I had the pleasure – a strange word to use, I know, given the subject matter – of presenting my second Moneybox programme over Easter.
But a pleasure insofar as we got to shine a spotlight on a hugely misunderstood area of personal finance – the psychology of fraud – with the hope that the programme’s wide reach will help both existing and potential victims.
For we ALL fall into one of those two categories. If you think you are immune to fraud, think again. What I discovered in the course of making this programme is terrifying. It completely transformed my perception of fraud, even as a knowledgeable financial journalist.
And we ALL need to learn the truth about fraud if we are to reduce the number of shattered lives, encourage more victims to come forward and make our banking system protect us when we need it the most.
Fraud: the last vestige of victim-blaming
Fraud is one of the last corners of crime where victim blaming is still acceptable.
Don’t believe me? Ask the banks. Generally speaking, they will only refund any money lost to fraud if it’s “unauthorised” – i.e. someone hacks into your bank account and takes your cash without your knowledge. But that principle doesn’t apply to anyone who is tricked into handing money over to con artists under false pretences, otherwise defined as “authorised” fraud.
As far as the banks are concerned, that is your fault. You consented to passing on your money, even if it’s to a bad actor using virtually undetectable techniques. So you must pay the price – which was £350m in total last year, according to the banking industry body UK Finance.
This ruthless policy suits the banks, already struggling to refund the sums lost through their worryingly insecure infrastructure. It gets them off the hook for another vast bill that can never be realistically retrieved from the criminals themselves. But this institutional endorsement of victim blaming has, no doubt, poisoned our common attitude to fraud. Where most of us might otherwise have empathy, we instead scrabble around for any clues that might suggest the defrauded had somehow brought it on themselves.
The narrative persists that fraud victims are stupid, gullible and too trusting for their own good. This form of social Darwinism is now rightly seen as antiquated and callous in other areas of crime – sexual assault, for instance. But it lingers on in our financial attitudes because we have never properly brought it out into the open and questioned it.
“Fraud doesn’t bang, bleed or shout”
It’s partly down to our general aversion to talking and thinking about (let alone dealing with) money in a measured, constructive way. But the stigma around fraud has profound consequences. It compounds the trauma that fraud victims experience, piling shame and self-loathing on top of the the heartbreak and anxiety they would have already felt about their (often irretrievable) financial losses.
Add over-stretched police into the mix, and it’s easy to see why only one in 50 fraud cases is reported, with criminal investigations routinely dropped. An alarming report by HM Inspectorate of Constabulary said fraud does not “bang, bleed or shout”, meaning police forces often fail to follow up on cases, even when they could get a conviction.
One force was reported to have dropped 96 per cent of cases it received from the National Fraud Intelligence Bureau despite strong evidence, including identified suspects. One analyst told HMIC:
Everything is against fraud. It is not a priority, not sexy, people don’t report it and it is difficult to prove, which takes time, resources and money.
How and when fraudsters strike
In her book, The Confidence Game, Maria Konnikova outlines the two systems that “govern our reality” – one is emotional, one is rational. She describes how scammers skillfully manipulate our emotions to override our better judgements:
Emotions cause us to act in a way that nothing else quite does…when our emotions are awakened we tend to rely on them more than anything else…it’s good to make someone happy or sad if you’re trying to con them but what if you can also make them fearful? If the emotion is strong enough, we don’t see anything else.
And the most crucial thing to remember is that con artists strike when our minds are elsewhere. We’re perfect fraud fodder during difficult, stressful or even exciting times in our lives. She writes:
When it comes to predicting who will fall, personality generalities tend to go out of the window. Instead, one of the factors that emerges is circumstance: it’s not who you are but where you happen to be at this particular moment in your life. If you’re felling isolated or lonely it turns out you’re particularly vulnerable. Likewise if you’re going through a job loss, divorce, serious injury or another major life change, are experiencing a downturn in personal finances or are concerned with being in debt.
Suddenly, the spike in fraud among young people – who are experiencing their fair share of financial problems – doesn’t seem so inexplicable.
