Mild Cognitive Impairment and Susceptibility to Scams in Old Age

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Authors:  Duke Han, Rush University Medical Center and VA Long Beach Healthcare System; Patricia Boyle, Rush University Medical Center; Bryan James, Rush University Medical Center; Lei Yu, Rush University Medical Center; David Bennett, Rush University Medical Center

Publication: Journal of Alzheimer’s Disease

Year: 2015

Focus Area: 2000 to present, Aging, Decision Making, Victim Profiling

Relevance: A greater understanding of the factors that impact susceptibility to scams in old age is an urgent and important public health concern. Elders with MCI, typically show no impairments in functional activities of daily living, but if older adults with MCI show greater susceptibility, it implies that the diagnoses affects a broader range of behaviors and has important implications for clinicians who treat these older patients. This study extends the findings from an earlier study that found greater susceptibility to scams in older adults without cognitive impairment.

Summary: This study involved 730 participants recruited from the Rush Memory and Aging Project, a community-dwelling sample of adults. The mean age of the overall sample was 81.8 years.

  • For assessment of susceptibility to scams, participants rated their agreement with five statements that address topics such as suspiciousness of claims that seem too good to be true, being targeted by con-artists, and telemarketing behaviors. A battery of 21 cognitive measures was administered.
  • The researchers found that the presence of MCI was associated with greater susceptibility to scams which was equivalent to the effect of more than 5 additional years of age.
  • Among the domains of cognition that were evaluated, episodic memory and perceptual speed were associated with susceptibility to scams in older adults with MCI.

Author Abstract: Background: Falling victim to financial scams can have a significant impact upon social and financial wellbeing and independence. A large proportion of scam victims are older adults, but whether older victims with mild cognitive impairment (MCI) are at higher risk remains unknown. Objective: We tested the hypothesis that older persons with MCI exhibit greater susceptibility to scams compared to those without cognitive impairment. Methods: Seven hundred and thirty older adults without dementia were recruited from the Rush Memory and Aging Project, a community-based epidemiologic study of aging. Participants completed a five-item self-report measure of susceptibility to scams, a battery of cognitive measures, and clinical diagnostic evaluations. Results: In models adjusted for age, education, and gender, the presence of MCI was associated with greater susceptibility to scams (B = 0.125, SE = 0.063, p-value = 0.047). Further, in analyses of the role of specific cognitive systems in susceptibility to scams among persons with MCI (n = 144), the level of performance in two systems, episodic memory and perceptual speed abilities, were associated with susceptibility. Conclusions: Adults with MCI may be more susceptible to scams in old age than older persons with normal cognition. Lower abilities in specific cognitive systems, particularly perceptual speed and episodic memory, may contribute to greater susceptibility to scams in those with MCI.

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Caught in the Scammer’s Net: Risk Factors that May Lead to Becoming an Internet Fraud Victim, AARP Survey of American Adults Age 18 and Older

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Authors: AARP: Doug Shadel, Karla Pak, and Jennifer H. Sauer

Year: 2014

Focus Area (s): Victim Profiling, Fraud Surveys, Consumer Behavior, Prevention Techniques

Relevance: Identifying risk factors for being victimized by internet fraud may help identify and protect those who are most vulnerable.

Summary: This multi-state survey of over 11,000 individuals age 18 and older sought to answer three questions:

  1. Are there behaviors and life experiences that may increase a person’s risk of becoming a victim of online fraud?
  2. What proportion of individuals may be at risk of being victimized by online fraud?
  3. How concerned are Americans about online fraud and what if any steps are they taking to protect themselves?

Key findings include:

  • Nearly one in five Americans (19%) who use the internet, or as many as 34.1 million people, engage in at least 7 of the 15 behaviors or experience life events that may put them at increased risk of being victimized by online fraud.
  • Two-thirds of Americans (65%) who use the Internet, or as many as 116 million, people received at least one online scam offer in 2013.
  • Nearly eight in ten (79%) Americans who use the Internet are concerned about being scammed on the Internet.

First Paragraph: A new AARP survey finds there are 15 particular behaviors, life experiences, and knowledge attributes that may make a person more vulnerable to online fraud. Data from this national and multi-state survey of over 11,000 online users also shows that Americans are very concerned about online fraud, yet many avoid taking basic precautions to protect themselves.

