Fuel Fraud

---

2 minute read

Author: Sophie Jiotis

---

In a world of ever-shrinking margins and skyrocketing costs, carriers must carefully monitor spending across all categories. The most significant single operating cost for a freight carrier is fuel. Diesel alone can represent up to 40% of a carrier's per-mile operating expenses. These expenditures fluctuate wildly in tandem with fuel market prices. This fluctuation further narrows the margin, spelling trouble for profitability. Any additional expenses levied on a business could potentially drive rates beyond break-even levels. A startling trend, however, is pushing fuel costs to unforeseen heights: fuel fraud. 

Fuel fraud refers to any unauthorized or deceptive use of company fuel resources. Possible perpetrators range from truck drivers to station attendants to internal personnel. Fuel fraud execution varies significantly; some common schemes include: 

• Card Skimming or Cloning: Fuel cards that are duplicated and used without authorization

• Side-Fueling or Fuel Siphoning: A driver may fill a personal vehicle or containers while appearing to fill the company truck

• Inflated or False Receipts: A driver may report more gallons than were actually pumped, or they may fabricate a transaction entirely 

• Off-Route Fueling: Drivers may use company fuel cards to fill up at locations not tied to assigned routes, indicating unauthorized use 

• Collusion with a Fuel Station: Drivers and station attendants may inflate charges and split the resulting difference 

• Receipt Exploitation: Submitting the same receipt more than once for reimbursement

The Financial Impact of Fuel Fraud-

In North America alone, fuel fraud is estimated to cost the logistics industry $1.3-2.1 billion annually. This amounts to $10,000-$500,000 in individual fleet losses per year according to The

American Trucking Association (ATA). Some large fleets have reported millions in annual losses before implementing anti-fraud measures. 

How Widespread is Fuel Fraud?-

A 2021 WEX report suggested that nearly 1 in 4 fleet managers had caught a driver abusing fuel privileges in the past year, amounting to 6% of all logistics fuel spending in Europe and North America. Fuel fraud is a chronic and cumulative problem, often going undetected for weeks or even months. 

Fuel fraud is especially prevalent in companies with unintegrated internal operations and telematics. Without proper integration, administrators lack real-time visibility for fuel purchases. This uncoordinated approach, in unison with inadequate purchasing controls (e.g., not limiting fuel card usage by time, location, volume, etc.), spells concern for fuel budgets. 

Fuel fraud doesn't just cost you money; it weakens performance metrics, customer trust (if inefficiencies occur), and compliance standards. So that raises the question: How can you prevent fuel fraud? 

Detection and Prevention Technologies-

Modern TMS and fleet management systems can seamlessly integrate with tools to mitigate fraud. Amous TMS, in particular, integrates with myriad fuel cards, thereby eliminating reimbursement fraud. Users are given real-time notifications for fuel transactions, specifically those deemed peculiar or excessively costly. This AI-based anomaly detection allows you to stay ahead of fuel expenditures, scanning for fraud in every transaction. Integrated telematics and fuel usage monitors enable users to track fuel tank levels comparatively with reported transactions. 

Fuel card limitations are crucial in reducing fuel fraud. Geofencing fuel cards ensure they are only active when the vehicle is physically at an authorized fueling location, ensuring your driver stays on route and in budget. These limitations act in tandem with fuel purchase limits, ensuring fuel volume and refilling frequency stay under a set rate. Driver identification requirements are similarly crucial in ensuring the person utilizing the fuel card is authorized to do so. 

Case Study- 

In 2020, a U.S. logistics company noted a $250,000 annual loss after fuel logs showed consistent over fueling

compared to telematics data. After setting fuel card limits, location tracking, and driver training, losses dropped 85% in a single year. 

This story isn't an uncommon one. Fuel fraud in logistics is underreported, highly prevalent, and often hidden in plain sight. As margins tighten and fuel prices remain volatile, companies must invest in fraud prevention systems. Companies that don't, risk losing thousands in profit.