Relevance: We may make errors of judgment when we succumb to legitimate sales appeals. This work seeks to identify what particular errors lead to scam victimization.

“[A] modest probability of falling for a scam is no longer an inexplicable exception to the general tendency of human choice, but rather an inevitable by-product of the processes that enable normal economic life to continue.” (p. 15)

Summary: This work includes an extensive literature review of scams (mass-marketed consumer frauds) and outlines four studies:

1. Extended interviews with scam victims

• In addition to providing useful subjective feedback, these were also “text-mined” for psychological features that characterized victimization. For instance, most victims described perceived legitimacy and high reward in the scam ploy.

2. Text-mining scam communications

• By categorizing the language of different scams, the researchers could identify key ploys typifying scams generally: appeals to trust/authority & visceral (vividly emotional) triggers referencing the future (“phantom fixation”).

3. Victim/Non-victim comparison – susceptibility to errors of judgments

• “There was no evidence that any of the decision error propensities distinguished victims… from non-victims more effectively than others” (p. 121)
• However, victims did report trying harder to understand scams than did non-victims. This counter-intuitive result may reflect non-victims reflex to discard promotional materials, rather than a careful attentiveness on the part of victims.

4. Scam simulation experiment – “hot” and “cold” conditions

• By varying whether a mailed survey initially looked like a scam mailing (“hot” condition) or an innocuous mailing (“cold” condition), researchers were able to garner more direct feedback from people targeted by a “scam” – in this case from those who, by opening the mailing, had demonstrated interest in the ploy
• Impact of $$: In the “cold” condition, respondents indicated that they would have been more likely to respond to the ploy when the prize was larger. In the “hot” condition, however, the manipulation cues were most critical.
• The differences between conditions suggest that in-the-moment feedback may be particularly important when studying fraud and its victims.

First Paragraph: According to the Office of Fair Trading (2006), 3.2 million adults in the UK fall victim to mass marketed scams every year, and collectively lose £3.5 billion. Victims of scams are often labelled as ‘greedy’ or ‘gullible’ and elicit the reaction, ‘How on earth could anyone fall for that?’ However, such labels are unhelpful and superficial generalisations that presume all of us are perfectly rational consumers, ignoring the fact that all of us are vulnerable to a persuasive approach at one time or another. Clearly, responding to a scam is an error of judgement – so our research sought to identify the main categories of decision error that typify victim responses, and to understand the psychology of persuasion employed by scammers to try to provoke such errors.

Full Source

Summary: Building on previous profiling studies of known investment and lottery fraud victims, this project surveys both a substantially larger population (723 victims and 1,509 general population participants) and four additional fraud types.

Using demographic, psychological, and behavioral measures, the study identified predictive models for each type of victimization

• Investment fraud: Demographically, they are more likely to be men, college educated, income of $50,000 or more per year, and have a higher average age than the general population.
• Psychologically, they are less upset at the prospect of losing money (even controlling for income, age, and gender).
• Behaviorally, they are more likely to expose themselves to sales situations.
• Lottery fraud: Demographically, they are more likely to be single, have less than a college education, report an annual income of less than $50,000, and have a higher average age.
• Behaviorally, they are more likely to expose themselves to sales situations, take fewer prevention measures, and are less informed about consumer protections.
• Prescription drug fraud/Identity theft: Demographically, they are more likely to be female, single, have less than a college education, report an annual income less than $50,000, and have a higher average age.
• Behaviorally, they report taking fewer preventative measures and are less aware of consumer protections.
• Advance Fee Loan fraud: Unclear profile, though they are more likely to report a lower income.
• Business Opportunity fraud: They are more likely to be male, college educated, and have an annual income greater than $50,000. Behaviorally, they report taking more preventative measures than the general population.

All types of victims, excepting business opportunity victims, demonstrated greater interest in persuasive statements than the general population.

• Admitting to victimization: Only 37% of victims 55+ acknowledged being defrauded. 56% of victims under age 55 acknowledged it.

First Paragraph: Counting only those losses which are detected or prosecuted, or surveying those working in the area for their opinion, will never be accepted as a reliable indicator of the real economic cost of fraud.

Full Source

Relevance: Victims of fraud are not always visible, and thus providing a window into the experiences and perspectives of a range of fraud victims is necessary to truly appreciate its impact.

Summary: This is one of several reports focusing on the costs of fraud — social, financial, and personal — in this case, on the human damages. This report features the personal voices of fraud victims, as gleaned from personal interviews — 750 telephone interviews, 30 in-depth, face-to-face interviews, and 2 group discussions among victims.

“One of the striking myths that still predominates around fraud victims is that fraud is a victimless crime or that it has less impact than some other crimes. This is wrong” (p. 3).