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Consumer Fraud in the United States, 2011: The Third FTC Survey

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Title: Consumer Fraud in the United States, 2011: The Third FTC Survey

Author: Anderson, Keith B.

Publication:  Staff Report of the Bureaus of Economics and Consumer Protection, Federal Trade Commission

Year: 2013

Focus Area: Prevalence, Victim Profiling, Fraud Surveys

Relevance: Surveys of fraud prevalence in the United States help define the scope of the problem and allow enforcement agencies to tailor their prevention and education efforts. The FTC Survey is one of the most comprehensive surveys of fraud-related information.

Summary: This report details the findings from the third survey commissioned by the Federal Trade Commission to examine consumer fraud in the United States. The survey was conducted from late 2011 to early 2012.

Consumers were asked questions designed to learn whether they had been victims of specific types of fraudulent transactions.  The survey also provides information about the mechanism through which the fraudulent transaction occurred.  Finally, the survey investigated the relationship between certain demographic characteristics and the likelihood of fraud victimization.

Key findings include:

  • During 2011, an estimated 25.6 million adults (10.8 percent of the adult population) were victimized by fraud.
  • The top 5 fraud categories were:
  1. Weight-loss Products (estimated 5.1 million victims)
  2. Prize Promotions (estimated  2.4 million)
  3. Unauthorized Billing for Buyer’s Club Memberships (estimated  1.9 million)
  4. Unauthorized Billing for Internet Services (estimated  1.9 million)
  5. Work-at-Home Programs (estimated  1.8 million)
  • The Internet was the most common way victims first learned about offers that turned out to be fraudulent and the most common way orders were placed.
  • High school graduates were the least likely to have been victimized by fraud.
  • Survey respondents who were more willing to take risks, who recently experienced a negative life event, and who had more debt than they could handle were more likely to have been victimized by fraud.
  • In general, consumers age 45-54 were the most likely to have been victimized by fraud. Those under age 45 were somewhat less likely to have been victimized than those 45-54, and those 55 and over were the least likely to have experience fraud.  However, those between 55 and 74 had the greatest chance of being victims of fraudulent prize promotions.

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Neural and behavioral bases of age differences in perceptions of trust

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Title: Neural and behavioral bases of age differences in perceptions of trust

Authors: Elizabeth Castle, Naomi Eisenberger, Teresa Seeman, Wesley Moons, Ian Boggero, Mark Grinblatt and Shelley Taylor; University of California, Los Angeles

Publication: Proceedings of the National Academy of Sciences of the United States of America (PNAS)

Year: 2012

Focus Area: Victim Profiling, Decision Making, Emotion/Motivation, Aging

Relevance: Understanding the biological basis of why older adults may be more vulnerable to financial fraud is helpful in order to develop more effective means of protecting them.

Summary: This study suggests that older adults’ vulnerability to fraud may result from their lack of response to visual cues of untrustworthiness.  In the first part of the study, older and younger adults rated people in photographs as “trustworthy,” “neutral,” or “untrustworthy” based on cues like insincere smiles, averted gazes, and postural difference.  Older adults and younger adults performed equally well when identifying people judged to be trustworthy or neutral, but older adults were much more likely to rate suspicious-looking people as approachable. In the second part of the study, participants underwent functional magnetic resonance imaging (fMRI) brain scans while evaluating the photographs. The researchers found that an area in the brain called the anterior insula, which is linked to disgust, displayed different patterns of activation in the two groups of participants. The younger adults showed anterior insula activation whenever they were making the ratings of the faces and especially when viewing the untrustworthy faces. In contrast, the older adults displayed very little anterior insula activation during evaluation of all faces.

Author Abstract: Older adults are disproportionately vulnerable to fraud, and federal agencies have speculated that excessive trust explains their greater vulnerability. Two studies, one behavioral and one using neuroimaging methodology, identified age differences in trust and their neural underpinnings. Older and younger adults rated faces high in trust cues similarly, but older adults perceived faces with cues to untrustworthiness to be significantly more trustworthy and approachable than younger adults. This age-related pattern was mirrored in neural activation to cues of trustworthiness. Whereas younger adults showed greater anterior insula activation to untrustworthy versus trustworthy faces, older adults showed muted activation of the anterior insula to untrustworthy faces. The insula has been shown to support interoceptive awareness that forms the basis of “gut feelings,” which represent expected risk and predict risk-avoidant behavior. Thus, a diminished “gut” response to cues of untrustworthiness may partially underlie older adults’ vulnerability to fraud.

