A recent headline proclaimed that scam victims aren't dumb, just human.
The article confirmed there is no such thing as a typical victim of fraud. There is little correlation between age, gender or financial literacy and the likelihood of being duped by conmen and women.
Numerous publications about consumer financial fraud dating back to 1990 were analysed. They showed we're all vulnerable to some extent though certain people may be more susceptible to particular scams than others.
Investment fraud victims are more likely to be male, relatively wealthy, risk-taking and better educated than the general public. Lottery scam victims are more likely to be female, older, single with lower income and less education than the general public.
I was surprised to learn younger consumers are more often victimised than older consumers, particularly via internet fraud where scams cleverly mimic everyday online transactions.
The research was as interesting in what it didn't tell us as what it did; fraud is hard to detect, fraudsters are largely invisible and it is difficult to gauge the impact and nature of fraud overall.
We know consumer-targeted fraud is a growing problem with tens of billions of dollars lost each year to millions of victims around the world. The US Attorney General last year highlighted financial fraud as one of three top priorities - after terrorism and violent crime.
One issue limiting our understanding of fraud and its victims is it tends to be under-reported. According to a US crime centre, only one in four investment fraud victims (losing between $1,000 and $25,000 in a scam) admitted to having been swindled because they were too embarrassed.
Other reasons for not reporting scams were victims feeling there would be little benefit, not enough evidence or the cost of pursuing action would outweigh any restitution.
In the case of Bernie Madoff's 2008 Ponzi scheme which wiped out $US20 billion of investors' money, a handful of victims left $US2.5 billion on the table, deciding against lodging a claim. They must be kicking themselves today as victims have received 57 cents on the dollar.
How can we avoid being conned?
The two greatest motivators for scam victims are fear and greed. A key element of successful financial fraud is creating a sense of excitement in their targets.
While rational people might question a too-good-to-be-true offer our filter switches off and we want to believe when we are in a state of excitement. In this state of suspended belief, we are more likely to say yes.
Fear also motivates us as scammers make us believe that, if we don't act, we will somehow suffer - like a relative will be stuck in jail if we don't immediately wire money for bail.
The best way to protect ourselves is to disengage from unusual decisions. We should be particularly wary if the fraudster insists on secrecy or a quick decision. A good financial decision should never require us to act instantly or keep something to ourselves.
The other thing to look for is legitimacy. Just because someone has your contact details does not mean they know you. A guarantee or assurance from a complete stranger is worth nothing.
Avoiding being a fraud victim is not always easy. Common sense can often detect a scam but humans are emotional and programmed to trust people. When emotions kick in, our logic can fail us.
Keep your head - only fools and their money should be easily parted.
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