Fraud Notes PDF

1/20/25, 11:23 PM OneNote Lecture 5: Fraud Friday, January 17, 2025 3:12 PM What is fraud? Fraud has a diversity of victims and offenders Definition ‘Any crime wh...

1/20/25, 11:23 PM OneNote Lecture 5: Fraud Friday, January 17, 2025 3:12 PM What is fraud? Fraud has a diversity of victims and offenders Definition ‘Any crime which uses deception as its principal modus operandi’ (Wells, 2017, p.2) ‘Fraud is the obtaining of financial advantage or causing of loss by implicit or explicit deception; it is the mechanism through which the fraudster gains an unlawful advantage or causes unlawful loss’ (Button and Cross, 2017) Fraud yields some kind of financial or economic gain to someone. Fraud does not always cause a financial or economic loss to someone. (CV fraud) The financial or economic gain does not always benefit the fraudster Fraud Act 2006 Fraud by False Representation – e.g. making false qualifications Fraud by Failing to Disclose Information – e.g. lying to insurance companies to get money Fraud by Abuse of position – e.g. accountant sending money that belonged to the government to himself Other relevant offences Possession, making or supplying of articles for use of frauds – producing fake passports Participating in a fraudulent business - working in a company that you know is doing fraudulent business Obtaining services dishonestly (Ferrell, et al 2007) - dine and dashing Economic Crime and Corporate Transparency Act 2023 Failure to prevent fraud (to be effective in 2025) - if you run a company and one of your employees commits fraud you could prosecuted for not putting in enough measures to stop fraud from happening Criminal or Unethical (Button and Cross, 2017) https://cf-my.sharepoint.com/personal/jonaszs_cardiff_ac_uk/_layouts/15/Doc.aspx?sourcedoc={edce8746-85ef-4948-8eb3-f67378cbb710}&action=ed… 1/8 1/20/25, 11:23 PM OneNote Legal spectrum of 'frauds' and 'scams' DAMAGES Upward trend in the number of fraud victims Fraud as a global problem Fraud is a transnational phenomenon West African area is famous for hosting fraudsters specialised in advanced fee fraud Europe is both victim and perpetrator of business email compromise – pretending to be someone else via email Cyber Frauds McGuire and Dowling's (2013) distinguishment of 'cyber-dependent crimes' and 'cyber-enabled crimes' Cyber-dependent frauds – frauds which could have never existed without computer technology Cyber-enabled frauds – frauds that existed before cyber technology but have now become easier because of it Influence of the Internet https://cf-my.sharepoint.com/personal/jonaszs_cardiff_ac_uk/_layouts/15/Doc.aspx?sourcedoc={edce8746-85ef-4948-8eb3-f67378cbb710}&action=ed… 2/8 1/20/25, 11:23 PM OneNote Scaling up (Button and Cross, 2017: Duffield and Grabosky, 2001) - more than half emails now are spam emails which can contain a lot of fraudulent communications New opportunities (Button and cross, 2017) - individuals from poor countries can aim to defraud rich people from rich countries instead of their own Technology tools (gee et al, 2018) - fraudsters use ChatGPT to make their communications sound legitimate Digital interface – neutralisation (button and cross, 2017) - less of a psychological block because they're behind the screen Learning – TikTok post went viral for 'money glitch' but it was actually teaching fraudulent activities Industrialisation of old frauds 'globalisation' - huge gap between the global north and south Victimless crime? Biggest misunderstanding about fraud is that there is no victim Loss reimbursed by banks? - people believe that victims of fraud always get reimbursed by banks but that is not always the case Only certain types of fraud victims get reimbursed – an overwhelming majority do not get their money back Banks are also victims Financial Loss Decline of fraud loses from unauthorised payment fraud – when you don't authorise the payment e.g. when someone's uses your to buy something/ withdraw money without your permission The losses from fraud Psychological impact (Button and Cross, 2017) Anger, stress, upset https://cf-my.sharepoint.com/personal/jonaszs_cardiff_ac_uk/_layouts/15/Doc.aspx?sourcedoc={edce8746-85ef-4948-8eb3-f67378cbb710}&action=ed… 3/8 1/20/25, 11:23 PM OneNote Embarrassment If we walked into Tesco to go shopping we would go at 9 or 10 o'clock at night because it was quieter because if we went our during the day all I saw was people looking at us (Loraine, bogus holiday fraud victim) Stress resulting eating disorders, suicidal thoughts Damages to relationships Other impacts Fear of violence Fear of arrest Rarely, but some cases resulted in murder Diversity of Victims (Poppleton et al, 2021) Victim Blaming Offenders are largely invisible due to the difficulty of prosecuting them While the third parties are another entities that are held accountable for the insufficient education and awareness (e.g. banks) people often blame victims due to the neoliberal conception of a prudential citizen (Cross, 2020) - have to be responsible for your own misfortune The stereotype of fraud victims are greedy, gullible, uneducated and somewhat deserving of their victimisation Contradiction with the images of an 'ideal victim' (button and cross, 2017) Can cause underreporting Professionals have a more nuanced and ambivalent views A game changer? The Payment System Regulator (PSR) has announced that as of 7th oct 2024 it became compulsory for banks to compensate for their customers who are tricked into sending money for fraudsters Previously some banks voluntarily compensated to different extents when it comes to authorised payment (APP: Authorised Push payment). In a case of unauthorised payment it was compulsory Under new rule, the maximum amount of compensation will be £85,000 (initially was £415000) HOW FRAUD WORKS Mechanisms of fraud Cialdini (1984) Psychology of Persuasion Reciprocation e.g. rejection-then-retreat technique Liking e.g. physically attractiveness, similarity, familiarity Social proof e.g. 