• While compiling research and data from a range of studies, this report serves primarily to convey the human cost of fraud through personal profiles, and by “simply letting the victims speak for themselves.” (p. 4)
• The range of voices help represent both the difficult consumer experience in the wake of fraud as well as the range of individuals who are victimized.

Improving support: Many victims described intense frustration when approaching the police or other reporting bodies, frequently encountering disinterest from responsible officials.

First Paragraph: This Report allows 11 victims of fraud a voice. They each describe the impact of fraud on their lives – this shows what the real human cost of fraud is.

Full Source

Year: 2011

Relevance:While based exclusively on self-reported consumer complaints, the National Consumers League’s Fraud Center’s annual report provides a valuable perspective on trends in frauds and scams.

Summary: Scams which received the most number of consumer complaints were:

1. Prizes/Sweepstakes/Free Gifts 26.98%
2. Fake Check Scams 26.65%
3. Internet: Gen Merchandise 24.51%
4. Phishing/Spoofing 8.17%
5. Advance Fee Loans, Credit Arrangers 3.09%
6. Scholarships/Grants 1.51%
7. Friendship & Sweetheart Swindles 1.40%
8. Nigerian Money Offers (not prizes) 1.14%
9. Family/ Friend Imposter 1.06%
10. Internet: Auctions 0.92%

The majority of scams were implemented via the web (34.9%) or telephone (29.2%), followed by email (20.4%) and postal mail (12.2%).

Payment was most often sent via wire transfer (64.0%), followed by credit card (14.9%) and bank account debit (7.3%).

Full Source

Publication: National White Collar Crime Center

Year: 2006

Relevance:This broad survey measures various forms of fraud and identifies factors associated with victimization.

Summary: This national survey polled a random sample of 1,605 adults about their personal and household experiences with white collar crime. These crimes include consumer fraud, embezzlement, identity theft, and many others.

Overall, 46.5% of households and 35% of individuals reported experiencing at least one form of these crimes within the previous year (p. 2). This was a 10% increase in household victimization over NW3C’s previous survey (1999).

There was an average of 1.49 victimizations per respondent within in the previous year (p. 11) and 2.23 victimizations per respondent within their lifetimes (p. 12).

• Rate by type: The most common types of victimization were product pricing fraud (35.9%), credit card fraud (24.5%), unnecessary object repairs (20.8%), and being directly affected by national corporate scandals (21.4%) (p.2).
• Vulnerability (lifetime): “For the lifetime measure the variables associated with increased victimization rates were being male, Caucasian, having a higher income, and using the Internet.” p. 2
• Vulnerability (12-month): “On the 12- month level, those factors most closely associated with being victimized were utilizing the Internet and living in an urban setting” (p. 2).
• Reporting: Overall, “only 14.43% of total victimizations were brought to the attention of any type of criminal justice agency” (p. 11).
• Perception: “Respondents view white collar crime as being as serious as more traditional crime types” (p. 3). “Organizational offenses are viewed more harshly than those committed by individual offenders” (p. 3).

More details on each sub-section can be found in the full source survey (see link below).

First Paragraph: In 1999, the National White Collar Crime Center (NW3C) conducted a national public survey on white collar crime. The telephone-based survey elicited responses from 1,169 U.S. adults in the areas of public perceptions of crime seriousness, risk behaviors, white collar crime victimization, and reporting behaviors. The types of victimization measured included: frauds involving product pricing, “free prizes,” and auto repair; 800/900 number scams; unauthorized pin number use; unauthorized credit card use; Internet fraud; and financial planning fraud.

Full Source

Publication: Doctoral Thesis

Year: 2007

Summary: This work provides a literature review of social influence (as it relates to consumer fraud) and consumer fraud victimization (including fraud’s prevalence, fraud types, and typical victim profiles).

It also introduces an undercover taping project identifying various persuasion strategies used by conmen.

• Of 1,112 influence tactics coded across 128 transcripts, the most commonly-used tactic was “Phantom Fixation,” with 249 instances (p. 66). See page 67 for a chart of influence tactics by scam type.

The work also describes a series of fraud victim profiling studies, comparing known victims of fraud to non-victims. In so doing, it seeks to identify factors that predict victimization in two different types of fraud, while circumventing the problem of victim-denial.

• Investment fraud victims are more likely to be financially literate, married, male, have a college degree or more, earn $35,000 per year or more, and are more open to persuasive appeals (p.157).
• Lottery fraud victims are more likely to be female, widowed, living alone, earn less than $30,000 per year, be less financially literate, and “live for today” (p. 158)

The survey also found that many known victims were unwilling to acknowledge their victimization:

• When asked simply, only 10-20% of investment victims and 14-56% of lottery victims would acknowledge having been defrauded, with the rate depending on the question phrasing (p. 150).
• The secondary study of just investment victims was able to attain 62% acknowledgement using a series of progressive, investment-specific questions (p. 150).

