No one would consciously hand over hundreds of thousands of euros in cash or products to a complete stranger, but by not carrying out sufficient checks that’s virtually what some companies are doing in Europe, when they award delivery contracts to transport companies

 The rise of so-called ‘phantom carriers’ is becoming such a concern that GDV, the German Insurance Association, has produced a paper containing loss prevention tips to highlight some of the tactics criminals are using and to help protect high-value truck consignments from fraudulent theft.

Björn Kupfer, Loss Prevention Manager Marine Insurance at GDV, has no doubt that this type of criminal activity is on the rise: “In the Spring of 2017, we organised our 2nd Round Table on ‘Embezzlement of truck consignments’ to look at new modus operandi, the current situation and options for preventive action around the topic of ‘phantom carriers’. Klaus-Dieter Baier (DESA John & Baier GbR), who took part in the round table, talked of 600 known claims involving phantom carriers between 2011 and 2015. The loss in these cases of fraud was between €50,000 and €2.5 million.

“The experts at the round table were all in agreement that there has been a noticeable rise in the phenomenon of phantom carriers since 2015, and particularly since the Fall of 2016. It is a big problem. In most cases, the perpetrators concentrate on high-value goods and goods that are not difficult to dispose of profitably. The loss is massive.”

As a rule, he says the loss per claim value is in excess of €50,000 but there appears to be no upper limit. He cites another case in which a 21-tonne shipment of cigarettes disappeared after being entrusted to what turned out to be a phantom carrier, resulting in a loss amounting to hundreds of thousands of euros.

GDV believes criminals are increasingly focusing on the theft of truck consignments by fraudulently acquiring freight contracts. When the perpetrators take charge of the goods, everything initially appears to be a perfectly normal transport operation but the transport contract will not be fulfilled. The goods do not reach their intended recipient but are instead sold elsewhere. Not surprisingly, this coincides with all contact being lost with the company that picked up the goods, which disappears without trace. 

Vigilant has previously reported concerns from TAPA members about the vulnerability of truckloads awarded to companies via online freight exchanges, which are known to have been used by bogus operators to gain access to high value, theft attractive goods in transit. More than 500,000 new freight offers a day are now being processed through online channels like this and the vast majority of loads are delivered by perfectly reputable companies. However, the fast-moving nature of supply chains and the constant pressure on transport operators to lower costs means this is one of the high volume business environments criminals have been known to infiltrate.  

According to GDV, however, it’s not only one-off contracts that are affected but also repeat contracts that have a correspondingly higher loss potential. It highlights three methods used by criminals in order to acquire contracts:

·       Pretending (identity theft) to work for well-known freight carriers/haulage contractors (transport companies)

·       Establishing bogus companies 

·       Purchasing established transport companies, gaining access to freight exchange sites, documents and references.

Such practices have been known for some time and buyers of services as well as legitimate transport operators have taken steps to avoid becoming a victim of a phantom carrier. However, GDV says offenders are increasingly able to adapt to preventive measures as they identify them.

The increasing use of technology to facilitate transportation can play neatly into criminals’ hands. Initial contact with potential clients is generally made via mobile phone, email or online marketplaces such as freight exchange sites. “The criminals disguise their activities well,” says Björn Kupfer.

One issue that often only comes to light after a cargo crime has been committed is the high level of subcontracting that can go on once a company is awarded a load. Customers that awards contracts are usually oblivious that the delivery of their goods may have been passed on several times from carrier to carrier – and ultimately ended up under the control of a criminal group. Similarly, as discussed at TAPA conferences, offenders that ‘win’ a contract through whatever means have been known to then outsource it themselves to a legitimate carrier, which will innocently collect the cargo in good faith by presenting all of the correct documentation. Once the goods are onboard and the truck is in transit, the offenders simply notify the carrier they are using of a change of delivery address and, ultimately, the cargo disappears after being unloaded.

“Subcontracting, i.e. when the transport company hands over the transport contract to a different transport company, the subcontractor, carries additional risks and should be avoided if possible. To minimise the risk of fraudulent theft of the goods being transported, the subcontractors should be subject to the same reliability checking as the transport companies. This should be stipulated in the transportation contract. If the transport company cannot guarantee that such a check will be performed, they should not be permitted to subcontract the transport contract. If contracts are awarded using freight exchange sites, subcontracting should never be permitted,” is GDV’s strongly-held view on the subject.

