7 principles behind being scammed

The Madoff debacle has many of us wondering just how so many sharp people made such a tragic mistake.

A pair of researchers from the University of Cambridge's Computer Loboratory recently released a report that explains just how we fall victim to scams like Madoff's: three-card monte, the ring reward rip-off, the money machine scam, and the shop phone call swindle. The key? Those darned inconvenient human emotions.

In their paper, Frank Stajano and Paul Wilson broke our vulnerabilities into seven principles:

The Distraction Principle

We all know that magicians use distraction to entice us to watch one hand (pointing to a scantily-clad beauty, in many cases) while their other hand is making the "magical" switch. Scammers do the same thing, using partners to create distractions at the moment when your money becomes theirs. Faux police raids, dishes dropped, bodices ripping, all can pull your eyes away at the wrong moment.

The Social Compliance Principle
Often in the guise of policemen, cons play on our tendency to cooperate with authorities, those we perceive to be above us in the work or social heirarchy, or those carrying out a familiar task to our benefit (such as a valet). The valet steal is a scam predicated on this principle, where we willingly turn over our car to anyone standing in front of a fancy restaurant or hotel next to a "Valet parking" sign and wearing a uniform or badge.

The Herd Principle
Those who lead the pack run the risk of receiving the first bullet, so humans naturally favor following behind. Swindlers play on this by using their pals to establish a herd mentality, so you won't appear to be the mark in a shell game, but merely one of several players. Unfortunately, everyone but you is part of the scam. I see this at work at the coffee shop when it's busy: when one person willingly leaves their laptop unguarded while they head to the restroom, it unleashed a flood of others who now feel that it's OK to do so.

The Dishonesty Principle

Con people love to lure you into a scam that requires you to do something against the law; such as helping pass a few bills that you believe are counterfeit. Why? Because once you've been conned by those you thought you were conning, you won't be able to go to the police for redress.

The Deception Principle
The authors related how a British TV show that exposed scams built a fake ATM on a busy street that a scammer could sit within to grab info from the cards of dupes that attempted to use the machine. Before the fake ATM was even complete, though, while its back was still exposed to view, passersby were already trying to use it. Scammers play upon our familiarity with devices, situations and people to deceive us. We often judge people by their demeanor, and a deft con can do a spot-on cop, investment banker or horny housewife. Paranoia is not all bad.

The Need and Greed Principle
The more you need and lust for something, the more vulnerable you are to a swindle. You might control a donkey with a carrot, but humans are just as easy to manipulate with a carat or a roll in the hay. The lottery scam works on this. The con arranges to befriend you, perhaps through his partner, confesses that he is an illegal immigrant who has a winning lottery ticket but cannot cash it in without risking deportation, so he offers you a cut. Of course, you'll need to give him a good-faith payment before he turns it over. Your need, your greed, results in you holding a counterfeit ticket and an empty wallet.

The Time Principle
Many of us make good decisions with enough time to think, but stupid ones when rushed. Scammers play on this by escalating the pitch, adding an urgency that doesn't allow us time to step back and evaluate the deal. In advertising, you'll see "Offer expires at 5 p.m." In the con game, this takes the form of "I've got another guy coming by in an hour; if you don't take the deal, he will," or "the cops are on their way."

How can you minimize the odds of being swindled? Using the info above, I've created a cheat sheet that you can use to identify scams and scammers.
  1. Is someone attempting to distract you?
  2. Have you confirmed the identity of the cop, the valet, the bank representative who wants something from you?
  3. Just because everyone else is doing something doesn't mean its a good idea for you. Think for yourself.
  4. Don't listen to the larceny in your heart. If the deal is illegal, pass.
  5. Don't automatically believe what you see when money is on the line. Does that ATM have a card skimmer attached? Is that counterfeit money detecting pen real?
  6. Evaluate your greed level. The higher it is, the move vulnerable you are to a scam, the more you need to take care.
  7. What's the rush? If the deal is only good for a short time, be extra suspicious.
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