Cognitive heuristics and risk evaluation in crisis fraud

Published date06 May 2021
Date06 May 2021
Subject MatterAccounting & finance,Financial risk/company failure,Financial crime
AuthorJoshua Chang,Mark David Chong
Cognitive heuristics and risk
evaluation in crisis fraud
Joshua Chang
The University of Sydney, Sydney, Australia, and
Mark David Chong
College of Arts, Society and Education,
James Cook University, Townsville, Australia
Purpose The recent COVID-19 crisis has been followed by an epidemic of fraud. This study aims to
evaluate cases of COVID-19-related fraud to identify cognitive heuristics that inf‌luence decision-making
under the pressureof crisis conditions.
Design/methodology/approach An analysis of fraud advisories and cases relating to COVID-19 is
conducted and matched againstvarious types of cognitive heuristics to explain their inf‌luence on victimsof
crisis fraud.
Findings The affect, availability,cue-familiarity, representativenessand scarcity heuristics are identif‌ied
and explainedto have a substantialinf‌luence on risk evaluations of crisis fraud.
Originality/value The f‌indings from this study can help individuals avoid fraud victimisation by
helping them understand psychological vulnerabilities that they may be unaware of under the pressure of
crisis conditions.
Keywords Crime, Fraud, Internet, Crisis, Psychology, COVID-19
Paper type Research paper
Crisis fraud can be described as the fraud that exploits diff‌icult or dangerous periods where
victims are cognitively and emotionally impaired when attempting to make decisions under
pressures of time, such as during this COVID-19 pandemic where health, family and job
security are at risk. Crisis fraud is a similar concept to disaster fraud, the latter of which
describes how deception is usually perpetrated after the occurrence of a discrete event such as a
hurricane, earthquake or f‌lood (FEMA, 2020;NICB, 2020). Unsurprisingly, the COVID-19 crisis
is being exploited by fraudsters with thousands of related scams reported worldwide, thereby
necessitating the relevant national authorities actively monitoring such cases and warning
people against them (ACCC, 2021;Cabinet Off‌ice Government Counter Fraud Function, 2021;
DOJ, 2021). Like advance fee fraud (Dobovšek et al., 2013),thesecrisisscamsarebecoming
more frequent, increasingly targeted and potent, as well as tapping into peoplesintimate
concerns about the pandemic (SCMP, 2020). According to Interpol Secretary-General Juergen
Stock [c]ybercriminals are developing and boosting their attacks at an alarming pace,
exploiting the fear and uncertainty caused by the unstable social and economic situation
created by COVID-19(AFP, 2020). Authorities have identif‌ied several central themes of such
fraud, and these include the impersonation of authorities; fake grants and f‌inancial assistance;
fake test kits and medicines; shopping scams for high-demand items such as face masks and
fake vaccinations (ACCC, 2021;Cabinet Off‌ice Government Counter Fraud Function, 2021;DOJ,
2021;FDA, 2021). By the 1st of February 2021, the US Federal Trade Commission (FTC, 2021)
evaluation in
crisis fraud
Journalof Financial Crime
Vol.29 No. 2, 2022
pp. 447-459
© Emerald Publishing Limited
DOI 10.1108/JFC-02-2021-0030
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