Opening Remarks: 9:00 – 9:15 am

2. Chairman William Kovacic Chairman, Federal Trade Commission Opening Remarks: 9:00 – 9:15 am

3. Becoming a Scam Artist, Understanding the Victim: Exploring the Psychology of Scammers and Victims Moderator: Dan Salsburg, Assistant Director, Division of Marketing Practices, FTC Panelists: Lynne M. Vieraitis, Ph. D., Associate Professor, Criminology Program, University of Texas at Dallas Jim Vitale, Former telemarketer of fraudulent business opportunity Doug Shadel, State Director, AARP Washington Panel 1: 9:15 – 10:45 am

4. The Motivations and Lifestylesof Identity Thieves Lynne M. Vieraitis, Ph.D. University of Texas at Dallas Heith Copes, Ph.D. University of Alabama at Birmingham

5. INTRODUCTION • Overview of Identity Theft • Decision-Making of Offenders

6. Methodology • Sampling • Newspapers • Press Releases • Data Collection • Federal Bureau of Prisons • Interviews

7. Key Findings • Motivations • Justifications • Perceptions of Risk

8. Money • Primary motivation “It’s all about the money. That’s all it’s about. It’s all about the money. If there ain’t no money, it don’t make sense.”

9. Lifestyles • Street—Partying Lifestyle “…getting money and getting high.” “It comes in and you throw it out. . . Partying, females… I bought a lot of things… I mean it’s a party… Just to party, go to clubs, strip clubs and stuff. Just to party.”

10. Lifestyles, cont. • Conventional “…to maintain an upper class lifestyle. To be able to ride in first class, the best hotels, the best everything.” “…putting it away, saving it. Nothing flashy. Just living off it.” “I had been laid off at work, my son was in trouble, about to go to jail. I needed money for a lawyer.”

11. Denial of Harm* Denial of Victim Diffusion of Responsibility Appeal to Higher Loyalties Justifications

12. “I always thought that just because it was white collar crime it didn’t hurt nobody.” “…it’s plastic. No one was being hurt.” “Everything that I did was based on opening, grabbing the identity and then opening separate accounts. It didn’t, it affected them, but it was different.” Denial of Harm

13. “Man I can’t do that…Intentionally screw someone over…It’s just, it’s not right to me. So I couldn’t do it. But corporations, banks, police departments, government – oh, yeah, let’s go get ‘em. Because that’s the way they treat you, you know what I’m saying. If they done screwed me over, screw them.” Denial of Victim

14. “I’m an outside guy. I’m not really involved. I don’t know what’s going on. I’m not making no transactions. None of this money is coming into any of my bank accounts. So I don’t have nothing to do with it. But now I look like I’m the main guy.” Diffusion of Responsibility

15. “…but I don’t regret at all what I did because everything that I did was for the safety of my kids. And I don’t regret it. As a mother, I think you do whatever needs to [be done] to keep your kids safe.” “I did it for my son…I just wanted my son to be happy and loved.” Appeal to Higher Loyalties

16. Perceptions of Risk • Think Positively • Risk of Detection • Perceptions of Punishment

17. Don’t dwell on risks Think positive for success “I was super-optimistic.” “…it’s just like you get a superpower. You don’t think you’re going to get caught.” Think Positively

18. Low Risk of Detection Skills “It was calculated risk. Before the feds actually got me the first time, I never worried about getting caught. And that’s the truth. I never worried about getting caught. Because that’s how quick and good I was.” Risk of Detection

19. Minimal expectations “I did, but as I said, my mind frame was that it’s white collar crime. At that point in time, back then, everyone that was getting [convicted of] white collar crime was getting a slap on the wrist.” “…fired from my job. Yeah, that’s the worse I thought I’d get.” Perceptions of Punishment

20. Conclusion • Rewarding • Easily Justified • Risk-free

21. This project was supported by Grant No. 2005-IJ-CX-0012 awarded by the National Institute of Justice, Office of Justice Programs, U.S. Department of Justice. Points of view in this document are those of the authors and do not necessarily represent the official position or policies of the U.S. Department of Justice. Acknowledgements

22. Former telemarketer of fraudulent business opportunity Jim Vitale

23. State Director AARP Washington, Seattle, WA Doug Shadel

24. Advances in Fraud Prevention Research Doug Shadel State Director AARP Washington FTC Fraud Forum February 25, 2009

25. Advances in Fraud Prevention Research Contributing Organizations AARP Washington AARP Foundation Consumer Fraud Research Group FINRA Investor Education Foundation National Telemarketing Victim Call Center

26. Advances in Fraud Prevention Research Consumer Fraud Research Group Anthony Pratkanis – University of California Doug Shadel – AARP Washington Karla Pak – AARP Washington Bridget Small – AARP Foundation Melodye Kleinman – Telemarketing Victim Call Center Bruce Carlson – AARP Washington

27. Advances in Fraud Prevention Research Overview Profiles: What we know (and don’t know) about victims. Persuasion: Common psychological tactics found in fraud. Prevention: Challenges and Successes.

28. Advances in Fraud Prevention Research Profiling What we know (and don’t know) about victims.

29. Advances in Fraud Prevention Research Victim Profile Studies Off the Hook (2003) USDOJ/AARP Foundation – A survey of 500 general population and 310 lottery fraud victims. Investor Fraud Victim Study (2006) FINRA Foundation/WISE Senior Services - A survey of 160 general population, 80 investment fraud victims and 80 lottery fraud victims. Stolen Futures Investor Study (2007) AARP Washington – A survey of 258 general population and 125 investment fraud victims. Profiling Investment Fraud Victims (2008) AARP Foundation – A survey of 150 general population and 150 investment fraud victims. Lottery Fraud Victims and Cognitive Capacity (2008) AARP Foundation. Mental status evaluations of known lottery fraud victims. Study still underway.

