Why do individuals respond to fraudulent scam communications and lose money? The psychological determinants of scam compliance

Authors: Peter Fischer, University of Regensburg; Stephen Lea, School of Psychology at University of Exeter; Kath Evan, School of Psychology at University of Exeter

Publication: Journal of Applied Social Psychology

Year: 2013

Focus Area: 2000 to Present, Consumer Behavior, Emotion/Motivation, Persuasion Methods

Relevance: Scams use a variety of persuasion tactics to convince their targets to comply. Victims respond differently than non-victims to these messages. High values of the promised reward and trust in the message are very important in convincing people to comply.

Summary: Using a mixed methods approach, this paper presents the results of three separate studies. The first study involved qualitative interviews with scam victims, the second study was a questionnaire completed by victims and non-victims, and the third study investigated scam framing effects and the impact of other motivators on interest in the scam.

  • In the 23 victim interviews, the main questions were: Why did participants react to the scam.What did they think and feel? And what were their motivations and behaviors? Results showed that over 87% of interview transcripts included words relating to (a) cues associated with positive emotions; (b) cues of trust; (c) cost–benefit considerations; and (d) words trying to prompt behavioral commitments.
  • In the second study, potential subjects were mailed a questionnaire that included a list of statements that would be typical of people who were vulnerable to four different kinds of psychological processes associated with decision errors. Respondents were asked to indicate how far they agreed with them. Results showed that the primary factors associated with becoming a scam victim or near victim are affected by the high values of the rewards offered, and showing a high degree of trust in the scammers. High motivation, positive emotion, self-confidence, and lower belief in personal superiority are also predictive of scam vulnerability.
  • In the third study, respondents were presented with a simulated postal scam that was enclosed with a questionnaire asking for their reactions to it. They manipulated variables such as high motivation (varied by manipulating the amount of money offered in the scam), positive emotion (varied by including or omitting triggers to contemplate how receiving the money would make the recipient feel), and trust (varied by including or omitting conventional symbols of authority). They also manipulated the format in which the simulated scam was sent out–either the scam flyer was enclosed in the envelope such that it would be seen first when the letter was opened, or it was bundled inside the questionnaire and not seen until later.

Author Abstract: Why do so many people all over the world, so often, react to completely worthless scam offers? In two questionnaire studies, one of which included the distribution of an experimentally manipulated simulated scam,we investigated differences between respondents who did and did not report past compliance with scams. We found that the principal differences were in their response to very high-value incentives, in the extent to which they reacted with positive emotions to the thought of winning a large prize, in their reliance on signs of official authority, and in their self-confidence. The first two of these can be regarded as forms of visceral processing. Some of these differences suggested a dispositional difference between victims and non-victims.

Neural and behavioral bases of age differences in perceptions of trust

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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Age-Related Differences in Deception

Relevance: Understanding age-related differences in lie detection ability could offer insight as to which age group is more susceptible to falling for fraud pitches.

Summary: An interesting question in deception research is whether lying and lie detection ability change with age.  On one hand, both lying and the ability to spot a lie may improve with age due to greater experience. On the other hand, the ability to lie and to detect lies may decrease with age due to cognitive decline. This study addresses the question by comparing younger and older adults’ abilities to lie as judged by both younger and older listeners. Additionally, in order to learn about the specific processes that may account for age-related differences in deception, the researchers tested the listeners’ ability to identify emotion and to estimate age in facial recognition tasks.  In the study, 30 young adults (17 to 26) and 30 older adults (60-89) judged the veracity of opinion statements made by 10 young adults (<30) and 10 older adults (>60).

Key findings of the study include:

  • Older adults were relatively transparent in that both young and older listeners found it easier to differentiate truths from lies in older adult speakers.
  • Older adults were worse than younger adults in differentiating truths from lies by both younger and older speakers.
  • Emotion recognition, but not age recognition, from facial cues is related to lie detection ability.