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The psychology of scams: Provoking and committing errors of judgment

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Authors: Office of Fair Trading (prepared by University of Exeter School of Psychology)
Year: 2009

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.

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The Psychology of Consumer Fraud

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Authors: Doug Shadel & Karla Pak

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.

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Routine Online Activity and Internet Fraud Targeting: Extending the Generality of Routine Activity Theory

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Authors: Travis C. Pratt, Kristy Holtfreter & Michael D. Reisig

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.

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Modeling the Underreporting Bias in Panel Survey Data

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Authors: Sha Yang (Leonard N. Stern School of Business, New York & School of Economics and Management, China), Yi Zhao (J. Mack Robinson College of Business, Georgia), Ravi Dhar (Yale School of Management, Connecticut)

Publication: Marketing Science

Year: 2010

Focus Area: Impact, Research method development

Relevance: Surveys are used extensively to determine the prevalence and impact of financial fraud.  Given the sensitivity of the topic, it is also particularly prone to underreporting biases in surveys, as respondents are reluctant to admit their own victimization.  Determining this rate of underreporting is essential to untangling fraud’s actual social and economic impact.

Summary: While underreporting has been documented (Turner 1961, Waksberg and Neter 1965, Lee, Hu and Toh 2000) and modeled (Bailar 1975, Bollinger and David 1997) in other studies, this paper proposes a more sophisticated means of quantifying its impact.

  • By studying both reported behavior and partially observed behavior, the authors propose a mathematical modeling framework that determines who is underreporting, when, and how much.
  • This model allows collected information to be accurately interpreted, provides computation of true behavioral incidence, and identifies particular demographic and psychological characteristics that correlate with increased underreporting (such as sex, age, income, and motivation).
  • For example, in a study examining drinking habits (water and soft drinks), rates of underreporting varied with specific psychological and demographic characteristics (women reported less than men; those inclined to indulge reported less than those motivated by “looking good” and “health”).
  • By identifying factors that correspond with underreporting, the model highlights options to intervene in a targeted manner, and encourage full and accurate participation by respondents (such as incentives).

While this model is intended for longitudinal survey panel reporting, it has promise for similarly rigorous computational analysis of one-time surveys (commonly used to identify the rate of fraud).

Author Abstract: Panel survey data have been gaining importance in marketing. However, one challenge of estimating econometric models based on panel survey data is how to account for underreporting; that is, respondents do not report behavioral incidences that actually occur. Underreporting is especially likely to occur in a panel survey because the data-recording mechanism is often tedious, complex, and effortful. The probability of underreporting is likely to vary across respondents and also over the duration of the survey period. In this paper, we propose a model to simultaneously study reported behavioral incidences and partially observed actual behavioral incidences. We propose a Bayesian approach for estimating the proposed model. We treat those unobserved actual behavioral incidences as latent variables, and the Gibbs sampler makes it convenient to impute the nonreported consumption incidences along with making inferences on other model parameters. Our proposed method has two advantages. First, it offers a model-based approach to remove the underreporting bias in panel survey data and therefore allows marketing researchers to make accurate inferences about consumers’ actual behavior. Second, the method also offers a natural way to study factors that influence respondents’ propensity to underreport. Because we treat those underreported behavioral incidences as nonmissing at random, this underreporting propensity varies across respondents and over time. This understanding can help marketing researchers design the right strategy to intervene and incentivize respondents to authentically report and hence improve the quality of survey data. The proposed model and estimation approach are tested on both synthetic data and actual panel survey data on consumer-reported beverage-drinking behavior. Our analysis suggests that underreporting can significantly mask respondents’ true behavior.

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Fraud and the American Dream: toward an understanding of fraud victimization

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Authors: Adam Trahan (Indiana University), James W. Marquart (University of Texas at Dallas), Janet Mullings (Sam Houston State University)

Publication: Deviant Behavior

Year: 2005

Focus Area: Profile

Relevance: By examining a single $19 million fraud and its victims in detail, this article serves as a case study of investment fraud.