30. Advances in Fraud Prevention Research Victim Survey Methodology *Use Random Digit Dialing sampling to select a general population. *Work with law enforcement to identify individuals whose victim status has been verified. *Develop survey instruments that measure demographic, psychological, behavioral and situational characteristics of each group. *Administer survey to general population and victim list.

31. Advances in Fraud Prevention Research Profile of Investment Fraud Victims *Male *55-61 years old *More financially literate *College-educated *Higher income *Internal locus of control *More Optimistic *Less “Persuasion” Literate *Open to new sales presentations *Take more risks

32. Advances in Fraud Prevention Research Profile of Lottery Fraud Victims *Female *Over 70 years old *Less financially literate *Less educated *More negative life experiences *Earns less than 30k per year *External locus of control *Cognitive Impairment

33. Advances in Fraud Prevention Research Benefits of Profiling *Target a much smaller subset of the population. *Customize prevention messages to fit the profile: Lottery Profile - A 75 year old, low income, single woman Investment Profile - A 58 year old, higher income, married man *Find common characteristics that link some victims together (ie) Inability to spot persuasion.

34. Advances in Fraud Prevention Research Gaps in Profile Research Investment and lottery victim profiles are well developed. But profiles of other victim types are not: *Mortgage fraud *Advance fee loan fraud *Foreign money offer fraud *“Romance” fraud *Phishing fraud *Internet auction fraud *Travel fraud Privacy rules have made it difficult to get victim lists.

35. Advances in Fraud Prevention Research Persuasion Common psychological tactics found in fraud.

36. Advances in Fraud Prevention Research Undercover Audiotapes Project Analysis of over 300 undercover fraud tapes completed by AARP and the FINRA Investor Education Foundation in 2006 identified the most common persuasion tactics used by con men by scam type.

37. Advances in Fraud Prevention Research Most Commonly Used Persuasion Tactics Phantom Fixation (22.39%) “The El Gordo is the biggest, most lucrative lottery in the world and you have won big.” Scarcity(15.11%) “Time is running out and if you don’t make a decision right now, I will give your winnings to the second place qualifier.” Source Credibility(10.88%) “This is John D’Arme from the Royal Canadian Mounted Police…I have good news for you.” Comparison(9.53%) “The regular price on this coin is $3,000, but if you buy it today, you will pay only $899.” Social Proof(5.58%) “Everyone is calling wanting to participate in this promotion.”

38. Advances in Fraud Prevention Research

39. Advances in Fraud Prevention Research Percentage of Persuasion Tactics used by Scam Type

40. Advances in Fraud Prevention Research Victims and Persuasion Literacy Two separate studies have found that investment fraud victims are less “persuasion literate” than the general investor population. Victims were asked to rate their interest in a series of con man persuasion statements on a scale of 1 to 7. The average percentage of victims scoring 5-7 (strong interest) was greater than the general population.

41. Advances in Fraud Prevention Research Persuasion Literacy: Victims Show Higher Interest in Con Statements

42. Advances in Fraud Prevention Research Interest in Con Man Persuasion Statements Source: AARP Washington - 2007

43. Advances in Fraud Prevention Research Interest in Con Man Persuasion Statements Source: AARP Foundation - 2008

44. Advances in Fraud Prevention Research Key Points about Persuasion *It is possible to identify the most common persuasion tactics used in fraud (ie. Phantoms, scarcity, source credibility). *Scams themselves change over time, but the underlying persuasion tactics remain the same. *Victims have been shown to be less “persuasion literate” than the general population. *Studies have shown if you can see a persuasive communication coming from a distance, you are better able to defend against it by developing counter-arguments or refusal scripts.

45. Advances in Fraud Prevention Research Prevention Challenges and Successes

46. Advances in Fraud Prevention Research Challenges to Preventing Fraud Psychological Barriers *Illusion of invulnerability (I can’t be taken.) *Reactance (You’re not the boss of me.) *Threats to self-esteem (I am not stupid.) *Too much information (I cant remember what you taught me.) Systemic Barriers *Scams everywhere (how do you warn against so many different frauds?) *Scale (how do you reach a critical mass of consumers?) *Proving a negative (how to you show when something doesn’t happen?) *Persistence (if you can show a preventative effect, does it last?)

47. Advances in Fraud Prevention Research Tactics That Work *Outsmarting Investment Fraud Workshop - A 90 minute workshop centered around how con artists use persuasion as a way to help investors avoid fraud – co-developed by the FINRA Foundation and AARP. *Fraud Fighter Call Centers – A national program where volunteers provide one on one peer counseling to victims and potential victims of fraud – co-developed by the AARP Foundation and the National Telemarketing Victim Call Center.

48. Advances in Fraud Prevention Research • Outsmarting Investment Fraud • *Workshop is centered on persuasion education and employs a variety • of tools including videotapes, lecture, powerpoint and audience participation exercises. *Self-assessment quiz is administered to address the “illusion of invulnerability”. *Participants are told they are being trained to warn others, thus addressing the reactance and threats to self-esteem barriers. • *A simple decision rule: is the broker licensed and is the investment is registered?

49. Advances in Fraud Prevention Research • Testing the Outsmarting Investment Fraud Curriculum • Method of testing: A group of investors randomly self-selected to attend • one of two workshops. 117 attended the first group, 158 the second • group a week later. In between workshops, a former professional con • man was hired to pitch both groups with a fraudulent investment offer. • The hypothesis: The first group that received the training would respond • less than the second group that had not received the training.

50. Advances in Fraud Prevention Research 17.6 Source: FINRA Investor Education Foundation - 2008