The researchers conclude that it is easier for people to discern when an older adult is lying or telling the truth compared with a young adult. In other words, older adults are worse liars. Regarding lie detection, the researchers conclude that older adults have more difficulty differentiating lies from truths than do younger adults. In other words, older adults are also worse lie detectors. Additionally, the study suggests that the decline in lie detection ability with age is related to a decline in emotional recognition.

Author Abstract: Young and older participants judged the veracity of young and older speakers’ opinions about topical issues. All participants found it easier to judge when an older adult was lying relative to a young adult, and older adults were worse than young adults at telling when speakers were telling the truth versus lying. Neither young nor older adults were advantaged when judging a speaker from the same age group. Overall, older adults were more transparent as liars and were worse at detecting lies, with older adults’ worse emotion recognition fully mediating the relation between age group and lie detection failures.

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

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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Decreasing Resistance by Affirming the Self

Authors: Julia Zuwerink Jacks (Greensboro—North Carolina) & Maureen e. O’Brien (Louisiana State University at Alexandria)

Publication: Resistance and Persuasion. Ed. Eric S. Knowles & Jay A. Linn. Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Persuasion, Prevention

Relevance: The ability to facilitate acceptance of safe behavior and increase resistance towards dangerous behavior is an important opportunity for fraud prevention professionals.

Summary: This chapter outlines a series of studies examining the relationship between self-affirmation and susceptibility to persuasion.

  • Self-affirmed individuals are more likely to process a persuasive message in an open-minded fashion.  By reinforcing the target’s positive self-perception, the persuasive message is perceived as less threatening, making resistance less necessary.
  • The extent of a person’s susceptibility depends on the relationship between the attribute being affirmed (e.g., independence, cooperation) and the persuasive message.
  • The persuasive power of self-affirmation is only effective if the affirmation is unrelated to the persuasive message, or if the self-affirmation is compatible with the message (e.g., “you are so supportive” and “would you mind driving me to the bank?”).
  • If the self-affirmation is incompatible (e.g. reinforcing a person’s sensible caution and then asking the person to behave recklessly) then resistance increases.

Bolstering potential fraud victims’ perceptions of their own careful deliberation and sensible caution may increase resistance to a fraudster’s ploy of the quick sale, regardless of the specific fraud type.

Author Abstract: “You’re the coolest person I’ve ever met,” she said to Heather. They were drinking sweet tea on the patio and staring into the fishpond, both tired from a long day of classes. Heather wasn’t sure where her friend was going with this, but of course she didn’t mind the flattery. “I mean, of all the friends I’ve met in college you’ve got to be the nicest,” continued Jen. “You’re warm, caring, honest. Like, who else would have run after that man to give him the $20 he dropped? I would have kept it. I mean, like he wasn’t even good looking! What else have you done like that? It’s so . . . it’s so honest!”

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Consumer Psychology and Attitude Change

Authors: Curtis P. Haugtvedt, Richard J. Shakarchi, Kaiya Lui (The Ohio State University) & Bendik M. Samuelsen (Norwegian School of Management)

Publication: Resistance and Persuasion. Ed. Eric S. Knowles & Jay A. Linn. Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Prevention, Consumer Behavior

Relevance: Understanding how best to change consumers’ perspectives on the risk of fraud and their own vulnerability is a significant challenge to fraud prevention.

Summary: The studies outlined in this chapter focus on the role of ‘elaboration’ (thinking about, considering, mentally expanding upon a message) as it influences persuasion and attitude change.  The goal is to facilitate attitudes that are resistant to future changes.

  • A statement that might inspire a negative reaction (e.g. “You have no choice!”) may also draw more attention and may thus be remembered by the consumer.  If the argument is invalid, then resistance will occur, but if the argument is strong, it is possible that reactance might be overcome by the increased attention and focus.
  • Priming certain kinds of information (e.g., a safe investment warning with a story about a fraud) may lead people to consider the message in greater depth, increasing the likelihood of persuasion.
  • Asking individuals to consider their own prior experience in a related situation or with a related product may similarly increase their mental elaboration on the topic.
  • Asking individuals to imagine the benefits of a given option (e.g., hanging up on a solicitor) before suggesting it outright may make that option more appealing.  They may be more likely to be persuaded, as the arguments have come from a trustworthy and appealing source — themselves.