Summary: This article uses the example of a Ponzi investment scheme to analyze the behavior and motivations of victims of fraud.  Based on a previous article relating the American Dream to perpetrators of crime, this theory provides a new sociological  perspective on fraud victimization.

The author emphasizes the role of “the American Dream” as capitalist drive:

  1. requires constant pursuit of money for its own sake (86% of victims indicated that there was no specific purpose for their investments other than wanting more money.)
  2. emphasizes the end result instead of the means of acquisition
  3. focuses on individual gain without consideration for the impact on others

This set of priorities has been proposed as a partial explanation for the United States’ high crime levels.  This article suggests the “American Dream” may also underlie the motivation of fraud victims.

  • By focusing on the possible gains and de-emphasizing the method of obtaining them, consumers ignore the risks in investment.
  • Particularly when traditional investments fail at downturns in the economy, the incessant monetary drive of “the American Dream” provokes riskier, desperate action.
  • This urgency promotes poor, hasty decision making, and increases the appeal of fraud.

The authors also identify a particular context that, in combination with a fraud ploy, makes an investor likely to become a victim: the deification of money in society and a common belief in the status it provides.  This is not a function of personal greed, but rather an aspect of the economic culture. Fraud victims may be more thoroughly “indoctrinated” than non-victims.

Author Abstract: American culture and the practices of government focus an overwhelming majority of attention on violent ‘‘street’’ crime. As a result, very little is known about the victims of fraud. In order to contribute to this literature, a case study is provided that examines the victim population of a Ponzi scheme. Data are provided on the general characteristics of the victims, their investments, and the growth of the scheme. A theoretical model is formulated from Messner and Rosenfeld’s work in Crime and the American Dream. This paper expands the concepts of this theory by providing evidence that it can be used to explain victim behavior.

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Consumer vulnerability to scams, swindles, and fraud: A new theory of visceral influences on persuasion

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Authors: Jeff Langenderfer (Berry College) & Terence A. Shimp (University of South Carolina)

Publication: Psychology and Marketing

Year: 2001

Focus Area: Profile, Persuasion

Relevance: By outlining the theoretical process of a scam (and how a person either resists or succumbs), the author provides a template for evaluating reactions to the scam process and what contributes to vulnerability or resistance.

Summary: This article seeks to develop a theory of scamming vulnerability – what makes some people more vulnerable than others.

  • If we assume that there is some characteristic of scams that would allow a reasonable person to identify them as fraudulent, then there must be a process by which victims miss these cues.  Either, a) victims carefully examine a message but fail to recognize indicators of fraud, or b) victims fail to consider the offer carefully.  The former can be addressed through education, but the latter is related to the emotional appeal or “visceral influence” of the fraud.
  • The authors’ model of vulnerability suggests that, if a target is interested in a fraudulent offer, then the degree of vulnerability can be predicted by the target’s visceral response:
    • High visceral response (inspiring greed, hunger, lust, etc.) leads the target to ignore the rational elements of the message and focus instead on the emotionally desired outcome.
    • Low visceral response frees the target to examine the message rationally, and potentially identify cues that indicate its fraudulence.

This model is reinforced both by subjective evaluations of those witnessing fraud, such as employees of the Better Business Bureau, and by former scam artists who use emotional appeals to persuade targets.

This article also posits that victims who are not viscerally invested may be vulnerable because they are older and socially isolated.  This is countered by Van Wyk & Benson, 1997 and Van Wyk & Mason, 2001.

Author Abstract: Scams exact a huge toll on consumers and society at large, with annual costs in the United States alone exceeding $100 billion. The global proliferation of the Internet has enabled con artists to export their craft to a rapidly expanding market and reach previously untapped consumers. In spite of the prevalence of scams around the world, there has been virtually no academic attention devoted to understanding the factors that might account for why individuals differ in their scamming vulnerability. Building on the background of elder consumer disadvantage and informed by the authors’ own survey of expert opinion, this article presents a tentative theory of scamming vulnerability. The proposed theory incorporates the effects of visceral influences on consumer response to scam offers and hypothesizes a role for various moderating factors such as self-control, gullibility, susceptibility to interpersonal influence, and scam knowledge. Theoretical propositions are provided for future empirical investigation.

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