The True Cost of Theft and Fraud in Vehicle Transportation

Authors: Karl Fazio, General Counsel and Jacob Patterson, SVP, Finance

Introduction

Vehicle theft and fraud during transportation continue to rise dramatically,costing the automotive transportation industry approximately $35 billion annually¹. With criminals employing increasingly sophisticated tactics such as identity theft, fictitious pickups, and digital scams, businesses must understand the legal and financial impacts these fraudulent activities can have. By recognizing the risks, taking the right precautions, and partnering with trusted transport providers, you can safeguard your business against theft and fraud.

Understanding Fraud from a Legal and Claims Perspective

Karl Fazio, General Counsel

Fictitious Pickups

Fraud in vehicle transportation takes many forms, and each carries distinct legal and insurance implications. One common scheme is fictitious pickups. Bad actors monitor public load boards, impersonate carriers, and intercept vehicles by presenting fake credentials. In some cases, criminals target locations where vehicles are routinely left for pickup or drop-off—such as auctions—and pose as the legitimate recipient. Vehicles are released, paperwork is exchanged, and by the time the fraud is discovered, the assets are long gone.

Unauthorized Double Brokering

Unauthorized double brokering poses another fraud risk. This is where a legitimate carrier passes the job off to an unvetted and/or uninsured third party who either disappears with the vehicle or delivers it to the wrong recipient. Some schemes are more opportunistic. Carriers may delay delivery under false pretenses, using the vehicle for personal gain before abandoning it. Others abuse after-hours delivery processes or use stolen identities to fraudulently acquire and redirect vehicle shipments.

Recent Cases Highlighting the Threat

These scenarios are not theoretical. In Miami, a group was arrested for a luxury car theft ring that rerouted Rolls-Royces and Lamborghinis after pickup by falsifying delivery information and deceiving drivers into handing off the vehicles to criminals². In another case, hackers infiltrated a transport company’s dispatch system and rerouted a $200,000 Maybach SUV to a fraudulent address, circumventing identity checks and documentation protocols³. Even everyday consumers are impacted. A military family’s vehicles were held hostage after a double-brokering scam, with extortion threats made by an unapproved second carrier⁴.

The legal recourse for victims of these incidents may be limited. A notable federal case found that a broker was not liable for stolen cargo under state law. This left the shipper with little legal recourse when its loads were lost to carrier fraud, and the carrier disappeared⁵. This underscores the importance of proper carrier vetting and a strong understanding of legal responsibilities between shippers, brokers, and transporters.

Claims and Insurance

From an insurance standpoint, fraudulent handoffs—especially when a vehicle is voluntarily released—can trigger exclusions in cargo or property policies. Claims may be denied under carrier insurance policy provisions related to voluntary parting or lack of due diligence. Repeated incidents can also lead to increased premiums, stricter underwriting, or even cancellation of coverage.

To reduce exposure, businesses must proactively select verified transport partners and require clear evidence of insurance, driver credentials, and compliance procedures. RunBuggy helps mitigate these risks through embedded protections like real-time transporter verification through our platform, secure digital documentation, and thorough onboarding requirements. In today’s high-risk landscape, mitigating legal exposure is only half the battle—understanding the financial toll of fraud is just as critical.

The Financial Toll of Fraud

Jacob Patterson, SVP, Finance

Short-Term Impacts and Direct Costs

The direct financial costs of fraudulent activities can be effectively mitigated by knowing your transport partners and vendors through extensive background checks, insurance verification processes, and frequent compliance requirements reviews. Ensuring your company’s liability insurance policies are robust, with appropriate coverage, is also critical to minimizing the direct financial cost associated with cargo theft and other fraudulent activity.

Not only is fraudulent activity becoming more prevalent in logistics, but the direct costs associated have increased considerably. The average cost per cargo theft incident has increased over 1,500% from 2021 to an estimated $200,000 per incident⁷. One example of fraudulent activity that poses significant financial risk is cargo theft. Bad actors constantly survey shipment activity and load boards, claim to be legitimate transporters, and will attempt to circumvent operational or security procedures. Another example of direct cost attributable to fraudulent activity is the exchange of funds between the various parties, along with internal fraudulent activity committed by employees through misuse of funds or unauthorized payments.

Long Term Impacts and Indirect Costs

While the direct costs attributable to fraud are more easily quantified, the longer term and indirect costs can be sometimes overlooked. First and foremost, repeated fraudulent incidents will eventually take a toll on your brand and ultimately your credibility as a service provider in the logistics and transport industry. Addressing fraudulent activities after they have occurred is also an indirect cost to the organization. It takes time to thoroughly investigate and resolve these incidents and consumes resources that would otherwise be focused on core operations. Like your personal auto insurance policy, if there are too many claims against the policy because of fraudulent activity, the premium cost will increase which adds operational expense and lowers operating profit.

To reduce the negative impact caused by fraudulent activity, preventative measures should be an area of focus, such as background and multi-point verification checks previously mentioned. Since a growing number of banking transactions are electronic or digital in nature, it’s also critically important to ensure you have the appropriate security measures in place. These security measures span from physical access to company assets to cyber security and general IT practices to prevent and mitigate potential threats.

Another effective means for preventing fraud comes in the form of internal controls. These controls can range from simple approval permissions to more complex processes including multi-step checks and balances. Requiring multiple approvals for outgoing payments, requiring customers and vendors to maintain and update their own banking information in a secure environment for fund exchange, and reconciling banking activity daily are examples of internal controls typically initiated and enforced by the accounting or finance department. Combining extensive security practices with strong internal controls, along with implementing KYC (Know Your Customer) practices will go a long way to prevent fraud.

RunBuggy’s Proactive Approach

Transporter Vetting

Before a transporter can begin using the RunBuggy platform, they must first go through a thorough vetting process. During this process, we check for the following…

DOT Compliance: Verifies transporters meet all federal safety and operational regulations, ensuring they operate legally and safely.

Insurance Verification: Confirms that every carrier maintains the appropriate level of insurance coverage required to transport vehicles, protecting shippers from significant financial liabilities.

Background Checks & Business Validation: Comprehensive background checks are conducted, and company credentials are verified.

Security Measures

Zero-Trust Architecture: Passwords have been replaced with secure credentials tied to private keys that stay on the user’s device, helping to prevent account takeover fraud.

Passwordless Authentication: Eliminating shared passwords significantly reduces the risk of cyber fraud. It helps ensure only verified and authorized individuals have access to sensitive information.

Continuous Monitoring: We constantly monitor compliance and cybersecurity protocols, immediately addressing any anomalies or potential risks.

These stringent measures help in preventing fraud and theft. In turn this helps reduce legal implication, insurance claims, and increase financial security.

Conclusion

Fraud prevention in vehicle transportation isn’t just about avoiding immediate losses. It’s a strategic imperative for ensuring legal compliance, financial health, and maintaining a trustworthy reputation. At RunBuggy, rigorous verification, robust cybersecurity measures, and proactive strategies form the cornerstone of secure vehicle shipping.

Protect your assets and your bottom line by aligning your operations with proven, industry-leading security practices. Learn more and get started today at runbuggy.com.

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