In 2024, retailers dealt with a costly challenge: U.S. consumers returning $685 billion worth of merchandise — 13.21% of total retail sales, according to Appriss Retail’s latest report.
Alarmingly, 15.14% of these returns were fraudulent, costing retailers a staggering $103 billion.
The report, created with Deloitte, highlights the most common fraud schemes. Wardrobing, in which customers return used items, led at 60% of retailers experiencing this type of fraudulent return, followed by experiencing fraudulent returns involving payments (55%) and stolen merchandise (48%). Other tactics include counterfeit receipts and employee collusion.
Online sales, which grew to $1.48 trillion in 2024, pose a unique challenge as well.
With a return rate of 24.52%, double that of in-store purchases, fraudulent online claims — such as reporting empty boxes or missing items — cost retailers $21 billion in claims and concessions alone.
Retailers are looking to fight back, though. Reported strategies like requiring receipts and limiting return windows are common, but advanced tools, such as real-time return technology, remain underutilized.
The report emphasizes a delicate balance for improvement between setting stricter policies aimed at curbing fraud and avoiding the risk of eroding customer loyalty.
Check out the rest of this week’s newsletter to learn more fraud-preventing measures from fraud crime experts!
From fake calls to AI cons: Uber Freight’s fraud playbook 📖
FreightWaves recently spoke with Chris McLoughlin, senior director of operations for Risk and Compliance at Uber Freight, about current freight fraud trends and how he has used 30 years of industry experience to build a fraud prevention program at the company.
FREIGHTWAVES: How have you seen freight fraud crimes change over your time in the industry?
MCLOUGHLIN: The crime has changed with the times.
They are still using load boards to find targets and opportunities to commit fraud or steal loads, but now they are also using those same load boards to move the freight they are stealing, too.
Criminals are now marching forward with the now tech-forward transportation space and instead of just using the traditional methods we have seen in the past like fake phone calls and email deception, they are now using new technology for deception and don’t necessarily have to be based in the U.S. to perpetrate their crimes.
[At Uber Freight], we have actually started seeing bad actors starting to leverage AI and voice AI methods. While tracking or following up on shipments, we’ve found several bad actors leveraging AI voice technology to field phone calls and provide driver tracking updates for potentially stolen loads.
FREIGHTWAVES: How do you combat these criminals when they are using the same technology that makes you operationally efficient against you?
MCLOUGHLIN: We internally have that conversation on a daily basis.
When looking at new features or new technologies, we have to ask ourselves: How could somebody attempt to use this of ill intent? What are some of the potential negative ramifications to using this? How could this be used against us?
As an industry, if we are going to continue to ingest these different technologies, we need to consider how bad actors can hack it and use it illicitly.
FREIGHTWAVES: How can everyone in the transportation and logistics ecosystem work better together to combat freight fraud?
MCLOUGHLIN: It all starts with self-awareness, and everybody needs to understand that they have to expose these bad actors in one way or another.
In the world we are in today, everybody plays a part. No part is going to be immune to these bad actors.
Once you gain that self-awareness, the next step is collaboration. We are not asking to share the secret sauce to how your organization or technology works, but we need general awareness, information sharing, and that means everyone needs to be willing to own that they are a victim and share what they can to law enforcement and not push any incident under the rug.
You might have had one load or one issue with a bad actor, but then you start talking to other organizations in the industry, that same bad actor hit them three times before. Once we can combine those situations and present it to law enforcement as a package, it makes the ability to go after these groups a lot more efficient. Quite frankly, from a prosecution perspective, a one-off situation is really hard to go after, but if it’s with a broader collective of information, it is easier for authorities to understand and manage.
FREIGHTWAVES: How can companies leverage technology properly to protect shipments from fraud?
MCLOUGHLIN: Even though these bad actors are using technology, technology is still our greatest tool.
First thing I would say is there is not one single piece of technology or process that is going to prevent fraud. You need a multilayered approach so if one step doesn’t catch it, hopefully the next three steps down the line will. This is especially true seeing that a lot of these bad actors move and change their processes as they learn of new ways to catch them.
Uber Freight is leveraging predictive AI and active AI in our platforms as a digital eye in the sky, evaluating different aspects of what is going on in our technology and what the general health of our ecosystem is.
We use predictive intelligence in our onboarding process to look at various data points and raise flags for human intelligence to review. The longer a company is on our platform, the technology will make adjustments to how we are evaluating that entity’s profile and performance.
The other thing I’d say is we’re not just focused on carriers, right? We monitor shippers and brokers offering freight in our ecosystem, too. We ask ourselves, How are they interacting with our system? Is a customer profile constantly looking for rates but never putting freight into our system? Why would they do that? We are definitely going to make a phone call to them and trigger compliance teams to monitor those situations, too.
We are looking to layer as many tools as we can to prevent and detect.
Also, a one-size-fits-all approach does not work. What we are doing might not work perfectly for your organizations. You have to really consider the life cycle of a shipment and the relationships of your users.
FREIGHTWAVES: How do you build human operations and company culture to help combat these bad practices?
MCLOUGHLIN: We can talk about technology all day, but if we don’t have sound operational processes, none of this will work.
We are very strict on how we manage account profiles, who can be added, when they can be added, who has access to an account, who doesn’t have access to accounts, and very strict protocols are documented that must be followed.
For example, you can’t just change the name of a primary contact on a carrier profile. There is a very lengthy process that we have to go through to manage that, which brings up the importance of the human element of managing these bad actors.
We are constantly providing training to our employees and our network. We also do very job specific training for carrier sales, customer sales and accounting teams.
FREIGHTWAVES: Do you believe we will see governmental oversight or regulation come in 2025 to help expose these fraud scenarios?
MCLOUGHLIN: It would be great if regulators would get in on this, but in general the trends I see going into 2025 is that anonymity is a thing of the past. Now it’s about transparency, visibility and awareness.
If you are going to be an entity participating in supply chains, you are going to have to be willing to validate and prove who you are. The old days of just picking up the phone and telling somebody you work for ABC company is not going to work anymore. The industry is beyond that.
Carriers also have to be more mindful in their operations. We recently had a conversation with a legitimate carrier that booked a load with a bad actor off the load board and we asked the carrier how they validated that the company they spoke to was legitimate. They ended up telling us that their load planner didn’t follow their processes, didn’t do a credit check and didn’t validate any paperwork. The rate for the load was also 50% above market price, and that didn’t raise a red flag either.
That traditional approach will need to change.
Refunds, lies and plastic toy frogs 🐸
Sajed Al-Maarej, a 27-year-old from Dearborn, Michigan, was recently sentenced to three years in prison for orchestrating a $4 million retail refund scam.
Using Telegram to run what he called “simple refunds,” Al-Maarej and his team of fraudsters duped retailers by faking undelivered or damaged goods claims, even enlisting shipping insiders to manipulate tracking data.
Purchasers kept items while Al-Maarej pocketed a cut. His tactics included returning junk — like toy frogs — instead of merchandise. The scam misled young participants, raised retail prices and prompted a $4.35 million restitution order.
Al-Maarej even offered a $6,000 mentorship to teach others his fraudulent ways.
Learn more about his crimes here.
With rising cargo theft, brokers need a simple way to safeguard freight
