The application of scam compliance models to investment fraud offending

Date23 March 2020
Publication Date23 March 2020
AuthorDavid Lacey,Sigi Goode,Jerry Pawada,Dennis Gibson
SubjectHealth & social care,Criminology & forensic psychology
The application of scam compliance
models to investment fraud offending
David Lacey, Sigi Goode, Jerry Pawada and Dennis Gibson
Purpose The purpose of this paper is to undertake an exploratorystudy on mapping the investment
fraud methodsand tactics used by scammers againstthe emerging literature on scam compliance.
Design/methodology/approach Qualitative interviews were conducted with victims of investment
fraud supported by the engagement of specialist counsellors and allied health professionals who
specialisein scam victim support (including investmentfraud).
Findings Investment fraud offendingin the cases sampled exhibited a number of dominant offending
traits and methodologicalthemes. These included a strongreliance or dependency on legitimateservice
provisioningon the part of the fraudster and the use of key trust measures to lure the victim. The empirical
data revealed the presence of a number of scam compliance influences captured in the literature,
including trust, socialinfluence and urgency, as well as others not previously documented that pavethe
way for furtherresearch attention.
Research limitations/implications The research only examined a sample of investmentfraud victim
experiences that engaged a national victim support service immediately following detection over a 24
month period.
Practical implications The researchfound that offending relied uponthe participation of trust-building
signals and measures. Legitimate economy participants appear to play a dominant role in enabling
investment scam activities, further creating efficiencies for criminals. The offending tended to follow a
number of distinctbut connected phases. Impacts were influencedby specific offending attributes, such
as whether remoteaccess was given to offenders of a victim’s device,as well as the nature of the identity
Originality/value The research has practically applied an emerging view of scam compliance
influences and vulnerabilities within an investment fraud context. The study is novel in its thematic
analysisof the distinct phases and tacticsused by scammers.
Keywords Fraud, Cryptocurrency, Investment, Victims, Crime prevention, Deception, Victimisation,
Scam, Scam compliance
Paper type Research paper
Investment fraud, involving the solicitation of investment opportunities in non-existent or
worthless shares or securities, is increasing. According to the Australian Crime Commission
(2012), investment fraud is a calculated, sophisticated organised crime that can impact
experienced and non-experienced investors alike and not opportunistic as common
wisdom might suggest. The Australian Competition and Consumer Commission (ACCC)
recorded a 74 per cent monthly increase in investment fraud scam reports impacting
Australians from July 2018 to June 2019 (ACCC, 2019). IDCARE, the national identity theft,
scam and cybercrime victim support service for Australia and New Zealand, reported an
equally dramatic growth in demand for its charitable support services over the same period
(IDCARE, 2019). Anecdotal evidence in popular literature and news publications indicate
that investment scams can have highly damaging effects on individuals, their families and
livelihoods. According to the Australian Criminal Intelligence Commission, investments
David Lacey is based at the
Institute for Cyber
Investigations and
Forensics, University of the
Sunshine Coast,
Maroochydore, Australia.
Sigi Goode is based at the
Research School of
Management, Australian
National University,
Sydney, Australia. Jerry
Pawada is based at the
School of Banking and
Finance, University of New
South Wales, Canberra,
Australia. Dennis Gibson is
based at the School of Law
and Criminology, University
of the Sunshine Coast
Maroochydore, Australia.
Received 9 December 2019
Revised 16 January 2020
Accepted 16 January 2020
The authors wish to
acknowledge the staff and
clients of IDCARE, Australia
and New Zealand’s national
identity and cyber support
service and for the ethics
approval provided by the
University of the Sunshine
Coast (S16867). We also note
that one of the authors is on the
Board of the support
organisation and has managed
this conflict through clear
conflict treatment processes
that are aligned to that
organisation’s research and
student placement policy.
DOI 10.1108/JCRPP-12-2019-0073 VOL. 6 NO. 1 2020, pp. 65-81, ©Emerald Publishing Limited, ISSN 2056-3841 jJOURNAL OF CRIMINOLOGICAL RESEARCH, POLICY AND PRACTICE jPAGE 65
scams result in hundreds of millions of dollars in proceeds of crime generated
internationally each year (Australian Criminal Intelligence Commission, 2017). Despite the
severity of this type of fraud, there has been little focus on the application of psychological
and criminological models that serve to explain or understand scam compliance and
investment fraud. As a result, little is understood about how scammers deliberately
construct “fake” investment opportunities and the attributes of such scams in validating
such models.
The aim of this research is to consolidate the ex ante researchon scam compliance and the
attributes thought to influence an individual’s vulnerability to being scammed and examine
this in the context of empirical data on the contemporary attributes and methods used by
scammers to elicit compliant behaviours (i.e. to invest and keep investing in the fraud). In
doing so, the paper addresses two research questions:
RQ1. What is a contemporary model of scam compliance in drawing from the
psychologicaland criminological literatures relevant to investmentfraud?
RQ2. To what extent do scam compliance predictors or influences apply to investment
scam offendingtraits?
To answer these questions, a literature review was undertaken on scam compliance that
drew upon emerging works cited in the psychologyand criminology disciplines to construct
the scam compliance model. Complementing this work was the access and qualitative
analysis of 583 investment fraud casescollected as part of a larger study on the predictors,
influences and response strategies relating to scams impacting the Australian community.
Each case presented an opportunity to map the precise methods used by offenders and
experienced by victims, includingthe distinct phases of offending.
The paper is structured in firstly capturing key prior literature into the characteristics of
scam compliance in building a consolidated view or model of the attributes identified as
creating vulnerabilities or increasing the susceptibility towards complyingwith a scammer’s
request (in this paper, the investment of money in a scheme that does not exist).The paper
then presents the research method and analysis of offending data from the case files
examined. The analysis specifically examines the overlap between ex ante scam
compliance influences with the distinct phases and methods captured from the analysis of
the investment fraud offending from first-hand accounts. The paper then discusses the
extent to which offenders seek to createconditions that give rise to the scam model.
Investment scam victimisation
Investment scams in their contemporary form deceive individuals to commit funds to an
“investment”, often through a purported investment broker or trader, to achieve a financial
return. The deception relates to both the investment itself not existing, in most cases, the
legitimate broker or trader, or leavingthe investor unable to recover the funds they invested.
In extreme instances, the investment deception includes providing would-be investors with
access to an online broker portal or specialist software package, whereby investors can
literally watch their fake investmentbalance grow on a graphic display.
Prior to engaging the literature on scam compliance, it is important to explore what studies
have focused on the context of investment fraud and their relevant findings to this work. Of
the studies that have considered the issue, none have been found to examine the extent to
which offenders and their construction of the scam setting encourage or promote known
predictors or influences of scam compliance. Instead research has either reflected the
demographics of the investment fraud victim (Deevy et al.,2012), the likely reasons behind
the demographic skew (such as to a retiree or near-retirement population) (Blanton, 2012)
or their financial status or accumulatedwealth (Lokanan, 2014).

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