The Fraud Examiner

Think you're too educated to become a fraud victim?

By: Martin Kenney, CFE and Dr. Alexander Stein

Martin Kenney & Co. Solicitors                           

A major Indonesian newspaper recently carried an article that claimed the country’s investment scams were highly successful because of “low financial literacy” among the Indonesian population at large.

The article cited a report by a researcher at Prasetiya Mulya University who concluded that financial illiteracy was indeed a major factor in a large number of the country’s frauds. His paper also asserted that women were more vulnerable than men when it came to fraud schemes.

As a lawyer who specializes in the investigation of international fraud and asset recovery, I initially read the piece with some surprise.

My first response was skepticism about the connection between financial illiteracy and fraud. The claim about women was unlikely, as well as bordering on offensive, and something which would certainly trigger a lot of backlash if it were published in Canada, the U.K. or the U.S.

As I read on, however, I eventually grasped the context of Indonesian culture — men ordinarily hand over their salaries to their wives who then manage the household purse-strings. In this setting it’s hardly surprising that women are defrauded more often than men, simply because they are managing the family finances.

The research also concluded that financial literacy was not always in keeping with the victim’s education level. Now all was becoming clearer — this was neither intended as sexist nor as a slight against the Indonesian education system. Actually, the report affirmed what we have been saying for years — no matter how clever, experienced or sophisticated you are, everyone is vulnerable to becoming a victim of fraud.

The lack of correlation between a person’s education and their propensity to fall victim to a fraudster is all too familiar. Fraudsters are entrepreneurs. The types of fraud they perpetrate and the marketplaces in which they find success vary depending on their talents, skills and operating comfort zones.

Also, fraud is a relational crime. Potential victims — prospective marks — will be more susceptible to the persuasions or pressures of someone with whom they are familiar. It can be difficult to say “no” in such circumstances. People are often charmed or seduced by compelling elements which resonate as emotionally familiar. Everyone scans for certain cues regarding other people's education or social station, but ultimately we can give over trust or suspend disbelief for reasons unconnected to rational thought.

We deal on a daily basis with clients who are savvy and well-educated. Our clientele are professional individuals who are university graduates and who have built up companies and businesses that transcend international boundaries. They are astute businesspeople who comfortably wield authority and whose backgrounds demand respect. However, none of them are necessarily immune to the silver-tongued fraudsters who weave tales of investment daring-do, and convince these marvelous businesspeople to part with their hard-earned funds.

Being a fraud victim is a trauma. It predictably triggers some common human responses — including embarrassment, shame, guilt and outrage — regardless of whether you're a fund manager, trader, corporate CEO, high-flying investor or an Indonesian housewife.

In this, fraud and other cons are very different from crimes of force, not only in how they're executed but in what it's like for victims afterwards. The money-or-your-life scenario is a no-brainer when looking down the wrong end of a pistol. Law enforcement professionals always recommend acquiescence, not heroics, and everyone understands that you really have no choice but to hand over your valuables.

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