Consumer

Mind Games

^{Graeme Samuel | February/March 2010}

Why do the same people fall for the same scams over and again? We explore the psychology of being duped.

Much is known about the various types of scams in Australia, but what about the psychological triggers used to dupe older people out of their hard-earned cash? What are the “hot buttons” that con people into bogus lottery scams, phishing, or the old favourite, Nigerian money transfers?

According to the Australian Institute of Criminology’s (AIC) latest online survey, individual victims of scams report losing up to $300,000 each and a median loss of above $1000. The numbers are consistent with the previous year’s survey.

Fraud and financial abuse of older people is difficult to quantify because many are reluctant to report their victimisation. While socially, commercially and financially active seniors may feel safer, they are also exposed to greater risk because they are out and about. Among older Australians, consumer fraud is twice as prevalent as assault, the most common of violent offences. This contrasts with younger persons, among whom fraud is as common as assault.

Similar to the Australian findings, consumer protection authorities in England have observed trends and a few surprises. The most recent UK study finds that knowing about investments, being impulsive and living on your own are some of the characteristics that help make you susceptible to scams.

"A good background knowledge of the subject of a scam offer, such as experience of investments, may actually increase the risk of becoming a victim through over-confidence," Exeter University researchers found. "Victims are not, in general, poor decision-makers".

Far more common traits include:

• a "lack of emotional control" which could make victims impulsive,
• isolation, either by living alone or by not sharing their decision to invest (which suggests that they are partly aware that the offer is fundamentally suspect),
• a history of being scammed (20 per cent of the population is deemed vulnerable to scams because they are serial victims),
• being vulnerable to certain psychological triggers - such as the building of relationships, often through phone calls, with apparently obliging people (who turn out to be scamsters); being impressed by authority (as many scam letters use words, fonts and other techniques to give themselves gravitas); and feeling "a strong inclination to give something back" if they receive a small gift.

People with a resistance to such frauds "often discard scams virtually unread", say the researchers, who carried out in-depth psychological interviews with victims, sent fake prize draw mailings to 10,000 people and carried out other research.

In contrast, victims can pore over the scam documents, feeling uneasy but not acting on those hunches that tell them to walk away.

“It was striking how some scam victims kept their decision to respond private and avoided speaking about it with family members and friends,” the researchers found. “It was almost as if with some part of their minds, they knew that what they were doing was unwise, and they feared confirmation of that.”

Another surprise finding was that scam victims often had better-than-average knowledge in the area of scam content.

“For example, it seems that people with experience of playing legitimate prize draws and lotteries are more likely to fall for a scam in this area than people with less knowledge and experience in this field. This also applies to those with some knowledge of investments.

“Such knowledge can increase, rather than decrease the risk of becoming a victim.”

In fact, some scam victims are driven by a “long-odds gamble” – they regard the scam as probably no good, but worth a small punt.

The researchers said that scammers place the greatest and most consistent emphasis on:

• appeals to trust and authority: people tend to obey authorities so scammers use cues that make an offer look like it comes from a reliable official institution or reputable business,
• visceral triggers: scammers exploit basic human desires and needs such as greed, fear, avoidance of physical pain or the desire to be liked. They exploit emotions such as excitement or fear to provoke a spontaneous 'gut reaction'. For example, scammers try to get potential victims to focus on huge prizes or benefits on offer,
• scarcity cues: scams are personalised so the offer seems unique; they urge an urgent response to reduce the target’s motivation to consider the offer objectively.

Some victims even had successful careers in business and the professions.

“They seem to be towards one end of normal range of persuadability,” the researchers said. “Some people seem to be unduly open to persuasion, or perhaps unduly undiscriminating about who they allow to persuade them.”

In Australia, con artists use all the same psychological triggers. The ACCC’s specialist website SCAMwatch shows the same repetitive use of words like “money”, “cash”, “offer” and “guarantee”. For example the Nigerian advance fee fraud scam: “I need your urgent assistance in transferring the sum of USD$20m to your account within 10 to 14 banking days. This money has been dormant for years in our bank without claim. I want the bank to release the money to you.”

Or the Lottery scam, complete with official-looking letterhead, urges the victim to respond quickly to a windfall cash win of US$615,810 – but “due to a mix-up of some numbers and names, we ask that you keep this award from public notice…”. Of course, the letter seeks your bank information, to get your money. You won’t get theirs.

The Exeter University research was undertaken on behalf of the Office of Fair Trading in the UK, where scammers fleece 3.2 million adults of $6.35 billion every year.

The Little Black Book of Scams is available free on the ACCC website or by calling the ACCC Infocentre on 1300 302 502.