How economic instability influences freight crime in Chile

Cargo on ship - freight crime

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Mike Yarwood, from international freight insurer TT Club, examines the trend of freight crime as a result of global economic instability, with particular attention to theft statistics from Chile.

The economics

Various geopolitical situations and the macro-economic impact of inflation around the globe have driven a series of trends that are likely to continue into the foreseeable future.

The global logistics industry needs to be alert to this changing threat landscape.

Looking at freight crime in its simplest form, there are three primary factors that drive criminal activity: motivation, opportunity and ability.

Ordinarily, criminal motivation is realizing funds from the sale of stolen goods.

TT’s studies have highlighted this fact and the direct influence of market forces on freight crime; the goods stolen are often those in high demand and low in supply, those that are easy to sell for a high price.

For example, during the pandemic there was a marked shift toward the theft of medical supplies and anti-bacterial products.

In many mature economies, inflation is at its highest level in decades.

While it varies by country and region, the general increase in the cost of living for many populations translates to diminishing purchasing power.

As the price of everyday essential items spikes, families contend with purchasing decisions they have typically not faced for decades; these families may need to defer luxury or indulgent purchases to ensure their incoming funds stretch to cover the daily essentials.

Criminals will face these exact same constraints, but are acutely alert to recognize opportunities for easy markets.

Analysis from 2022 demonstrates a targeting of essential commodities, including food and beverage (16%), agricultural (9%) and automotive and fuel (17%), almost certainly on the basis that shadow markets develop to satisfy consumers seeking ‘bargain’ prices for essential goods.

Nevertheless, electronics (12%) have remained attractive to those behind freight crime, displaying resilience in such high-value goods despite economic downturn.

Vulnerability factors create the opportunity for theft. Increased dwell times for cargo during times of supply chain congestion is one such weak link.

Cargo at rest remains at greatest risk with the road modality presenting the highest threat, while theft from storage facilities continues to increase.

As to the ability of criminals to carry out theft, there are varied and evolving methodologies used in targeting cargo.

Of course, breaking and entering a facility or depot presents greater risks for the criminals and they would often need to contend with established security measures, such as fences, CCTV and license plate recognition (LPR) equipment.

If caught, the freight crime categorisation in many jurisdictions is more serious than cutting the curtain of a trailer and stealing cargo at the roadside.

However, the potential rewards are much greater too; rather than being satisfied stealing several pallets of goods from a truck at the roadside, there is opportunity to steal several truckloads of goods at a depot facility. 

The greatest challenge for those responsible for managing security through the global supply chain is criminals’ ability to access cargo.

Trends in this regard vary by country and region and include sophisticated methods as well as pure opportunism. 

Information security remains a key threat for the supply chain. Digitalization can, if not carefully managed, create vulnerabilities.

The process must be twinned with robust management controls across all types of user to ensure that access rights are entirely appropriate at all times, including revoking where necessary.

The threat landscape for physical and technological access is vast, including apps and personal devices, for example.

Fraud is a strategy that TT has highlighted regularly through its research, data suggesting that there has been no decrease in this aspect of risk.

While fictitious collections remain a relatively small proportion overall, such incidents continue to occur and the apparent ease with which the criminals are able to exploit the supply chain to access goods in this way remains concerning.

The Chilean case study

Of course, motivation, opportunity and ability are intrinsically linked.

Where the cost of living for example increases to uncomfortable levels, not only is there greater potential for a shadow market to develop (motivation), there are also changes to supply chain strategies (opportunity) and it arguably becomes easier for criminals to access cargo (ability).

TT’s latest analysis reports dramatic 2022 year-on-year increases in freight crime in Chile with incidents of theft estimated at 27% up on pre-pandemic levels.

Among the detailed findings are:

  • A 450% increase in the frequency of insurance claims in 2022
  • Increased value of claims over same period of 820%
  • Over half of cargo crime incidents involve hijacking
  • Insider threat heightened due to socio-economic factors
  • Most common commodities targeted were electronics (25%) and foodstuffs (20%)

Together with business improvement organization, BSI SCREEN, the Logistics Association of Chile (ALOG) and the crime investigation unit, Signum Services (an associate of TT within the Thomas Miller Group), TT’s analysis focused on a worryingly dramatic trend in the Chilean freight transport sector.

The extensive report, based on the wide-reaching data resources of the four organizations, has recently been published and is called Freight crime in Chilean supply chains.

In an introduction to the risk landscape, the report notes that pandemic-induced measures such as quarantine, restrictions in movements and curfews had the effect of reducing the incidence of cargo theft for much of 2020 and 2021.

However, last year, with such limitations lifted, levels of freight crime sprung back with a vengeance to 27% higher than pre-pandemic levels, according to ALOG data.

The underlying factors that seem prevalent in explaining the alarming statistics seem to be predominantly social and economic in nature.

Inflation, increases in the cost of living and social unrest have motivated individuals to turn to freight crime.

These circumstances, which also encourage a larger black market, particularly in foodstuffs, instill heightened criminality in the population.

Unsurprisingly perhaps, criminal organizations were found to be behind much of the theft.

They are exploiting, to a greater degree than in the past, those employed in the supply chain, to provide valuable data and information on cargo flows, nature of loads and an ability to falsify delivery instructions.

Labor strikes, also common in a recession, create pinch points in the usual smooth flow of goods.

Such locations become a focal point for freight crime. The reported statistics show that second to hijacking as a mode of theft (57%) is the combined activity of stealing from a facility or of a vehicle itself when cargo is at rest, contributing to 32% of all incidents.

The primary goal of the research is to create a greater awareness of the threats, so operators can take protective steps.

To this end, the report carefully details two of the primary strategies used by the criminal fraternity – hijacking and the use of insider knowledge and cooperation.

As with all awareness reports of this nature, there is also an aim to offer guidance on how such theft risks can be alleviated with advice, in particular on combatting the criminal device of fictious pick-ups.

The report contains a long list of measures from secure verification procedures and driver ID checking to staff training in identifying suspicious circumstances and monitoring through tracking technology to ensure shipments are being delivered correctly.

There continues to be an increasing need for such research across the globe.

The freight crime trends exemplified by the Chilean case study are replicated in many other regions and the need for mitigation is a universal one.

To this end, TT with its partners is committed to extending this work in order to forearm the global supply chain and transportation industry with information on trends in such damaging losses.

This article on executive protection was originally published in the January edition of Security Journal Americas. To read your FREE digital edition, click here.

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