The Psychology of Fraud, Persuasion and Scam Techniques

Understanding What Makes Us Vulnerable

Martina Dove

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9781000334029
• Topic: Psychology
• Subtopic: Forensic Psychology
• Index: Psychology

The Psychology of Fraud, Persuasion and Scam Techniques provides an in-depth explanation of not only why we fall for scams and how fraudsters use technology and other techniques to manipulate others, but also why fraud prevention advice is not always effective.

Starting with how fraud victimisation is perceived by society and why fraud is underreported, the book explores the different types of fraud and the human and demographic factors that make us vulnerable. It explains how fraud has become increasingly sophisticated and how fraudsters use communication, deception and theories of rationality, cognition and judgmental heuristics, as well as specific persuasion and scam techniques, to encourage compliance. Covering frauds including romance scams and phishing attacks such as advance fee frauds and so-called miracle cures, the book explores ways we can learn to spot scams and persuasive communication, with checklists and advice for reflection and protection.

Featuring a set of practical guidelines to reduce fraud vulnerability, advice on how to effectively report fraud and educative case studies and examples, this easy-to-read, instructive book is essential reading for fraud prevention specialists, fraud victims and academics and students interested in the psychology of fraud.

Chapter 1

Introduction

My scam experience

About five or six years ago, I was defrauded on eBay. I wanted to buy a mobile phone and since I had some money in my PayPal account, I decided to see if I could buy a new mobile phone on eBay. I purchased the phone (which was not a ‘too good to be true’ deal, only cheaper by a tiny amount than retail) and when it did not arrive when it was supposed to, I got a slightly unsettling feeling in my stomach, but I emailed the seller hoping for the best. When two of my emails went unanswered, I knew I had been scammed. I reported it to eBay and had to wait ten days for a resolution. In those ten days, I obsessively tried to find out as much information as possible about my seller. I found out that, on the same night that I purchased the phone, they advertised the same phone several times, as well as other types of phones. They also purchased camping gear on the same night. Their feedback prior to that was good and someone has even picked up things from their address. Perhaps they were just amateur scammers, thinking they could defraud a few people at the same time, to get some camping gear for their holiday. Or they had their eBay and PayPal account compromised by someone who used it for fraud. But I blamed myself for not checking what else they were selling, as I was convinced that this would have made me more suspicious. I was angry, disappointed in human nature and I imagined scenarios in which my scammers suddenly realise the money is taken out of their account by PayPal (as it frequently is when there is a dispute and goods are not sent), leaving them stranded without money while they camp in the wilderness. Or where police visit them and they get arrested, fined or shamed in front of their neighbours. I knew I would get my money refunded by eBay but I still felt angry and I felt taken advantage of and, until I got a refund, I had no closure. Even after I received a refund, purchased a phone and moved on, I would periodically have flashbacks of the incident and it made me question motivations of anyone I did not know. I simultaneously felt ashamed that I was not more mature and able to move on from this relatively benign fraud experience that did not even result in a loss of funds, and extremely angry that this happened to me. This is a struggle most fraud victims have long after they were defrauded, coupled with a sense of injustice. Many fraud victims are not as lucky as I was; they are never able to recoup funds lost to fraud. Often, the perpetrator is not punished. This, too, can have an effect on fraud victims. For many victims, the loss is significant too: a pension or entire life savings, money needed to live comfortably, money needed to survive. But fraud is not just about the money that is lost. It is also about the anger, sadness, humiliation, stress, disappointment, loss of trust, lack of sleep and loss of self-esteem, etc. It is about losing a sense of security that comes from knowing that certain societal and cultural norms forbid this type of behaviour. And, as such, it is extremely harmful.

Anatomy of the scam experience

My fraud was not even that sophisticated. Many people go through frauds that are socially engineered to enhance compliance, in which a scammer may pretend to be a friend over a course of many months, building trust and creating plausible scenarios. Or they may engineer highly effective and believable phishing emails. And all the time they are getting better at creating scams that target what makes us human: social norms, personality characteristics, behaviours and circumstances.

As such, scam experience can be extremely complex. Talking to fraud victims allowed me to configure a map of a typical stages and factors that come into it. I identified three stages: precursors, commitment and aftermath (see Figure 1.1).

Figure 1.1Scam stages and relevant factors.