Con artists are having a field day with tech
For the programme, I spoke to Elizabeth Costa from the government-sanctioned “nudge” unit, now known as the Behavioural Insights Team. She told us how tech has made life easier for us – and the fraudsters. At the tap of a screen, we can transfer almost instantly but with “very little opportunity” to reflect or undo decisions we might later regret.
Maria Konnikova also writes about the pitfalls of the internet in the context of the “put-up” – the crucial first stage of a scam where a victim is identified and initially targeted. She writes:
It’s easier than ever to clear the hurdle of the put-up: those who respond to the false ads, emails or other phishing scams. Gone is the need to be psychologically savvy from first glance…and is we’re in the world of virtual con artists or ones that strike over the phone, no amount of micro-expression reading [a way to tell if someone if lying] will do us any good.
Fraud can happen to anyone (yes, even young people)
I met several victims of fraud for Moneybox, all from different backgrounds and at different stages in life.
None could be written off as naive or foolish. One was a GP, another was a maths and statistics student at one of the UK’s best universities, another was a former headteacher. Despite the fraud occurring some time ago, all were still processing what had happened to them and were struggling to “get over” the crime completely.
All of them knew rationally that the crime wasn’t their fault, whatever 20/20 hindsight they may have gained. But depending on the severity of the scam and the amount of money they lost, all of them expressed emotions ranging from humiliation and loss of pride right up to depression and even suicidal thoughts.
As we become more knowledgeable and enlightened in our attitudes towards mental health, perhaps this will also lead is to re-evaluate our relationship with fraud. Understanding that fraud can and does happen to anyone is a crucial first step in forming a collective empathy towards fraud victims – and helping them get the justice they deserve.
For starters, we need to understand that young people need to be on guard as much as their grandparents or other more stereotypical victims of fraud. According to Shieldpay, nearly three times as many people aged 16-24 have succumbed to online financial fraud than those aged over 55, with 16-24 year olds losing £276 more than baby-boomers and receiving 30 per cent less back from their banks.
Kudos to TSB…let’s hope others follow suit
TSB has got many things wrong in recent times. Speaking as a customer of the challenger bank, I was as dismayed as anyone by the IT fiasco last year, less so by the cut in the – still very competitive – current account interest rate that was raised as compensation and (foolishly) pledged to be permanent.
But credit where credit is due. From 14 April onwards, the bank’s 5.2 million customers will be protected by a ‘fraud refund guarantee’ which will see the bank refunding ALL victims of fraud – regardless of the circumstances.
The bank is the first to scrap the controversial distinction between authorised and unauthorised fraud cases, six weeks before a new voluntary code is introduced which is designed to reduce victim blaming and make the industry more accountable for transfer fraud. This new code – launching on 28 May – is entirely voluntary, so banks have to agree to sign up. But TSB’s move is hugely significant and could put pressure on other banks, particularly those that brand themselves as forward-thinking and customer-friendly, to sign up.
Is fraud inevitable or preventable?
can fraud be stopped once and for all? Well, despite my strong criticism of the banks and my deconstruction of our backwards attitude to fraud, there is only so much we can do to tackle fraud. Maria Konnikova goes further – she believes it’s a necessary part of our evolution. With most of us prepared to operate on a trust basis, there will always be a minority that abuses this otherwise highly successful and functional system for their own advantage (if they happen to have the right pathology, circumstances and opportunity).
Combine this with policing pressures and the increasingly crafty techniques used by scammers, and we will have to (grudgingly) accept that some fraud will still slip through the net. But while it is complacent to think that fraud only happens to other people, we can certainly do our level best to stop it happening to us.
So if you want to be belt and braces, check out the Take Five – Stop Fraud campaign. Following these three steps will ensure that you don’t act too hastily when dealing with any new payee. So take some time over the following:
- Requests to move money: A genuine bank or organisation will never contact you out of the blue to ask for your PIN, full password or to move money to another account. Only give out your personal or financial details to use a service that you have given your consent to, that you trust and that you are expecting to be contacted by.
- Clicking on links/files: Don’t be tricked into giving a fraudster access to your personal or financial details. Never automatically click on a link in an unexpected email or text.
- Personal information: Always question uninvited approaches in case it’s a scam. Instead, contact the company directly using a known email or phone number.