we do in our underwriting process is we check an email domain. And sometimes you'll get them and they're, uh, they made it the day before they sent you your application. But then you'll have the legitimate ones where their company's 10 years old, as well as their email domain.

Chris Harris, Safety Dawg 1:

Those are great tips. Now, Altline is a factoring company. Can you tell us a little bit about that, Jennifer, before I let you go?

Jennifer Lockett:

Yes, we are a factoring company based in Alabama. We are bank owned. So that allows us to give very competitive rates, very competitive fees to help our new carriers, even our old carriers with their cashflow. Our main goal is to help our clients with cashflow and help them grow and continue to grow.

Chris Harris, Safety Dawg 1:

Yeah. And I would think you don't. I mentioned new carriers as a, uh, somebody who might use factoring, but there's many other reasons. Uh, if I'm in a 10 year old carrier and I want to grow and I need that cashflow coming in a little quicker would be another reason I would think at least. That I might want to reach out to a factoring company.

Jennifer Lockett:

Yes, and they say, I read a statistic the other day, 3 of 5 invoices in the U. S. are factored.

John Farquhar:

Oh, wow. That is interesting.

Jennifer Lockett:

Yeah, especially with the economy the way it's been, it's definitely become a huge, a huge partnership between the carriers and the factoring companies. Right.

Chris Harris, Safety Dawg 1:

And damn, if I was relatively new, I'd look at my credit card bill and I don't want to pay that whatever the interest rate is on my credit card. It would be more financially a benefit, I would think, to use a factoring company and not cover or carry those credit card balances at their interest rates.

Jennifer Lockett:

Correct. Yeah. Or even lines of credit. So we get clients not, it's not only people who can't qualify for your traditional financing, it's people who opt to go with fine with factoring over traditional financing.

Chris Harris, Safety Dawg 1:

Sure. I think that's great. And for everybody, if you want to reach out to Jennifer, of course, her contact info is in the show notes down below, along with the website for Alt Line, so you can get more information. Jennifer, I appreciate you taking the time to join Johnny and I. On this episode.

Jennifer Lockett:

I appreciate you guys having me. Thank you so much, this was fun.

Chris Harris, Safety Dawg 1:

Yay! Good deal. Johnny and I wish we were in Alabama so we could go golfing.

John Farquhar:

Exactly. Yeah, it would be way more fun than up here in the snow. I lose my balls in the snow and I can't find them.

Jennifer Lockett:

That's where my husband's headed today is golfing.

Chris Harris, Safety Dawg 1:

Smart man. Well, Mr. Lockett, have a good round.

People on this episode

Head Shot

Chris Harris

Host
Head Shot

John Farquhar

Co-host