Fraud victims fail to recognize fraudsters’ language
07 Jan 2008
Victims of fraud in the form of lotteries or worthless investments are usually not naïve or unworldly at all. On the contrary: they are generally fairly expert in financial matters. So why do they fall for it? The answer is that they simply fail to recognize the fraudsters’ use of language.
These are the findings of Karla Pak and Doug Shadel, who on 19 December will receive PhDs from the Dutch University of Tilburg for research they performed in the United States. Fraudsters also match their tactics to their victim’s psychological profile. To reduce the number of victims, consumers should be taught how to recognize the persuasive techniques they use, say the researchers.
Consumer fraud is a growing problem in the United States and in other countries. Fraudsters are estimated to make some 40 billion dollars a year in the US. According to United Nations figures, an average 7.7% of the population of industrialized European countries fall victim to fraud each year. The actual figure is probably higher, as many victims fail to go to the police.
Research method
American researchers Karla Schweitzer Pak and Doug Shadel studied consumer fraud in the United States by regarding it as a communication process in which the fraudster successfully communicates a message to the victim. The PhD researchers closely analyzed both the message and the victim.
Pak and Shadel listened to audio tapes made by the US justice department and the FBI of conversations between fraudsters and their victims. They chose tapes of the seven most common types of fraud, involving investment, credit cards, lotteries and holidays, among other things.
Conclusions
The analysis showed that fraudsters use social influence techniques such as intimidation, using certificates to appear credible, convincing the client that they are not the first to become involved, or appealing to them for help. Fraudsters have sophisticated methods for deciding which technique to use, based on a series of questions they put to the potential victim.
The researchers say that fraud victims differ clearly from people who do not fall for fraud, as revealed in two surveys which they conducted among victims of lottery and investment fraud and non-victims. Surprisingly, victims are more financially literate that the average consumer, say Pak and Shadel. They are also more likely to have had a negative life experience and are more inclined to listen to sales pitches by unknown individuals. Furthermore, they are less capable of recognizing fraudulent statements made by fraudsters.
Recommendations
To reduce the number of victims, consumers should be informed about persuasion techniques, say the researchers. This would enable them to recognize when they were being coaxed into buying something they did not really want. Since we are all potential victims of fraud, Pak and Shadel point out that this would be no luxury.
The research was performed at and funded by AARP Washington.