Online Scams & Frauds Cost Aussies Over $90Million In 1 Year | Lyonswood Investigations

Online scams and fraud cost Aussies over $90 million in one year

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Online scams and fraud cost Aussies over $90 million in one year

According to the Australian Competition and Consumer Commission’s (ACCC) fifth annual report into scam activity, Australians lost over $90 million to fraud in 2013. The report, published in June 2014, identifies nearly 92 000 scam-related contacts were receive by the ACCC in a single year. The numbers, daunting as they are, unfortunately do not represent the true financial loses victims of scams have suffered, with many reporting to agencies outside the ACCC or simply not realising they have been scammed in the first place.

The scope and magnitude of scams differs. Masses of victims may fall for the same fake products sold online, incurring disappointment and a modest financial loss, while others may be thrown into emotional turmoil and financial ruin.

Dating and romance scams moved to number one on the list in terms of financial loss in 2013. A whopping $25 247 418 in losses was reported despite romance scams making up only three per cent of all scam-related contacts to the ACCC.

While the majority of people alerting the ACCC of a scam reported no financial losses, nearly one third of people reported losing between $100 and $499, indicating that scammers tend to prefer ‘high volume’ scams targeting many people while asking for smaller sums of cash.

An unlucky few, just over 10 per cent, reported losses above $10 000. While the number of soul-crushing losses, above $1 million, dropped from six in 2012 to two in 2013.

Significant increases in phishing and identity fraud were noted, with reports jumping over 73 per cent.

Computer prediction software scams also grew, with recorded losses doubling to $9 144 288. This massive growth is most likely attributed to a betting software scam carried out in Victoria during racing season. Victorians alone lost over $5 million.

Advanced fees and up-front payments was the other heavy hitter. With Australians losing over $25 million. These up-front payment scams operate via unsolicited requests for advance payment in return for a product or ‘reward’ later. The ‘reward’ may be a pre-approved loan, tech products, a holiday, a credit card application or a cut of the profits from some activity.

It can be easy to judge those who fall victim to scams. But none of us are immune. A successful scam all depends on target a specific vulnerability that we’re all susceptible to at a specific time. So, while you may never be at risk of sending thousands of dollars to a Nigerian bank account you may fall trap to a cheap product on Gum Tree, which may not exist.

The psychology behind how we fall for scams is relatively simple. They appeal to our primary urge to help or to receive. “The psychology of scams: Provoking and committing errors of judgment” was a thought-provoking study prepared for the UK Office of Fair Trading by the University of Exeter School of Psychology.

The research found many scams utilise a range of highly persuasive techniques, overall bolstering their success rate.

Reported on the Exeter website was that ‘a common tactic is to seek to exploit basic human emotions such as excitement or fear to provoke a spontaneous ‘gut reaction’ to the scam offer. Such scams also abuse people’s trust of authority by making a scam look like a legitimate offer from a reputable business or official institution.’

Some of the most interesting findings from the report seem to be counter-intuitive to our general understanding of how scams work. Some of these key findings were:

  • Previous victims of a scam consistently more likely to show interest in responding again.
  • Good background knowledge in the subject of a scam offer, such as experience in investments or sweeps, may actually increase the likelihood of you becoming a victim through ‘over-confidence’.
  • Victims are not necessarily poor-decision makers but do tend to be more open to persuasion and less capable of controlling their emotions and;
  • Victims tend to keep quiet to family and friends about their decision to respond to scam.

Dr Paul Harrison, senior lecturer in consumer behaviour at Deakin University, wrote in his article in The Sydney Morning Herald:

‘People who fall for scams aren’t stupid or greedy. They are human, responding to an evolutionary process that is actually of significant benefit in terms of operating in a complicated world – most of the time. Responding to emotional and automatic cues helps us to make quick decisions.’

He writes: ‘Research into consumer psychology tells us that you are more likely to fall for a scam if what is being offered to you is important to you, particularly if it has an emotional or social component.’

‘So, for some it could be because you are lonely (dating scam), worried about your kids’ progress at school (maths software) or your financial situation (investment courses). People who have a tendency to believe that institutions and brands are mostly trustworthy (counter-intuitively, you may be less of a risk taker) are also at risk of being scammed, as are those who are in an unfamiliar place or situation.’

You can read Dr Harrisons full essay here: http://www.smh.com.au/comment/online-scams-and-fraud-australians-lose-over-90-million-in-2014-20150106-12ikoq.html

Romance scams as reflected in the figures for financial losses, can be particularly disheartening. By appealing to the most visceral and immediate of human emotions – love, companionship, loneliness and lust – online dating or ‘romance’ scams can truly bleed a victim dry. While the untrustworthy Lothario has always existed, the internet makes the creation of false identities easier and the spate of potential victims endless.

If you are engaging in an online relationship, Lyonswood Investigators have a checklist of things you can do to provide yourself with a certain level of protection. These include:

  • Never send your photo or those of your family members – Photos are used for identity theft and used as new identities to defraud others of your hard earned income.
  • Never send sexually explicit photos or trust anyone who wants you to become involved in cyber sex. Even if they promise they will never send that vision to third parties. That vision is liable to end up on the black market and you will unwittingly become a porn star.
  • Never send positive identification documents like passports or drivers license copies even if they have sent theirs. What they will send is likely to be just some other victims identification documents.
  • Never send your home or work address or those of your friends and relatives.
  • Never discuss your movements and particularly when you will be overseas or absent from your home.
  • Never discuss your financial circumstances.
  • Never provide bank account/ credit card details or passwords/security codes of credit cards.

You can read more about romance scams and computer investigations at our ‘Dating Site Scam’ page: https://www.investigators.net.au/private-investigation-services/computer-forensics/online-dating/

If you, or someone you know, suspects a scam contact us at 1300 438 776 for an obligation-free discussion.

 

Lachlan Jarvis
Lachlan Jarvis
Lachlan Jarvis is the owner and director of Lyonswood Investigations & Forensics. He began working at Lyonswood in 2009 and became the owner of Lyonswood in 2013. In addition to being a licensed investigator, Lachlan has completed a Diploma in Law (LPAB) and a Bachelor of Arts (English).