Author Abstract: The extent to which and the processes by which individuals are influenced by print, radio, television, interpersonal conversations, and Web sites (as well as future integrated technologies) is a fascinating area of study. As the various chapters in this book illustrate, as social psychologists make progress in understanding the nature of resistance to attitude change, new and very interesting questions about persuasion processes in general are raised. While many factors may be associated with strong attitudes, the extent to which individuals elaborate on the content of an initial persuasive appeal has been shown to be an important moderator of the extent to which and the processes by which they might resist subsequent opposing persuasive messages (see Petty, Haugtvedt, & Smith, 1995).

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Social Influence: Compliance and Comformity

Authors: Robert B. Cialdini & Noah J. Goldstein, Arizona State University

Publication: Annual Review of Psychology

Year: 2004

Focus Area: Persuasion, Decision Making

Relevance: Understanding what makes an individual more likely to comply with a request may help explain how fraud is achieved.

Summary: This article offers a review of the recent literature in compliance and conformity, a branch of persuasion research.  The themes of compliance and conformity are outlined around three central motivations that, together, help determine whether a person accepts or resists an outside persuasion influence:

  • Accuracy: the desire to achieve one’s goals effectively requires an accurate perception of reality – one misperception may be “the difference between getting a bargain and being duped” (p. 592).  An influence that appears reasonable and informs one’s thinking in a valuable way is more likely to be accepted, a tendency that can be influenced by distraction, authority appeals, and reframing.
  • Affiliation: the desire to be part of a meaningful social group.  A request emanating from a favored person or group, or that draws upon favored group identification, is more likely to be granted.  This tendency can be manipulated using flattery, reciprocation, and similarity appeals.
  • Maintenance of a positive self-conception: the desire to preserve a positive image of oneself.  A request framed to contribute to a person’s self-image is more likely to be granted.  This desire can be manipulated through appeals to consistency, public commitment, and follow-up techniques.

Author Abstract: This review covers recent developments in the social influence literature, focusing primarily on compliance and conformity research published between 1997 and 2002. The principles and processes underlying a target’s susceptibility to outside influences are considered in light of three goals fundamental to rewarding human functioning. Specifically, targets are motivated to form accurate perceptions of reality and react accordingly, to develop and preserve meaningful social relationships, and to maintain a favorable self-concept. Consistent with the current movement in compliance and conformity research, this review emphasizes the ways in which these goals interact with external forces to engender social influence processes that are subtle, indirect, and outside of awareness.

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Deception: From Ancient Empires to Internet Dating

Authors: Brooke Harrington, Ed., & Guido Möllering (Max Planck Institute), Paul Thompson & Hany Farid (Dartmouth College), Jeffrey T. Hancock (Cornell University), Tom Lutz (University of California, Riverside), Maureen O’Sullivan (University of San Francisco), Carl T. Bergstrom (University of Washington), Gary Urton, Frederick Schauer & Richard Zeckhauser (Harvard University), Mark G. Frank (State University of New York),  Gary Alan Fine (Northwestern University), Ford Rowan (George Washington University), William Glenney IV (Naval Operations’ Strategic Studies Group), & Kenneth Fields (Stanford University)

Publication: Stanford University Press
Year: 2009
Focus Area: Deception

Relevance: By synthesizing the fragmented world of deception research across the humanities and sciences, this text serves as a “status report on deception” (p. 2).

