FRAUDULENT STRATEGIES
collective insight
By Michael StreatfieldFly on the wall at the Meeting
of the Empyre of Evill (sic)
Beware financial fraud, we always hear. Yet, people still get conned. This cautionary tale goes ‘behind-the-scenes’ to take
a closer look at the methods fraudsters use to fool so many, and the new ways in which these villains plan to scam you.j
oin us as a fly on the wall at this fictitious villain's
meeting where we will learn how criminal masterminds
look to scam individuals. Now, please be quiet, mute
your microphones – their meeting is about to begin...“Order! Order! Let the fifteenth AGM of the
Empyre of Evill begin,” went the chair,
banging his gavel, stilling the chattering
in the rather hazy (from vaping, no
longer cigars!) boardroom.
“We, the Empyre of Evill, pride
ourselves on duping the herd and
separating them from their hard-
earned savings. Recall our three
pillars: one, financial statement
fraud; two, fraudulent mis-selling.
And finally, today’s focus, financial
scams – from investment sham
businesses to Ponzi schemes and
financial identity scams.
“Today, our collective is gathered to
discuss new ways forward.”
A hand shot up. It was that young new data
science guy, Doc Data. “Er. Pardon me, but...um...Why is
the organisation name spelt wrong?” The table groaned.
Someone hissed “Not again!”
The chair patiently intoned with an iron glare.
“Yes. Yes. We know. Our Nigerian prince 419 scam
operative never got around to installing the English
US dictionary on his pirated Eastern European Office
software. It’s our website name on
the dark web, and so be it.
“Google spam filters now spot
those corkers a mile away. Can we
stick to the agenda? New ideas.
How do we trick people now?”
Ms X of Incredible Wealth Inc.
piped up: “We still love emails and
dubious marketing. You simply
cannot beat this old chestnut.
Take the best short period of an
investment track record, say it went up like 20% in three
weeks, and blow it up over a year and dupe them so you
can get 346% per annum!” ((52/3) * 20%)
The shield of financial knowledge
The picky Prof Blacklist tut-tutted: “Nonsense madam,
your analysis is confounding the current structural lower
32 finweek 15 August 2019 http://www.fin24.com/finweekinterest rate cycle, which is making investors yield-
hungry. My erstwhile Durham University colleagues found
that one standard deviation more financial knowledge
predicates a higher propensity to detect fraud by 3%. Alas,
being prudent is no help though.”
“Yeah, right on guv,” popping out a huge vape smoke
ring, the tattooed London gangster, Lewis Cipher,
mused: “The people’s been reading financial
blogs and such, innit? Like, Collective
Insight, like. So they know wicked
financially literal now...”
“Hughhh”, interjected Prof. “You
mean literate, financially literate, you
ignoramus.”
“Stay focused please villains,”
interjected the chair. “What are the
current barriers?”
The young Doc summarised: “It is
certainly not as easy these days. Well, as
Prof said, people are more knowledgeable,
and sharing horror stories on social media
raises awareness.”Bank barricading but fintech flimsy
Cipher cracked his knuckles. “Yeah plus Banks 2FA – two
factor authentication – is a right on pain. Protecting the
geezers. Mr Regulator been all over the banks so they
toughened up like a frozen walnut.
“But I love me fintech man,” chortled Cipher. “These
guys in a garage are always behind the innovation in proper
data security. Crack ‘em open like a lobster.”
Doc continued. “In a digital world, more
info is our friend. We need to move from
spam to more targeted attacks.”
“Yes, yes,” interrupted the Prof. “We need
to exploit information asymmetries. The
eponymous Dunning Kruger effect means
those with less knowledge are overconfident
and over-estimate their abilities.”
[Fly note: In a 1998 article in The
American Journal of Economics and
Sociology, Steven Pressman disagreed – it’s not
asymmetry, but psychology and decision-making under
uncertainty about the future that makes fraud prevalent.]Weakness of human nature induces the leap of faith
“True. Well, truish,” Ms X beamed. “For the heart of a good
scam is human psychology. You have to lower your mark’s“These guys
in a garage are
always behind the
innovation in proper
data security.”