GDV’s loss prevention tips aim to help companies to deploy a number of relatively simple measures to prevent these types of transport losses.

The most obvious and simple rule is to always carry out detailed checks to confirm the integrity and reliability of any potential business partners. “This makes it possible to distinguish any black sheep from reliable transport companies. In particular if you are intending to establish new business contacts, it is crucial to subject the potential business partner to a rigorous examination,” the insurance association advises.

It lists six key areas for companies to focus on:

1. Initiation of a business transaction

The wide variety of communication options available for initiating a business transaction with a transport company mean that, increasingly, phone and fax are being superseded by communication over the Internet. Details regarding a contract are often sent by email.

Modern means of communication are extremely easy to use for genuine users, but they are increasingly offering offenders a variety of ways of establishing seemingly bona fide business contacts while disguising their true identity. The opportunities for crime that result from this present a wealth of risks for the customer. It is, therefore, essential that customers always apply the highest level of due diligence, irrespective of the communication channel used. 

2. Entering into a business relationship

GDV says the criminal activities described are increasingly being used successfully by organised gangs to fraudulently obtain as many truck consignments as possible with one ‘phantom carrier’. Special care must therefore be taken to check the reliability of a new partner when first entering into a business relationship. To this end, the transport company should, for instance, be required to provide the following documentary evidence in order to establish confidence:

-        References relating to completed transport contracts

-        Confirmation of insurance

-        Licences and approvals

-        Full company data, which in Germany should be based on extracts from the Commercial Register

-        Also in Germany, companies can request to see a colour copy of the personal identification document or passport of the managing director as entered in the German Commercial Register as proof of identity.

If any of the documents are not sufficiently legible or are not plausible, the customer should insist that correct documentation is presented or they should not award the contract. Offenders will often present forged documents so great attention to detail is required when checking the genuineness of any documents presented. When checking references, it should be established whether the transport contracts were fulfilled as described in the documentation.

Furthermore, GDV advises, the confirmation of insurance should be checked and confirmed by the insurer. Company data, such as the following, can be checked using a credit bureau or by making inquiries with the relevant registers:

-        Address

-        Registered office

-        Phone number

-        Fax number

-        Email address

-        Official website

-        Business licence number

-        Commercial register number

-        VAT identification number

-        Bank details

All these items can be compared for plausibility. The VAT identification number can also be used to check the registered office using the VAT information exchange system of the European Union.

Depending on where the transport company is headquartered, other country-specific information can be used for checking purposes:

-        Transport licence database (validity, operator, vehicles, traffic manager, contact person, number of licences)

-        Lists of hauliers

-        Offices of the green card agencies (licence plate queries).

The German Commercial Register also allows checks to ascertain how long the transport company has been trading and whether there has been a recent change of ownership. Information with regard to the solvency of the transport company is also important. Such information can be provided by credit bureaus, GDV adds.

3. Ongoing business relationship

From time to time, offenders will feign an employment relationship with a transport company that is known in the industry. It is therefore important to be able to identify the communication partner absolutely reliably, even with ongoing business relationships. In this context, GDV says it is helpful, for instance, to agree on specific communication channels and to assign particular members of staff responsibility for processing contracts with the transport company.

The confirmation of insurance provided by the transport company should also be checked regularly and confirmed by the insurer. Furthermore, the solvency of the transport company should be checked on a regular basis by monitoring their payment history.

If enquiries reveal a recent change of ownership, references should be requested on the new owner or managing director.

4. Awarding of a contract

GDV’s loss prevention advice clearly states that a transport contract should only be awarded after the reliability of the transport company has been checked by the customer. If any discrepancies arise, an explanation must be requested from the transport company. If no plausible explanation is forthcoming, a different transport company should be selected.

If the contract is awarded using a freight exchange site, the safety measures recommended by the site should be used and implemented. If inadequate safety measures are recommended, the freight exchange site in question should be avoided.

