Phantom carriers are clandestine operators that infiltrate the logistics industry by presenting themselves as legitimate freight carriers. This fraud becomes apparent when goods are reported lost or stolen in transit, triggering insurance claims.

They employ a variety of sophisticated methods to appear credible, including:

Fake document fabrication

These criminals meticulously produce forged documents and set up counterfeit websites that closely resemble those of authentic logistics firms. This extensive forgery spans bills of lading, insurance documents, vehicle registrations, and other transport documents, making it exceedingly difficult for businesses to discern the legitimacy of their operations.

Investigations commonly reveal that the vehicles used in these operations are stolen, equipped with counterfeit registration numbers, and operated by individuals with fabricated credentials. Utilizing online transport databases, phantom carriers pose as reputable providers to respond to companies in dire need of transportation services.

Fake company cloning

This tactic involves replicating the identities of legitimate companies using disposable communication tools and computers with masked IP addresses, allowing these fraudsters to convincingly impersonate real transport providers. This method not only misleads companies seeking logistic services but also risks damaging the reputations of genuine, established businesses.

Fake consignee

In this elaborate scheme, an unknown forwarding company registers with the consignor, providing details of the trailer and the carrier. Upon verification by the consignor, the carrier appears to be a legitimate entity, with all necessary documentation for the semi-trailer set, insurance, driver’s, and vehicle documents verified and in order. The operation proceeds under the guise of normalcy, with the carrier tasked to deliver the loaded goods to their intended destination.

Upon arrival, however, the carrier reports to a consignee that was deceitfully added to the order by the phantom entity. This fake consignee then directs the carrier to offload the goods at a location different from that specified in the CMR document.

The justification provided is often a plausible but misleading one, such as the need to deliver to a “second warehouse – just around the corner.” Following these instructions leads to the disappearance of the goods.

Complicating matters further, the carrier, having followed the directions provided by the fake consignee, considers the delivery obligation fulfilled as per the instructions received from the forwarding company. This adherence to the fraudulent instructions, coupled with the CMR document’s assertion of correct delivery, obfuscates the theft, leaving the consignor without their goods and the phantom carrier with plausible deniability.

Place employee at legitimate trucking company

In some instances, phantom carriers may involve placing a complicit employee within a legitimate trucking company to leak sensitive information or to facilitate fraudulent activities directly. Alternatively, a member of the criminal group might get hired by the company for the same purpose.

Tucked carrier fraud

Phantom operators, under the guise of an unknown forwarding company, deceitfully secure transportation contracts. These carriers, verified by senders as legitimate entities with all requisite documents in order, are tasked with transporting goods. However, in a sinister twist, the goods are unloaded at locations not specified in the CMR document, leading to their disappearance. It’s later discovered that the carrier was instructed by the forwarder to perform a different transport than what was outlined in the CMR, with the carrier claiming to have simply followed the forwarder’s orders. In instances where carriers resist these unlawful directives, they face threats of violence, highlighting the dangerous lengths to which these fraudsters will go to execute their schemes.

Freight Forwarding Company Exploitation

In this scheme, forwarding companies attract carriers with the promise of high compensation, securing transport orders at competitive rates to amass large volumes of transport. However, after a period of operation, these companies abruptly cease payments to carriers, leading to significant financial liabilities. Eventually, these forwarding companies vanish, leaving carriers with unpaid dues and no means of recourse. The abrupt disappearance of both staff and ownership further complicates the pursuit of justice for affected parties.

Trailer Thieves

A particularly heinous operation involves phantom forwarders luring carrier vehicles under the pretense of legitimate loading assignments abroad, with the actual intent of stealing the vehicles rather than the cargo. This method has been linked to severe criminal activities, including the murder of drivers, as was notably the case when vehicles were directed towards the former Yugoslavia. The situation was exacerbated by premature police intervention, informed by leaked details, which hindered the comprehensive resolution of the case and the apprehension of all involved criminals.

These elaborate and nefarious tactics employed by phantom carriers and fraudulent forwarding companies demonstrate the significant risks and potential for violence within the logistics industry. The sophistication and audacity of these schemes underscore the urgent need for robust verification measures, vigilant monitoring, and a cooperative effort among industry stakeholders to safeguard against such fraudulent activities, ensuring the security and integrity of the supply chain.

The culmination of these fraudulent activities often leads to the disappearance of goods, as phantom carriers divert shipments to unauthorized locations, leaving businesses without their cargo and facing substantial financial losses.

Impact on the European Market

This phenomenon is particularly damaging in the European market, where the interconnected nature of logistics networks allows these fraudulent operators to blend in and target unsuspecting companies. They often exploit busy trade routes, major ports, and logistic hubs, areas where the demand for carrier services is high.

Particularly within the DACH region, which includes Germany (D), Austria (A), and Switzerland (CH), the effects are markedly severe. The dense web of trade corridors and logistical nodes that span across these nations not only facilitates the smooth transit of goods but also renders them particularly susceptible to the machinations of phantom carriers.

Various reports by TAPA EMEA (Transported Asset Protection Association Europe, Middle East & Africa) shed light on the scale and nature of cargo theft incidents, offering a glimpse into the situation in these countries.

For instance, intelligence from TAPA EMEA in 2023 underscored a worrying escalation in cargo theft incidents across the continent. Despite the United Kingdom registering the highest number of incidents in a given month, the DACH region remains conspicuously challenged by this menace. The strategic positioning of Germany, Austria, and Switzerland, coupled with their active ports and trade pathways, renders them prime targets for criminal undertakings, including those executed by phantom carriers.

