Personal Fraud: the Victims and the Scams

The evidence from fraud victimization surveys is unanimous that repeat victimization is common. Greater education is not a protective factor against victimization; the evidence points to the reverse. Much evidence also suggests that older people are not at greater risk of fraud victimization. It may be that younger and better-educated people have wider interests, engage in a broader range of activities, and have more consumer participation in the marketplace than other demographic groups, thereby increasing their exposure to fraudulent solicitations and transactions. Risk heterogeneity and state dependence both appear to contribute to repeat victimization. The present study finds that fraud attempts are less likely to succeed if: (1) the offender is a stranger; (2) the initial contact is by telephone or mail; (3) the potential victim has heard of this type of fraud before; or (4) the potential victim tries to investigate the person or proposition before responding. Targeted campaigns aimed at fraud victims should be mounted. Enhanced and routine data collection on a national level is necessary, together with anticipation of new methods of fraudsters. Public perceptions of crime as a social problem often depend, in part, on the specific type of crime being referred to. When thinking about or discussing crime, most people have images of violent street Crime Prevention Studies, volume 12, pp. 133-151 134 — Richard M. Titus and Angela R. Gover crime, such as robbery, assault, rape, etc. As a result, a large amount of research in criminology and criminal justice has focused on the financial and physical consequences of these criminal actions on victims (Shichor et al., 1996). According to this research, victims experience trauma, self-blame, anxiety, and worry about their future safety over a long period of time (Greenberg and Ruback, 1992). Unfortunately, criminologjcal research has devoted much less attention to the aftermath of fraud victimization. This is an interesting fact, given that many believe that victims' experiences with fraud and other forms of white collar crime have more devastating effects on victims than street crime. In fact, according to a survey of public attitudes in Illinois on the costs of white-collar crime, 55.2% of the respondents believed that these crimes do more to undermine the morality of society than do regular street crimes (Cullen et al., 1983). Seventy-six percent of the respondents believed that the amount of money lost through white-collar crime is more than that lost as a result of street crimes such as robberies, burglaries and thefts. According to a national survey of fraud victimization (Titus et al., 1995) the total annual losses exceed $40 billion. Fraud offenses involve issues such as a violation of trustworthiness and honesty — basic values that are not typically associated with street crime victimization. A proposed typology of white collar crime victims includes individuals as victims, corporations as victims, government institutions as victims, society as victims and the international order as victims (Tomlin, 1982). In this chapter we are concerned with the typology of individuals as victims of fraudulent acts, for which we employ the term "personal fraud." Fraud victimization involves the deliberate deception or intention of deception of an individual with the promise of goods, services, or other financial benefits that are actually nonexistent, were never intended to be provided or were grossly misrepresented. There are several ways an individual may be victimized by fraud, such as telemarketing fraud, fraudulent acts that involve consumer goods or services, or fraudulent acts involving financial advice such as insurance coverage plans, investment packages or business schemes. Examples include: scams involving credit assistance or loan consolidation; offers for "free" prizes that may not actually exist and/or that may result in costs to victims; scams promising unnecessary or useless goods such as beauty products, or home repairs; unauthorized use of bank or credit card numbers; and charity scams whereby victims make contributions to fraudulent institutions under the pretense of assisting a charity. Personal Fraud: The Victims and the Scams — 135 REPEAT VICTIMIZATION BY PERSONAL FRAUD Forms of repeat victimization such as domestic violence fit well into the "routine activities" perspective: the victim and offender are continuously in the same place in the absence of capable guardians, and domestic violence can often be ended by having the offender or victim move away. But for other types of crime, such as personal fraud victimization, different explanatory models are required. A framework for these models was laid out early by Nelson (1980) and by Sparks (1981): repeat victimization is to be understood in terms of risk heterogeneity (predisposing characteristics of persons or locations) or state dependence (the influence of prior victimization on the likelihood of subsequent victimization). These two positions are examined elsewhere in this volume for a number of crime types; the focus of this chapter is to show how risk heterogeneity and state dependence interact in the case of personal fraud victimization and revictimization. VICTIM CHARACTERISTICS Victim characteristics are equally as important in the crime of personal fraud as they are in other types of crime. While in other crimes some amount of victim cooperation or facilitation may be involved, in personal fraud they are often indispensable. This emphasis on victim cooperation is not meant to invoke any moral judgements about victim blame, but to direct attention to the victim's role in assisting the offender and allowing the crime to occur. In fraud victimization there is a continuum of cooperation, ranging from none to considerable: • No cooperation: A woman discovers in her monthly credit card statement that she has been the victim of an identity fraud, having done nothing to facilitate the crime. • Some cooperation: A man responds to a "cold" phone call and contributes to a charity without investigating and learning that it was phony. • Considerable cooperation: Having responded to an ad for a fabulous investment opportunity and been victimized in a Ponzi scam, a man is burned again in a recovery scam. Over a period of years, a woman loses many thousands of dollars in a series of one-in-five scams but continues to participate. 136 — Richard M. Titus and Angela R. Gover Those types of fraud involving some element of victim cooperation may include one or more of the following actions: • The victim either makes the initial contact with the offender or takes steps that lead to the initial contact (e.g., by mailing in a coupon in response to a "free vacation" advertisement, or by visiting a website that promises extravagant returns on investment), thus providing an address and signaling some receptivity to the "pitch." • The victim provides information about him/herself (e.g., desires, tastes, financial capacity) that helps the offender carry out the scam. • The victim allows the offender to convert what should be a business relationship into a personal relationship, to create a sense of trust and to get a waiver of customary safeguards. • The victim allows the offender to create a scenario or version of events (e.g., specially selected, rare good fortune, unique opportunity, insider information, need for prompt action) that when believed sets the stage for fraud. • The victim writes checks, gives out credit card or bank account numbers and in other ways provides the offender with access to