Declining deforestation rates in the Brazilian Amazon are touted as a conservation success, but illegal logging is a problem of similar scale. Recent regulatory efforts have improved detection of some forms of illegal logging but are vulnerable to more subtle methods that mask the origin of illegal timber. We analyzed discrepancies between estimated timber volumes of the national forest inventory of Brazil and volumes of logging permits as an indicator of potential fraud in the timber industry in the eastern Amazon. We found a strong overestimation bias of high-value timber species volumes in logging permits. Field assessments confirmed fraud for the most valuable species and complementary strategies to generate a "surplus" of licensed timber that can be used to legalize the timber coming from illegal logging. We advocate for changes to the logging control system to prevent overexploitation of Amazonian timber species and the widespread forest degradation associated with illegal logging.