GDV advises specific timeframes and an order number should be agreed for collecting and delivering the consignment. Furthermore, the transport company should provide the customer with the following data (advance shipping notice) in good time prior to collecting the consignment:


-        Full name of the driver, nationality, colour copy of the driver's personal identification documents

-        Colour copy of the driver's driving licence

-        Official contact data (e.g. mobile phone number) for the driver, vehicle licence number, state of registration and type designations of the means of transport

-        Colour copy of the vehicle documents (vehicle identification number)

Any national statutory requirements with respect to data protection must be observed when personal data is collected.

Furthermore, the customer should draw up a consignment note compliant with § 408 of the German Commercial Code (HGB) or Article 6 of the Convention on the Contract for the International Carriage of Goods by Road (CMR).

5. Collection of the consignment

From the perspective of the sending party

In order to prevent the wrong goods from being loaded, the driver should be asked to provide the agreed contract number before the goods are handed over. The identity of the driver should then be reliably determined on the basis of his official identity card and compared with the data received in the advance shipping notice. It is recommended that a document inspection device is used for inspecting the documents.

The means of transport must be checked in the same manner. The vehicle type and the vehicle registration number must be checked to ensure that they match the details given in the advance shipping notice. If any discrepancies arise, an explanation must be requested from the transport company.

If possible, a photograph or video should be taken of the driver and vehicle. This should be of a sufficiently high resolution and should be archived. Once again, any national statutory requirements with respect to data protection must be observed when personal data is collected.

Once the consignment has been handed over, the recipient should be informed of the expected delivery date. If the journey is unbroken or direct, the details of the driver and vehicle should also be passed on to the recipient.

From the perspective of the driver

Any irregularities identified during inspection at transhipment points, such as damage or a discrepancy between the actual number of pieces of cargo and that declared in the consignment note, should be noted by the driver in the consignment note and countersigned by the sender. The recipient should also be informed that such irregularities have been noted.

6. Delivery of the goods

From the perspective of the client

The customer should check that the agreed delivery dates are met. If the driver cannot meet the delivery date, the transport company should be asked to provide an explanation. If no plausible explanation is given, the police should be contacted immediately.

From the perspective of the driver

If the place of delivery is changed by the purported recipient, the driver or the transport company should request instructions from the customer confirming the place of delivery. If it is uncertain whether the purported recipient is bona fide, the driver should proceed to the original delivery location and, if necessary, contact the police. Before handing over the goods to the recipient, the driver should reliably check the identity of the recipient by means of their official identity card. If there is any uncertainty with respect to the place of delivery or the identity of the recipients, the consignment should not be unloaded and the customer should be contacted for further instructions.

From the perspective of the recipient

In order to be able to trace any irregularities during transportation, the identity of the driver should be reliably determined on the basis of his official identity card and compared with the data received in the advance shipping notice.

If any discrepancies arise, an explanation should be requested from the transport company. If no plausible explanation is forthcoming, the quantity and condition of the packages should be checked particularly stringently during the interface check. In addition, the load units should be separated in order to check the packages. If any packages are missing or do not have the correct contents, the police should be notified.

The recipient should inform the customer that transportation has been completed correctly or alert them of any irregularities.

Dealing with a loss

One of the biggest challenges for insurers and law enforcement agencies is to do with incident reporting. GDV insists that every case of fraudulent theft of a cargo consignment should always be reported to the authorities.

Björn Kupfer states: “Our information indicates that cases are not reported or pursued for fear of a loss of reputation. But this is necessary in order that the police and the public prosecutor can take action. It is quite possible that there have already been similar cases in a particular region, and these can be given higher priority by the police in their investigations. Furthermore, insurers also engage investigators tasked with recovering the goods. In this context, collaboration with the police will increase the chances of success.

“Cases of phantom carriers, in particular, are not simply random or isolated acts committed as the occasion arises. Perpetrators and gangs of perpetrators are well organised and work professionally. In many cases, there are well organised structures ranging from obtaining information from insiders right up to planning the onward sale of the goods in the case of contract theft. After all, disposing of a complete truck consignment means that even the perpetrators have to have effective logistics, from storage through to transportation.”

To download a full copy of GDV’s paper ‘Fraudulent theft of truck consignments (phantom carriers) – loss prevention tips’ click on the link below