Paying for Fast Shipping Has Been Associated with Fraud

Nelson CabreraAir Freight, General, News, Shipping GuideLeave a Comment

Fast shipping service was once considered to be nothing more than an expensive convenience for shippers and a source of quick revenue for carriers. However, recently there has been concern that fast shipping is riddled with fraud. Indeed, paying for fast shipping could very easily get you flagged as a fraudster, which can significantly impact your standing in the industry and ability to access credit. For carriers, being the victim of fraudulent activities can significantly disrupt operations and could even lead to fines if they are found to be acting against the law.

Brief Description of this Con

The underlying principle behind these fraudulent activities in the shipping industry is relatively simple: the faster a transaction is processed, the less time administrators have to check it out thoroughly. That means that the fraudster can take advantage of this critical window of opportunity. Some of the fraudulent activities that might take place include the use of stolen credit cards or making purchases on redundant accounts.

Carriers are understandably nervous about the entire set up and will use data mining firms to track the behavior of online shoppers. Those purchases that have a high risk of being fraudulent are automatically denied. The denial is deemed to be final unless overruled by the carrier themselves, a situation in which full liability for the potential frauds falls on them. The time lapse during quick purchases increases the risk of a fraud being committed.

A third party often denies service and that might mean that the consumer or shipper is unable to get redress or a chance to explain their situation short of making a direct purchase of services using the longer route. There has also been some concern about tracking and ranking consumers without their knowledge or approval. These are some of the reasons why some shippers prefer doing business the old-fashioned way.

Key Markers for Fraud

  1. Buying too quickly
  2. Failing to check the return policy
  3. Paying for the fastest shipping option
  4. Not comparing prices
  5. Sorting prices and choosing the highest prices
  6. Using a proxy service to access the site
  7. Having an email address that does not match your Facebook profile
  8. Living or operating within a part of the world where most frauds happen

The scoring is often done anonymously but we know that there are certain international firms involved in the cross checking process, including Riskified (based in Tel Aviv); Accertify, Forter; Signifyd; and CyberSource. Some of these service providers have been taken over by credit card companies such as American Express and Visa, a situation that some equate to a conflict of interest.

Reactions from the Shipping Industry

Obviously, the filters do not bother the carriers because they keep the carriers from being saddled with the costs of fraudulent transactions. However, shippers have another story to tell, because they can be excluded from the market due to a remote scoring process which they have no control over and cannot subsequently challenge.

The companies that do these checks are evasive when asked for insights into their decision-making processes. According to Eido Gal, the CEO of Riskified:

“Riskified tends to be far more accurate and efficient than traditional fraud-prevention methods, but no solution is perfect, and we’re still improving.”

If a retailer or carrier overrules the decision, they are entirely liable in case of fraud. That is why many shipping companies just leave the decisions as they are, especially when they are dealing with international buyers who have a high risk of engaging in fraudulent activity. Research by the Retail Industry Leaders Association (RILA) has shown that online fraud has risen by up to 30% after the introduction of the chip and pin system.

Warning Signs to Watch Out For

Generally speaking, it is anticipated that a non-fraudulent shopper will behave in a “natural way,” which means they will browse for the best products at the lowest price then bid on them. Customers can further protect themselves by reading the terms and conditions so that their purchase is not flagged as an indicator of fraudulent intentions. If you are a frequent shopper or client with that particular carrier, then it might be a good idea to sort out the denial of service from the outset so that you are put on their pre-approved list. Of course, there is also the option of using the old methods despite their inherent inefficiency.

Common Frauds in the Shipping Industry

The shipping industry is beginning to experience certain frauds that have put it on high alert. Some of the more common fraudulent activities include:

  1. Carrying banned substances
  2. Changing weights and specifications to reduce costs
  3. Not disclosing vital information
  4. Colluding with agents not to remit fees or charges
  5. Ferrying looted or stolen merchandise

Safety Precautions for Shippers

Although e-Commerce has emerged as one of the most significant improvements within the shipping industry, it is not without its risks. The frauds that have been described above require vigilance. If need be, a third party can be called in to vet various transactions. It is advisable to demand originals of all the certifications and permissions that are required for a shipment before accepting it.

Other precautions might be putting the best customers on a pre-approved list so that they do not have to go through security checks for every transaction. It might also be a wise idea to have a frontline member of the team who can deal with complaints, comments, and appeals. The objective is to ensure that you can serve your customers in a safe environment without compromising your credentials.

Carriers and shippers need to be aware of the complicated and often sophisticated fraudulent activities that are taking place online and offline. The liability rules in the law mean that failure to do sufficient checks will leave you vulnerable to prosecution, fines, and economic losses. At the same time, the measures to protect against online and offline fraud should not be so stringent that they no longer permit you to provide the best service possible to your customers.

Nelson Cabrera
Nelson leads global business development efforts within LILLY + Associates and has been featured as a logistics expert in numerous publications, including SupplyChainBrain, The Bulletin Panama, Logistics Management, and the Miami Herald.

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