1. the financial industry: “He also said he has seen people become obsessed with the scam before. They are so desperate to recoup their losses with the big payout, they descend into a vicious cycle of sending money in hopes the false promises will turn out to be real.” (attached article)

2. politics and product marketing: ” Effective fraudsters don’t try to fill out all the gaps in a story. Like professional magicians, they know that manipulating us to reach a conclusion for ourselves is more powerful than making a direct statement. We’ll fill in the gaps in story for ourselves given the right motivation; and they know that greed and fear are both powerful motivators that they can easily manipulate.” (BBC article)

3. media/govt. regulatory complicity: This is a quote from a novel, The Girl with the Dragon Tatoo: “…the media do have an enormous responsibility. For at least twenty years many finacial reporters have refrained from scrutinising…On the contrary, the have actually helped…by publishing brainless, idolatrous portraits {of financial /political leaders-my insert}.”

The relative small scale scam (devastating for this woman and her family) is written large in the devastation of our current financial and political system.

Why are we so easy to fool?
When we fall victim to fraud, or the more legal but related forms of advertising and marketing manipulation, we often assist in our own deception. Effective fraudsters don’t try to fill out all the gaps in a story. Like professional magicians, they know that manipulating us to reach a conclusion for ourselves is more powerful than making a direct statement. We’ll fill in the gaps in story for ourselves given the right motivation; and they know that greed and fear are both powerful motivators that they can easily manipulate.

If we believe someone can enrich us, or we think they can prevent something we dread, we want to believe them and will often explain away any holes in their story for ourselves.

Once we have become victims of deception, another factor comes into play. Fraud is often under-reported. For most of us, self-esteem is important; and we, often quite unconsciously, look for ways to protect it. For this reason, we tend to pay more attention to information that builds our own self-esteem than information that threatens it. So, many of us are quite reluctant to accept that we are victims and are even more reluctant to tell others.

Intelligence and education are not a protection here. Indeed, there is some evidence that highly educated people are easier to fool, because they don’t expect to be fooled.

There are important parallels between the traits that make many of us easily deceived by fraud and those that make traders in financial markets easily deceived by market movements. In my own research on the behaviour of traders in investment banks, I found these well educated, intelligent and highly trained professionals to be often prone to illusions about the extent to which they were in control and able to make unbiased financial judgements…

Protecting yourself from fraud
So if the world is full of fraud and human psychology disposes us to be dupes, how can we protect ourselves? There is no foolproof solution, but some simple rules may help:

1. If it seems too good to be true, it probably is.
2. If a person, or organisation, starts to play on your fears it may be that person or organisation that you should fear.
3. If you are fooled, it does not mean you are an idiot. You are in good company. Do take the time to report the scam.

Article originally published 10th November 2005

A.k.a ‘The 419 Scam’

http://www.youtube.com/watch?v=uENSEfvj7uk

419 is the number in the Nigerian penal code for this ditty.