FMCSA Has "Too Little Data" To Tackle Double-Brokering Fraud

Federal regulators have informed Congress that the administration is struggling to address broker fraud due to a lack of data and jurisdictional issues.

In an “Unlawful Brokerage Activities” report sent to Congress last week, the Federal Motor Carrier Safety Administration (FMCSA) confirmed its ongoing assessment of the relationship between motor carrier safety and unlawful brokerage incidents.

However, “While the agency has received multiple expressions of concern from stakeholders regarding fraud related to ‘double brokering,’ it lacks data to quantify or confirm a safety impact,” the FMCSA report states.

The report noted that the agency “does acknowledge an association between motor carriers with poorer safety performance and carriers that lack a verifiable ‘brick and mortar’ principal place of business (PPOB).” The agency has also received comments and other information asserting that the use of a virtual PPOB is more common among entities engaging in unauthorized brokerage.

“As brokers do not typically engage in the actual transportation of goods, however, the direct safety impact of failing to register with FMCSA as a broker is unclear.”

FMCSA is considering additional research into “any safety nexus with unlawful brokerage” as required by an appropriations bill passed by Congress in 2022.

Much of the report refers to FMCSA’s oversight of broker violations in the household goods-moving sector of the trucking industry.

However, because an administrative law judge with the U.S. Department of Transportation ruled in 2019 that FMCSA does not have statutory authority to assess civil penalties for violations by unauthorized brokers, the agency’s ability to combat broker fraud is “significantly limited,” according to FMCSA.

The agency must instead defer to the U.S. Department of Justice (DOJ).

So, with the FMCSA throwing up its hands, citing a "lack of data." This leaves industry leaders scrambling for solutions.

One idea gaining traction comes from Andrew Smith, SVP at Circle Logistics.

He proposes a TWIC-like card system for registered agents with the FMCSA. Similar to the Transportation Worker Identification Credential used for port security, this card would require background checks.

Proponents believe this could significantly reduce theft, fraud, and inflation, while bolstering supply chain security.