Precursors can be situational or personal circumstances that can influence engagement with fraudulent offers. These can include lack of time to consider the information before a decision is made, existential problems, such as lack of funds, which can make fraud offers seem less risky and more appealing. Also, the backing of other people can make the offer appear legitimate and influence our decisions. In the commitment stage, the victim is engaged with the fraudulent offer, either by clicking links and following instructions or by talking to the scammer. In this stage two, different types of factors come into play: those pertaining to the perpetrator and those pertaining to the victim. Perpetrator factors include tricks used by scammers, which encourage compliance, such as appearing likeable and trustworthy, producing legitimate-looking communications and manipulating our decision-making processes by limiting the time offers are valid for. Victim factors include emotional reactions evoked by scam offers (e.g. excitement at the prospect of money or a job), inadequate information processing and compliance with social norms, which are exploited by scammers. Finally, the aftermath stage comes after the victim is defrauded, and includes different struggles victims might encounter including financial hardship and psychological distress suffered as a result of the fraud, such as loss of self-esteem and anger. Or it may include difficulties in reporting fraud and getting justice, or attaining a sense of closure. These difficulties often lead to a loss of trust in society as a whole. Victims often alter their behaviour or try coming up with different strategies to avoid being defrauded in the future. Some reported having less empathy for others as a part of a strategy, to not let this happen again (Dove, 2018).

Seeing the scam experience dissected in this way, it becomes clear that scams can be highly orchestrated and contain very persuasive elements that encourage compliance. These elements synchronise with victims’ own circumstances and vulnerability factors, increasing the likelihood of compliance further. Fraud warnings often forget to consider these complexities, concentrating instead on ‘dos and don’ts’. This can be counterproductive, as there is so much fraud advice online that users do not know what to listen to anymore. It leads to fatigue, which can result in non-compliance and less caution (Furnell & Thomson, 2009). For example, researchers found that warnings that give a detailed explanation of why malware is harmful and what it does, are received better than vague warnings (Modic & Anderson, 2014).

Instead of simple and authoritarian fraud warnings that generally lead to resignation, we could look deeper and consider the psychology behind fraud, and make warnings more people friendly, more personal. People often want to know more; they want to know how to protect themselves and understand the intricacies that make them vulnerable to fraudulent attacks, but often this information is just not there. In this book I want to address how scammers persuade us and how; what makes us human is often what makes us vulnerable to different frauds.

Contents

Chapter 2 explains what fraud is, how it might be different to unethical practices, what are typical characteristics of the fraudsters, problems with underreporting and sanctions and what fraud victimisation looks like from the victim’s perspective. Additionally, this chapter outlines suggested fraud taxonomy, which may be of interest to fraud prevention and fraud reporting specialists.

Chapter 3 describes common and enduring frauds, their variants, where appropriate and whom they may target.

Chapter 4 and Chapter 5 describe some of the processes that facilitate fraud, such as the process of communication, deception, how we think and make decisions and how scammers may utilise or exploit these processes.

Chapter 6 outlines persuasion and scamming techniques, designed to cloud judgment and influence decisions, which are frequently used by scammers to evoke compliance.

Chapter 7 outlines human factors in fraud, such as individual characteristics that make us vulnerable to fraud and Chapter 8 explains how and why fraud happens by reflecting on different models and theories that aim to explain fraud vulnerability.

Chapter 9 offers a variety of real scam examples and case studies, broken down to help illustrate scam techniques and individual vulnerabilities targeted by scams.

Finally, Chapter 10 gives a ‘SCAMS’ checklist, which can be used as a handy guide when one is not sure about potential scam situations or correspondence, or generally as a way of minimising fraud vulnerability.

Chapter 2

What is fraud and who are the fraudsters?

What is fraud?

Fraud is an act of deception resulting in personal or financial gain and can be committed in several ways. It can be committed by false representation (e.g. pretending to be a police officer to gain trust), by abuse of position (e.g. where someone occupies a position of a guardian, safeguarding someone’s finances, but they are not acting in their best interest) and by failing to disclose information that might be important (Fraud Act, 2006). Fraud can be perpetrated in many ways and against many different sectors, such as public (e.g. government), private (e.g. financial services, technology, construction, etc.) and the charity sector. Public sector fraud includes fraud perpetrated against local and central government, tax and benefits, the National Health Service and State Pension. Private sector fraud includes financial services, consumer goods, manufacturing, technology, media and telecoms, construction, retail and wholesale, travel, leisure and transportation, professional services, healthcare, pharmaceuticals and biotechnology, and natural resources.