The survey included 80 known lottery fraud victims, 80 investment fraud victims (9 self-identified), and 160 general population (self-identified as non-victims).

Author Abstract: This study was a three-part inquiry of consumer fraud. In part 1, undercover tapes of fraud pitches were analyzed to determine how con men pitch their victims. Tape analysis revealed con criminals customize their pitch to match the psychological profile of the victim and use a complex combination of influence tactics within each pitch to persuade. In part 2, a 72 question survey was administered to 80 victims of lottery fraud, 80 victims of investment fraud and 160 non-victims of fraud. Investment fraud victims demonstrated a better understanding of basic financial literacy than non-victims. Both investment and lottery victims were more likely to have experienced a negative life event unrelated to their fraud experience. Both victim types were more likely to listen to sales pitches from unknown sales persons. Investment and lottery fraud victims both dramatically underreport fraud. In part 3, a 2nd survey was administered to a different population of 125 investment fraud victims and 258 non-victims to determine if findings from survey 1 could be replicated. In fact, major findings relating to financial literacy were replicated, as were demographic, psychological and behavioral characteristics of investment fraud victims. In addition, new findings relating to “persuasion literacy” were found: victims of investment fraud were less able to identify pitch lines used by con men in fraud schemes than a non-victim population. This suggests that a key strategy for deterring fraud victimization in the future might be to teach both financial literacy and persuasion literacy to investors.

Full Source

Year: 2006

Relevance: Mass-marketed scams, or broadly-targeted consumer frauds, have a similarly significant impact in the United Kingdom as they do in the U.S.

Summary: This large-scale survey of 11,200 adults covered a wide variety of scams, including lottery, prize, investor, weight-loss, and loan scams.

• An estimated 6.5% of U.K. adults – 3.2 million people – fall victim to scams every year. (p. 9)
• U.K. consumers lost an estimated £3.5 billion to scams annually, or about £70 per adult, per year. (p. 9)
• Leading losses by scam were: £1.17 to holiday club scams, £490 million to high risk investment scams, £420 million to pyramid and get-rich-quick schemes, and £260 to foreign lottery scams (p. 9).

One unusual aspect of the report spoke to repeat victimization: “Findings suggest that on average, a victim has a 30 per cent chance of falling for another scam within the following 12 months” (p. 9).

Additional information was gathered regarding reporting behavior:

• Less than 5% of people in the U.K. reported scams to the authorities (p. 11) and more than a third failed to even mention their experience to others (p. 35).
• Nearly 1/3 of victims and 40% of targets claimed that it was not worth taking any action (p. 37).
• 16% of victims considered it probably not of interest to the authorities (p. 37).
• 21% of victims who failed to report admitted being too embarrassed to come forward (p. 37).
• For those who did report, 57% did so to ensure that it didn’t happen to anyone else (p. 38)

There was no indication that older adults were more likely to be victimized, though they did appear to be more targeted (p. 28).

Author Abstract: Routine activity theory predicts that changes in legitimate opportunity structures (e.g., technology) can increase the convergence of motivated offenders and suitable targets in the absence of capable guardianship. The Internet has fundamentally changed consumer practices and has simultaneously expanded opportunities for cyber-fraudsters to target online consumers. The authors draw on routine activity theory and consumer behavior research to understand how personal characteristics and online routines increase people’s exposure to motivated offenders. Using a representative sample of 922 adults from a statewide survey in Florida, the results of the regression models are consistent with prior research in that sociodemographic characteristics shape routine online activity (e.g., spending time online and making online purchases). Furthermore, indicators of routine online activity fully mediate the effect of sociodemographic characteristics on the likelihood of being targeted for fraud online. These findings support the routine activity perspective and provide a theoretically informed direction for situational crime prevention in a largely unexplored consumer context.

Full Source

Publication: Journal of Research in Crime and Delinquency

Year: 2010

Relevance: Routine behavior has been established as a reliable predictor of various forms of crime victimization.

Summary: Given the prevalence of fraud-related crime online, this study surveyed 922 Floridian adults (survey conducted in 2004-2005) explore the connection between relevant online behavior (such as online shopping) and the likelihood of online consumer fraud.

“Of all respondents, 2.5 per cent indicated they were the victim of Internet consumer fraud during the past year” (van Wilsem 2011; p. 5), with an estimated 300,000 people defrauded annually in The Netherlands (p. 7).

