why people fall for scams

Australians lost a staggering $3 billion to scammers last year, surpassing any previous year. This is equivalent to the cost of rebuilding three new hospitals. The latest Target scams report from the Australian Competition and Consumer Commission (ACCC) highlights the urgency of the issue.

In 2022, investment scams accounted for the largest losses at $1.5 billion, followed by remote access scams ($229 million) and payment redirection scams ($224 million). Small and micro businesses experienced a significant 95 percent increase in losses, reaching $13.7 million, primarily due to payment diversion scams. Overall, there was a 73 per cent rise in scam losses across the Australian business community, totaling $23.2 million, highlighting the urgency to understand the reasons behind scam victimization and implement proactive anti-fraud measures.

In an interview with the UNSW Business School, Dr Kam-Fung (Henry) Cheung, lecturer in the School of Information Systems and Technology Management (ISTM), and Shesha J. Maheshwari, a research student in the School of ISTM, emphasize the importance of understand the psychological factors that make people vulnerable to scams. The experts say financial desperation and a lack of awareness about evolving scam techniques contribute to why many individuals today are taken in by scams.

Why do people fall for scams?

According to Dr Cheung and Ms Maheshwari, there are six main reasons why people fall victim to scams.

Financial desperation: This is an important factor. When people are faced with financial problems or a desire for quick financial gains, people become more vulnerable to scams that promise easy money or high investment returns. In such circumstances, the desperation to improve one’s financial situation can cloud judgment and lead to susceptibility to fraudulent schemes. Social engineering: Scammers excel at social engineering, leveraging personal relationships and connections to manipulate victims. Using information gathered from social media and other sources, scammers personalize their scams, making them appear more legitimate and trustworthy. Victims who are deceived by this false sense of confidence are more likely to fall victim to scams. Lack of awareness: Scammers use sophisticated tactics to trick their victims, and many people are simply unaware of the various scams. A lack of awareness regarding evolving scam techniques, such as those involving cryptocurrencies and blockchain, makes individuals more vulnerable. People inadvertently increase their chances of falling victim to scams by remaining uninformed. Emotional triggers: Scammers often exploit emotional triggers to manipulate their targets. By creating a sense of urgency, fear or excitement, scammers impair rational thinking and force individuals to make impulsive decisions. Heightened emotions make it difficult for victims to objectively evaluate the situation, leading to unfortunate outcomes. Trust and authority: Posing as trustworthy individuals or authority figures is a common tactic used by scammers. Posing as government officials, company representatives or law enforcement, scammers exploit trust to convince victims to share personal information, provide access to financial accounts or conduct financial transactions. Trusting these fraudsters increases the risk of becoming a victim of scams. Lack of vigilance: Busy lifestyles and constant distractions contribute to a lack of vigilance, causing individuals to overlook warning signs or suspicious behavior. Failure to do proper research, failure to verify the authenticity of communications or offers, and inadequate protection of personal information can leave individuals vulnerable to scams.

Dr Cheung explains that awareness is a shield against scams that equips individuals with the knowledge to identify and avoid fraudulent activities. “This promotes a vigilant mindset that is essential in today’s world where scams continue to evolve and adapt to changing circumstances,” he says.

But it’s also crucial to remember that anyone can fall victim to a scam, regardless of their age, education or background, adds Ms Maheshwari, whose work focuses on phishing attacks with a particular focus on phishing attacks – a type of phishing attack carried out via Short Message Service (SMS) or instant messaging on a mobile device. “Scammers are skilled at exploiting vulnerabilities and manipulating people’s emotions and trust,” she says.

Ms. Maheshwari also notes that she has observed that younger generations, driven by curiosity and a propensity to take risks, often have the belief that scams will not affect them personally, making them more vulnerable. To promote online safety, she suggests a shift in mindset from “it won’t happen to me” to “it could happen to me, so I need to stay aware and vigilant.”

She says: “Awareness and vigilance play an important role in protecting against fraud and scams. Staying informed and maintaining a skeptical mindset empowers individuals to make informed decisions and protect themselves from falling victim to scams.”

How to avoid becoming a victim of scams

According to Dr Cheung and Ms Maheshwari, victims of scams do not reflect personal weakness or naivety, as scammers are highly skilled manipulators capable of deceiving anyone. And to better protect themselves from potential scams, individuals can take the following precautions.

Stay informed: Educate yourself about common scam tactics, emerging fraud schemes and evolving technologies used by scammers. Maintain skepticism: Approach unexpected or unsolicited offers with caution. Question the legitimacy of claims or promises that seem too good to be true. Avoid clicking on suspicious links, even if they appear to be from a “legitimate source”. Examine emails: Be vigilant when handling emails, especially those from unknown senders or requesting personal or financial information. Watch out for misspellings, suspicious links, and email addresses that don’t match the claimed source. Guard Personal Information: Be careful about sharing personal information online or over the phone. Only provide sensitive details to trusted and verified sources. Enable multi-factor authentication for accounts that offer this feature, and change passwords regularly for extra security. Verify the sites before entering login details and consider using a longer passphrase instead of passwords. Be careful with financial decisions: Do thorough research before making any financial decisions. Seek advice from trusted professionals and verify the legitimacy of investment opportunities. Never give personal information including bank account details, passwords or OTPs via email or phone. Legitimate financial institutions do not ask for personal information via these channels and usually communicate through secure portals.

How do I report being the victim of a scam?

In addition to these proactive measures, the Australian Government and ACCC have taken steps to address the issue of scams. The establishment of the National Center Against Scams, which was launched on 1 July 2023, is an important initiative to combat fraud. Over the next three years, the center will build its information-sharing capabilities and bring together experts from government and the private sector to tackle harmful scams head-on.

Finally, Dr Cheung and Ms Maheshwari reiterate that falling for a scam does not reflect personal weakness or naivety. “Highly skilled scammers are manipulators who exploit psychological vulnerabilities and use sophisticated tactics to deceive people from all walks of life, including highly educated and cautious individuals.

“Acknowledging this fact can help victims overcome any feelings of self-blame or shame and instead focus on reporting the scam, seeking support and learning from the experience to prevent future occurrences.”

To report a scam or seek help, you can visit the National Scam Center website. You can also report scams to ReportCyber ​​and ScamWatch.