In Germany, which serves as a crucial nexus for European logistics and transportation, the rising incidence of phantom carriers has necessitated a critical reassessment of security protocols and insurance frameworks. Acknowledging the profound economic repercussions of cargo thefts, evidenced by the staggering daily loss of products valued at €834,000 across the EMEA region in April 2023, the German insurance sector has led the charge in formulating sophisticated cargo insurance solutions aimed at curtailing these risks.

Similarly, Austria and Switzerland, albeit smaller in land area, confront analogous hazards owing to their integral positions within the trans-European logistics fabric. The considerable value and fluidity of commodities traversing these territories highlight the imperative for stringent legal structures and insurance schemes to safeguard against the financial losses engendered by phantom carriers.

Most Targeted Products

According to the 2023 updates and findings from various authoritative sources including TAPA EMEA and BSI, TT Club, there has been a notable shift in the trends and patterns of cargo theft, affecting different types of goods across the global supply chain.

Electronics, pharmaceuticals, and luxury items continue to be highly coveted by cargo thieves due to their high value-to-weight ratio, making them ideal targets for theft and subsequent resale on the black market. These goods offer high resale value with minimal traceability, attracting organized crime groups specialized in cargo theft.

Recent reports indicate a significant trend towards the theft of basic goods such as food and beverages, automotive parts, and fuel. This shift is partly attributed to the macro-economic impact of inflation, which has altered criminal patterns, pushing thieves to target goods that were previously considered less attractive. Fuel theft, in particular, has seen a rise, impacting supply chain security and resilience due to the vulnerability of trucks left stationary and susceptible to other forms of cargo crime.

How to fight phantom carriers? Prevention Measures

Mitigating theft in claims requires a comprehensive approach that necessitates careful attention and proactive measures from all entities engaged in the shipping process.

To substantially minimize risks and financial exposure, businesses must implement comprehensive prevention strategies. These strategies should encompass:

• Verify all carrier documents for authenticity.
• Check truck and trailer registration numbers.
• Photograph the truck and its license plate during loading.
• Request and document the driver’s license or ID.
• Conduct thorough internet searches and phone verifications of company information.
• Build and maintain strong relationships with carriers.
• Limit carrier selection to a trusted group.
• Enforce scheduled routes with controlled stops, disallowing personal detours.
• Implement satellite and GPS tracking systems with frequent position updates.
• Require multiple contact numbers and details for verification.
• Establish direct communication with multiple carrier representatives.
• Be cautious of unsolicited “special deals” or missing documentation, and report concerns to management.
• Ensuring that all staff involved in the handling and transportation of cargo are aware of and trained in security best practices.

Ascertaining Liability in Instances of Cargo Theft by Carriers

In cases of cargo theft by phantom carriers, the insurance sector utilizes subrogation as a legal mechanism to recoup losses after compensating the insured. This process requires identifying liable parties, collecting essential evidence for a strong claim, and navigating jurisdictional challenges to enforce judgments.

Subrogation is vital for mitigating the financial impact of cargo theft and ensuring accountability.

Determining liability when cargo is stolen presents a multifaceted legal challenge, deeply rooted in the specifics of the transport contract, particularly the Bill of Lading. This contract may contain specific provisions related to theft prevention, any relevant instructions, reporting obligations, and security measures that dictate how liability is shared between shippers, carriers, and logistics providers.

The adjudication process also entails an exhaustive examination of the carriage contract’s clauses, the coverage details of the insurance policy, and the applicability of any relevant international conventions or national legislation governing cargo transportation. Notably, the Convention on the Contract for the International Carriage of Goods by Road (CMR) mandates shared responsibility among all parties in the transport chain, underscoring the principle of collective liability. This aspect is crucial for understanding how the CMR facilitates unified responsibility in the transportation chain.

Immediate documentation of theft, preservation of evidence, and prompt notification of all involved parties are essential first steps in liability determination. Additionally, victims may have the legal basis to sue third parties whose negligence enabled the fraud. For example, brokers who fail to verify a carrier’s legitimacy could face claims for negligence, misrepresentation, or dereliction of duty.

In certain scenarios, victims can pursue legal recourse against third parties whose oversight contributed to the fraud, emphasizing the legal implications of inadequate verification of carriers’ authenticity. These actions are grounded in principles of negligence, misrepresentation, or failure to perform due diligence.

We invite insurance companies and all industry stakeholders to reach out to Marlin Blue to discover how we can support your business in overcoming challenges, including recouping losses through subrogation, and maintaining the integrity of global supply chains.

Our resources are specially designed to enhance your risk management strategies, improve your handling of legal and insurance claims, and facilitate effective recovers post-subrogation.

SOURCES

• TAPA EMEA. (2023a). “A Look at Cargo Crimes Reported to the TAPA EMEA Intelligence System (TIS) in the First Nine Months of 2023.” [Online]. Available: https://tapaemea.org/news/a-look-at-cargo-crimes-reported-to-the-tapa-emea-intelligence-system-tis-in-the-first-nine-months-of-2023/
• TAPA EMEA. (2023b). “Over €12 Million of Goods Lost from Supply Chains in May 2023.” [Online]. Available: https://tapaemea.org/intelligence/over-e12-million-of-goods-lost-from-supply-chains-in-may-2023/