How to Identify and Avoid Financial Fraud 2.0

Episode 2: The Psychology Behind Fraud

As you must have known by now from our last episode, fraud means obtaining something of value or avoiding an obligation by means of deception.

Before any financial fraud takes place, the fraudster must have had a well planned and fail proof strategy to convince you to dip your hand into your wallet.

Your desire to identify and avoid financial fraud will only be a pipe dream if you don’t first of all understand the workings of your mind, emotions and your behavior towards money.

For you to successfully fight your enemy, you have to at least know who he is and some of his devises. That is exactly what this episode of the series seeks to address.

I don’t intend to bore you with the nitty-gritty of the science of persuasion and how the con artist’s devises work to manipulate your mind just before you get scammed. That’ll take lots of pages to cover.

However, I will let you in on the origin of people’s vulnerability to fraud according to Robert Cialdini, formerly Regents’ Professor of Psychology and Marketing at Arizona State University.

Robert says the root cause of people falling victim to a financial fraud is their uncertainty about the details of the financial environment.

When people feel uncertain about financial decisions, he notes, they look outside themselves, and this sets them up for the fraud.

To seek reassurance and help reduce their uncertainty, people often turn to others who appear to be experts — or at least to ones who proclaim to be experts.

The second place we look when we are uncertain is to our peers…

We tend to be willing to say “yes” to our friends because we think they’re steering us right and because it’s very awkward to say “no” to a friend who comes to us with a great proposition — and is staking his reputation and status on it.

I want you to take your mind back to your past…

How many times have a close friend or supposed mentor you respect so well approached you with a dubious investment or Ponzi scheme?

Can you recall that still small voice telling you not to trust the investment?

Can you also recall how you finally gave in and put in your money, sole out of TRUST and RESPECT for that your friend?

That’s exactly how the your psychology worked to make you vulnerable to fraud.

The third place people turn to for advice is the internet. This includes search engines, social media and their emails.

When you are not financially savvy and you seek for easy, free and fast ways to multiply your money from unverified online sources, you are going to be an easy prey for Financial Fraud.

This is because every glitter will look like gold for you. You will effortlessly fall prey to the strategic deception of con artists parading as experts.

Now, do you know what makes con artist so successful in their fraudulent activities?

They feed on your “ignorant confidence”.

By that I mean your purported confidence in your knowledge to make the right financial decision for yourself even when you are grossly ignorant or half-knowlegible.

I learnt that the “con” in conman is short for “confidence”. People want to believe you can get something for nothing.

The truth is that many people really have no well-defined path to greater wealth. They are limited by circumstance, financial education, ability, etc. The con artist succeeds because he appears to offer a way around all that.

He succeeds by making outrageous claims that are supposed to get you quickly ahead financially – skipping the tedious long term process of saving and wise investment.

The bottom line of today’s episode is this:

It is your responsibility to protect your money and you can only do that by being aware of the Conman’s devices and investing in your own financial intelligence.

In the next episode, we are going to consider in-depth Why People Fall For Financial Fraud.

You will get to understand in specific terms the conditions that make you most vulnerable to fraud so that you can learn to shied yourself.
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If you are excited about this series, share this article on your social media platforms using any of the buttons below so as to keep your friends informed.

Remember, when they get their fingers burnt via poor financial decisions, you will directly or indirectly be affected.

Do them a favor by telling them about the great things you’re learning from the FINTEL Coach on this blog.

Have you any questions or suggestions from today’s episode? Make use of the comments box below.

If you don’t have any question, just type “I’m following the series” to encourage me.

If you are interested in knowing more about why people commit fraud, you can read this article by Business Insider

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Time to take the bull of your personal finance by the horns. Have you gotten your sample copy of my book How To Save Like A PRO yet?

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