The important intersection of chemicals and security cannot be overstated, particularly when viewed through the lens of homeland security. One longstanding issue, fraud, could not only jeopardize the safety and efficiency of the nation’s chemical supply chain but also the integrity of systems that safeguard critical infrastructure and public safety.
The work the chemical distribution industry does rarely makes headlines, but it underpins nearly every sector of the U.S. economy, supporting manufacturing, health care, agriculture, defense industries, and more. Because of this, the industry is deeply embedded in the homeland security landscape, making it an increasingly attractive target for bad actors looking to exploit supply chain vulnerabilities. Left unchecked, these threats have far-reaching implications, not just for business operations, but for national security and the safety of communities across the country.
In recent years, fraudulent activity has become a greater challenge for businesses as tactics have become more sophisticated and more prevalent, making it harder for companies to detect. This is particularly concerning, as government-industry coordination has dwindled in recent years due to the loss of critical security programs, such as the Chemical Facility Anti-Terrorism Standards (CFATS). For nearly two decades, the program successfully encouraged collaboration between chemical facilities, the U.S. Department of Homeland Security (DHS), the Cybersecurity and Infrastructure Security Agency (CISA), and local law enforcement. This constant communication put into place key safeguards against the latest threats – and it worked well. Consequently, with the loss of this program, trade organizations, like the Alliance for Chemical Distribution (ACD), have played a growing role in filling the information gaps to ensure businesses stay alert.
As Fraud Prevention Month, observed every March, comes to a close, it’s an important reminder for businesses both large and small to recognize how to stay vigilant against a range of evolving fraud attempts. While the chemical industry has experienced a rise in fraud, ACD has identified best practices to keep businesses across the supply chain protected against suspicious activity.
First and foremost, knowing your customer is more important than ever. Businesses must verify the legitimacy of customers and transactions, particularly within the chemical supply chain. Since chemicals are used in everyday products that contribute to Americans’ health and safety, the chemical supply chain is often an attractive target for malicious actors seeking to exploit vulnerabilities.
Over the last five years, our industry has seen an uptick in suspicious communication from individuals or organizations impersonating legitimate contacts, including vendors, customers, and other third parties. Additionally, there has been a high volume of fraudulent purchase order requests and requests for credit lines for the purchase of various chemical products. Just last year, ACD members reported they were contacted by suspicious individuals who requested chlorine products and demanded the locations of their distribution centers, raising alarms among businesses to further safeguard their products, customer information, and supply chain operations. Verifying the legitimacy of customers and transactions is a critical step to protecting business operations and securing against larger threats.
The sophistication of fraud attempts is also noteworthy. Cybercriminals have become increasingly skilled at using the latest technologies, such as artificial intelligence (AI), to appear legitimate. Member companies have recognized a recent shift from rough, easily detectable scams to highly coordinated attempts that can bypass traditional safeguards. Fraudsters are using the newest technologies to impersonate digital assets, such as websites and email domains, while also utilizing AI to write polished, industry-specific correspondence that appears authentic. Spoofing real phone numbers and using employee names are also common, well-orchestrated social engineering tactics that use insider knowledge and urgency to appear real.
Equally important is collaboration. No single company should address fraud in isolation. Information-sharing across the industry and with law enforcement, such as the Federal Bureau of Investigation, is essential to staying ahead of emerging threats and ensuring businesses are up to speed on the latest fraudulent schemes.
Unfortunately, the loss of the CFATS program and the constant coordination with key government agencies like CISA have put the industry on high alert.
While members of ACD uphold the highest safety and security standards through our mandatory, third-party ACD Responsible Distribution™ program, public-private coordination further enhances the industry’s ability to stay vigilant and effectively respond when a fraudulent attempt occurs. As we approach the three-year anniversary of CFATS expiration, we look forward to working with the new DHS Secretary, once confirmed, to enhance industry-government coordination and to further strengthen protections against known and unknown threats.
Security in the chemical distribution industry is not only about compliance; it’s a core business priority that directly protects public safety, preserves the integrity of the supply chain, and safeguards business reputation. Investing in robust internal controls, strengthening guidelines around knowing your customer and end-use verification processes, and ensuring employees are trained to identify and respond to suspicious activity are critical factors companies should implement, no matter the industry.
Businesses must familiarize themselves with what fraud attempts look like today and stay attuned to the latest developments to remain vigilant in the future. This work is critical not only to U.S. economic security, but U.S. national security as well.