Fraud can also be perpetrated against private individuals but this is often not viewed as seriously as other types of fraud. Fraud victims get very little sympathy, as if being scammed somehow implies being responsible for the victimisation (Cross, 2015). However, fraud against private individuals is still fraud and it is no different from any other type of fraud. Fraud committed against unsuspecting individuals has been going on for centuries and frequently features in children’s stories, perhaps serving as a warning about those that may betray our trust (Greenspan, 2009). For example, in the original story of Pinocchio, written in the 1800s by Carlo Collodi, Pinocchio gets defrauded by a pair of swindlers, a cat and a fox, who use the same scamming techniques seen today. He is defrauded several times before he learns his lesson not to trust them (Collodi, 2002). Greenspan (2009) argues that these stories serve as a warning to children, teaching them to avoid being fooled. There are many types of fraud in operation today: holiday scams, health scams, insurance fraud, pension scams, job scams, rental scams, tax frauds, pyramid schemes and other financial frauds, inheritance scams, ticket fraud, charity scams and fake GoFundMe campaigns, psychic scams, fake lotteries and prize draws, advance fee frauds, fake websites, online auction scams, doorstep scams, etc. The list is endless. The diversity of fraud in operation today suggests that fraudsters adapt quickly to current events and are inventive in designing scams that vary in narratives and are highly persuasive. This is why understanding how scams persuade us is important.

Delivery of fraud perpetrated against private individuals has also changed with times. Once upon a time, scams were delivered either face-to-face or by post. This carries considerable cost to the scammer. For example, Nigerian scams, in which a wealthy ‘Nigerian official’ contacts a potential victim and offers them a hefty fee for help in transferring funds from Nigeria, can be traced to the 1970s, when they were delivered via post and later via fax or phone (Glickman, 2005). However, some researchers argue that this type of fraud has been around for a lot longer, dating back to the sixteenth century (Zuckoff, 2005). But it is the invention of the Internet that allowed Nigerian scams to become omnipresent. They are so well known, obvious and far-fetched, that one theory is that fraudsters use them to identify the most vulnerable and gullible victims, whose details are then sold to other fraudsters as they are perfect candidates for repeat victimisation (Herley, 2012).

The Internet has allowed fraud to be delivered easily, anonymously and relatively cost free to the perpetrator (Button et al., 2015; R. G. Smith, 2010), with email being the most popular delivery of fraud for all age groups (Citizen Advice, 2017). It is, therefore, not difficult to see why fraud is flourishing. It allows perpetrators to defraud people in different countries, which makes it difficult to investigate and prosecute frauds perpetrated online (Button et al., 2012). Therefore, it is not surprising that, since 2009, fraud losses have risen by 56.5 per cent (Gee & Button, 2019). Low prosecution rates and low delivery costs translate to high profits and low risks associated with perpetrating fraud and this is why fraud is growing and evolving so rapidly. Gee and Button (2019) suggested that fraud might be rising due to the erosion of belief in moral and ethical norms, which are part of the society, and the distance between victims and perpetrators, as most of the fraud is perpetrated online. Additionally, the complexity of the processes and systems sometimes allows fraud to go unnoticed.

When is fraud a fraud?

Although deception is a huge part of fraud and necessary for successful execution of a scam, simply deceiving someone without a financial advantage is unlikely to be seen as fraud. What is fraud? I have heard the word ‘fraud’ used many times to describe different frauds, unethical practices as well as people who lie to their partners. I have heard someone explain that scams are when someone tricks you but fraud is something that happens on a larger scale and is more serious, such as fraud perpetrated against organisations. This is not technically true. Fraud can be perpetrated against private individuals, too, but the legal lines are often blurred there, with many victims told to pursue justice themselves, th...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of Figures
• Acknowledgements
• Chapter 1 Introduction
• Chapter 2 What is fraud and who are the fraudsters?
• Chapter 3 Different types of frauds and scams
• Chapter 4 Deception and communication
• Chapter 5 How we think and make decisions and why this matters in fraud situations
• Chapter 6 Persuasion and scamming techniques
• Chapter 7 Human factors in fraud
• Chapter 8 Theories and models that could explain why we fall victim to fraud and scams
• Chapter 9 Learning to spot scams, fraud and persuasive communication
• Chapter 10 SCAMS checklist: Advice for reflection and protection
• References
• Index