Summary: The interwoven contributions to this work are organized around four themes of deception:

  1. defining & detecting deception
  2. technology & deception
  3. the relationship between deception & trust
  4. social institutions through which deception is perpetrated & regulated

Each theme is addressed from three or four different perspectives, all of which account for and refer to the other works.  This creates a cohesive and broad view of the state of deception research, while allowing for the varying definitions, foci, and opinions within the field.  Of particular relevance to financial fraud are the sections on:

  • cognitive hacking (Paul Thompson, Dartmouth College)
  • digital deception (Jeffrey T. Hancock, Cornell University)
  • digital doctoring (Hany Farid, Dartmouth College)
  • method acting in daily life (Tom Lutz, University of California, Riverside)
  • fraud in financial markets (Brooke Harrington, Max Planck Institute)
  • why most people are poor lie detectors (Maureen O’Sullivan, University of San Francisco)

Opening Paragraph: Deception and especially lying are typically ascribed to human beings and often distinguished from other forms of conveying incorrect or misleading information by intentionality.  If a person is merely ignorant of the truth, then telling something other than the truth would not usually be considered lying, except that pretending to know the truth is itself a kind of deception.  (Different ideas about intentionality are presented elsewhere in this volume, along with proposals to distinguish lying from deception.) –excerpted from Foreword by Murray Gell-Mann, Santa Fe Institute (Nobel Prize in physics, 1969)

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Resistance and Persuasion

Editors: Eric S. Knowles (University of Arkansas) & Jay A. Linn (Widener University)

Publication: Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Persuasion, Prevention

Relevance: Understanding the properties of resistance puts one in a much stronger position to change another’s level of resistance – either to diminish or bolster it.

Summary: “This book explores persuasion by considering its antithesis: resistance” (p. 3).  This edited collection defines, dissects, understands, and explains the role of resistance as one half of a persuasive interaction.  Resistance can be expressed variously as: reactance, distrust, scrutiny, and inertia.

The book distinguishes “Alpha” from “Omega” strategies of persuasion – increasing the appeal of a change vs. reducing resistance towards a change – and identifies 7 strategies for managing resistance:

  1. pushing a decision into the future
  2. using narratives/stories to sidestep resistance
  3. warning a target of upcoming persuasion
  4. emphasizing positive thoughts about the message
  5. reinforcing the target’s self-esteem or self-image
  6. training people to identify illegitimate messages
  7. using resistance against itself

Identifying the processes that lead to a certain person’s perspective can indicate which methods would be most effective to overcome or reinforce that viewpoint.  The final chapter also provides a useful integration of information and points towards further areas of research.

Author Abstract: Do we need to convince you that persuasion is an important topic for the social sciences? Probably not. You know that humans are social beings. Our communication, psychology, social organization, political structures, market choices—in short, everything we do—is interpersonally coordinated. Persuasion is one of the important tools to achieve these alliances.

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Prospection: Experiencing the Future

Authors: Daniel T. Gilbert (Harvard University) & Timothy Wilson (University of Virginia)

Publication: Science

Year: 2007

Focus Area:

Relevance: If falling for a scam is partly the result of a victim incorrectly forecasting what will make them happy, then learning how to more accurately predict future feelings may help protect them.

Summary: Our notion of how we will feel in the future is based on simulation, or “prefeeling” – a combination of simulating an event, reacting to it internally, and then predicting that whatever we feel now is what we will feel when the event occurs.  Predictions can be flawed if the simulation is:

  1. Unrepresentative – by remembering the unusual instances the best, when we are called upon to envision something about the future, we think of the most memorable (and unlikely) situations in the past.  Our predictions become less accurate.
  2. Essentialized – by imagining the best or worst features of a future event, we fail to account for the many small things that will lessen the strength of whatever feelings we experience.  Bad events are not as bad and good events are not as good as we generally predict.
  3. Abbreviated – by simulating only key elements of a future occurrence, we tend to focus on the immediate repercussions of an event, and fail to anticipate how we will adapt to a given circumstance with time.

People also mispredict their future feelings when a simulation is decontextualized.  When the context in which the scenario is envisioned (and experienced cognitively) is different than when the scenario occurs (and is experienced actually), the feelings experienced are different.  Given that the context will likely change over a given span of time, predictions are frequently inaccurate.

Author Abstract: All animals can predict the hedonic consequences of events they’ve experienced before. But humans can predict the hedonic consequences of events they’ve never experienced by simulating those events in their minds. Scientists are beginning to understand how the brain simulates future events, how it uses those simulations to predict an event’s hedonic consequences, and why these predictions so often go awry.

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