• 15.2% of the Florida adults survey respondents described being targets of consumer fraud in the previous year (2004). (p. 11)
• 3% of respondents reported being targeted via the internet.
• “Younger and more educated individuals are significantly more likely to be targets of consumer fraud via the Internet.” (p. 16) but “the effect of education and age on Internet fraud targeting is fully explained by the number of hours consumers spend online and whether they make purchases from Internet Web sites.” (p. 16)
• Accounting for age, education, and other demographic variables, “those who make purchases from Web site increase the odds that they will be targeted by cyber-fraudsters by 290 percent.” (p. 16)

Overall, consumer behavior online is a greater predictor of victimization than demographic characteristics. (p. 16)

Author Abstract: Routine activity theory predicts that changes in legitimate opportunity structures (e.g., technology) can increase the convergence of motivated offenders and suitable targets in the absence of capable guardianship. The Internet has fundamentally changed consumer practices and has simultaneously expanded opportunities for cyber-fraudsters to target online consumers. The authors draw on routine activity theory and consumer behavior research to understand how personal characteristics and online routines increase people’s exposure to motivated offenders. Using a representative sample of 922 adults from a statewide survey in Florida, the results of the regression models are consistent with prior research in that sociodemographic characteristics shape routine online activity (e.g., spending time online and making online purchases). Furthermore, indicators of routine online activity fully mediate the effect of sociodemographic characteristics on the likelihood of being targeted for fraud online. These findings support the routine activity perspective and provide a theoretically informed direction for situational crime prevention in a largely unexplored consumer context.

Full Source

Relevance: Understanding the relationship between online behavior, self-control, and fraud victimization could help identify those who are most vulnerable for fraud, why, and how best to protect them.

Summary: Using a large-scale survey of more than 6,000 Dutch adults, the authors conducted a survey to identify what – if any – factors would be tied to increase risk of fraud victimization. Demographics, online behavior, and a psychological survey measure of self control were used.

“Of all respondents, 2.5 per cent indicated they were the victim of Internet consumer fraud during the past year” (van Wilsem 2011; p. 5), with an estimated 300,000 people defrauded annually in The Netherlands (p. 7).

• Demographics: “Respondents 35 or younger are more likely to be victimized (4%), while respondents 55 years or older face very low risks (~0.5 per cent). No clear differences were found for sex, educational level, and urbanism” (van Wilsem 2011; p. 5).
• Behavior and Self-control: Active online shopping, participation in forums, and low-self control all correlated with increased rates of victimization:
  • A 20 year-old, educated, active online shopper who participates in forums and scores high on the “low self-control” measure has 43.1% probability of being victimized by Internet fraud.
  • This compares to a similar participant profile who does not participate in forums and scores as having high self-control (9.9% victimization probability), or a lower-educated, non-forum participant with low self-control (10.1% victimization probability) (p. 8).

Author Abstract: Consumer fraud seems to be widespread, yet little research is devoted to understanding why certain social groups are more vulnerable to this type of victimization than others. This article deals with Internet consumer fraud victimization, and uses an explanatory model that combines insights from self-control theory and routine activity theory. The results from large-scale victimization survey data among the Dutch general population (N¼6,201) reveal that people with low self-control run substantially higher victimization risk, as well as active online shoppers and people participating in online forums. Though a share of the link between low self-control and victimization is indirect— because impulsive people are more involved in risk enhancing online routine activities—a large direct effect remains. This suggests that, within similar situations, people with low self-control respond differently to deceptive online commercial offers.

Full Source

Publication:  Journal of Police and Criminal Psychology

Year: 2002

Relevance:  Given that so few victims of fraud report their victimization, understanding who reports (and why) may contribute to a better understanding of the extent of fraud within law enforcement, while also improving prevention, program, and policy efforts in the face of this often “invisible” crime. Figures were also used to analyze the factors associated with victimization.

Summary: Using survey data from a random sample of 400 adult Tennessee residents, implications were drawn regarding both victim profiles and
reporting behavior:

• Victim profile: “victims were most likely to be between the ages of 18 and 34, have some college to a college degree, and make between $15,000 and $50,000 per year” (p. 30). They were also most likely to be initially victimized by a stranger (87%).
  • For the personal frauds included in this study, the elderly were significantly less likely to be victimized than individuals in all other age categories.
• Reporting behavior: “fraud victims have a low overall reporting rate (23 percent) and are reluctant to report to police (10 percent for one-time victims, 5 percent for repeat victims)” (p. 31).
  • The only variable that consistently predicted official reporting was the amount lost – more money lost, the more likely the victim was to report.

Author Abstract: The bulk of the research on predatory crime focuses on characteristics, profiles, and patterns of offenders. This information is important, but from the perspective of police agencies, information about the victims of predatory crimes, including victims of white-collar predatory crimes, and how they officially respond to victimization is also important. Using survey data from a random sample of 400 residents of Knox County, Tennessee, we investigated the characteristics of victims of thirteen different types of fraud. After dividing individuals into categories of non-victims, one-time victims, and repeat victims, we develop profiles of personal fraud victims by examining differences in key demographic and offense characteristics. Next, we investigate the official reporting behavior of victims. The results are instructive for police agencies as they highlight common characteristics of fraud victims and suggest methods for encouraging fraud victims to report their victimization to police.

Full Source