'many others are believing' Authority e.g. Milgram studies, expert and trustworthy Scarcity Commitment and consistency Unity – fraudsters pretend to be your ally Elaboration Likelihood Model (Petty and Cacioppo, 1986; Langenderfer and Shimp 2001) https://cf-my.sharepoint.com/personal/jonaszs_cardiff_ac_uk/_layouts/15/Doc.aspx?sourcedoc={edce8746-85ef-4948-8eb3-f67378cbb710}&action=ed… 4/8 1/20/25, 11:23 PM OneNote 'central route' and 'peripheral route' Where there is lack of motivation to process or ability to process persuasive communication, peripheral cue (e.g. attraction) can change the cognitive structure Mechanisms of Romance Fraud Whitty's (2013) scammers persuasive techniques model Motivated to find ideal partners Presented with ideal partners: attractive pictures, including those of celebrities Grooming – carefully planned, hyper personal communication (Walther, 1996) Crises - 'scarcity' technique Sexual abuse – sextortion Recent rise of 'pig-butchering scam' Connection between romance fraud and Domestic Violence (Cross et al, 2019) - perpetrators of romance fraud use some common techniques used by perpetrators of domestic violence Isolation Tells the victims that they cannot tell others about the relationship Monopolising Making you more suspectable to control by contacting you loads Degradation Fraudsters aren't always nice and subconsciously you start to care about the mood of the perpetrator Contingent expression of love Psychological destabilisation Fraudsters make you question yourself WHY COMMIT FRAUD? Middle class crime? https://cf-my.sharepoint.com/personal/jonaszs_cardiff_ac_uk/_layouts/15/Doc.aspx?sourcedoc={edce8746-85ef-4948-8eb3-f67378cbb710}&action=ed… 5/8 1/20/25, 11:23 PM OneNote 61% of people in the UK have at some time committed at least one minor crime (Karstedt and Farrall, 2006) National retail Federation (2021) in the US found that fraudulent merchandise returns to merchants amounted to $25 billion in 2020 Employee Fraudsters 'crisis Responders' 'Opportunity seekers' 'stereotypical offenders' Less martial and occupational stability Organised Fraudsters 31 – 45% of reported frauds are perpetrated by organised groups (perpetuity research and police foundation, 2016) Fraudsters can participate in both ad-hoc, short-lived connections and a hierarchal organisation International mobility Include legitimate companies Connection between fraud and human trafficking History (Franceschini, li and bo 2023) First appeared in Taiwan with phone-based scheme called 'scratch card lottery' in 1990s Started in China, after authorities started to take server measures, they industry moved to southeast Asia, especially Cambodia and Philippines Mid – late 2010s, industry started to use large walled compounds Rise of online gambling industry in Philippines and Cambodia Scam compounds have spread all around southeast Asia and beyond Human Research Consultancy 2022 Victim- offender overlap Workers are from a variety of countries, mixed gender profiles, 18-30 yo Recruitment via legitimate legal job hunting websites, private job-matching groups, personal networks If they didn't meet a quota by scamming people they would get abused Serve human right breach Restriction of movement Sexual and psychical abuse Openly sold between employers Debt bondage Neutralisation https://cf-my.sharepoint.com/personal/jonaszs_cardiff_ac_uk/_layouts/15/Doc.aspx?sourcedoc={edce8746-85ef-4948-8eb3-f67378cbb710}&action=ed… 6/8 1/20/25, 11:23 PM OneNote Strain theory Possible strains – even white collar people feel strain, blockage of economic goals, the inability to achieve status goals and work-related stressors Corporate-level strain – globalisation of business, rapid social change, national/international economic instability, internation competition However, some found that companies engage in frauds when the whole industry is developing, rather than under strain either at the corporation or industry level Routine activity theory Kassem and Higson's 'new fraud triangle' Differential association and culture Learning fraud techniques from colleagues Role of local communities (e.g. workplace) in engaging cash-for-cash insurance fraud Everydayness of fraudulent activities – market anomie (fear of being victimised by a fraudster, distrust in business and market institutions, legal cynicism) predict the willingness to engage with fraudulent activities Conclusion Homogeneity of fraud Fraud has become a global concern Damages caused by fraud have many dimensions Victim blaming and sophisticated fraudulent techniques Linkages between fraud and other types of offences https://cf-my.sharepoint.com/personal/jonaszs_cardiff_ac_uk/_layouts/15/Doc.aspx?sourcedoc={edce8746-85ef-4948-8eb3-f67378cbb710}&action=ed… 7/8 1/20/25, 11:23 PM OneNote https://cf-my.sharepoint.com/personal/jonaszs_cardiff_ac_uk/_layouts/15/Doc.aspx?sourcedoc={edce8746-85ef-4948-8eb3-f67378cbb710}&action=ed… 8/8