Investment Scam Compliance and Susceptibility to Persuasion

Authors:
Adrada, Dave Moore R.
Cadimas, Niña Marie A.
Dalida, Trisha Marie S.
Judilla, Michelle S.
Rizardo, Jennifer B.

Abstract
This research study will provide an insight about investment scam compliance
and susceptibility to persuasion to the existing literature. In this study the researchers’
use narrative study to identify common themes related to the persuasion techniques
used by scammers and discuss what techniques are widely used by scammers to gain
compliance. A total of 5 participants is included for this research paper and shared their
own experiences. There are four main themes that are being identified that represent
the investment scam compliance and susceptibility to persuasion. The first one is the
techniques, second is psychological effects, third is the social effects and fourth is the
realizations/learnings. Seven social influence tactics, based on cognitive heuristics or
short-cuts, were discussed. These tactics, commitment and consistency, scarcity, social
proof and source credibility are all based on common rules for judging situations and
making decisions. Different techniques are revealed in persuading the victim as a tool of
persuasion.

Introduction
Even though numerous individuals know about the risks of scam, but not
everyone know about the underlying factors that govern scam compliance, some of
which are evoked by highly develop scamming techniques, or how their individual
personality make them comply with scammers. Aside of their financial loss, victims lose
far more than that.

1
 At the point when a persuasive message gotten, one of the two routes will be
picked relying upon the motivation and their ability to process the relevant information.
Using the peripheral route, one is probably going to focus on superficial cues, such as,
how appealing the communicator is, rather than looking for proof to support the claims
in the persuasive message. The central route is focus on the message arguments and
lead to change depend upon the argument quality.

Cacioppo and Petty (1982) contended that people low in the psychological
construct, 'need for cognition' (who do not enjoy effortful cognitive activities) tend to
process information by means of the peripheral route, in contrast to those with high
requirement for cognition, who depend less on peripheral cues and process data by
applying greater cognitive effort.

In the study by Cacioppo, Petty, Kao and Rodriguez (1986), participants were
given a Need for Cognition measure (Cacioppo et al., 1984) and were approached to
listen to a recorded message about educational expenses. The arguments in the
message were intentionally made weak or strong and participants were asked about
argument quality, just as being requested their assessment regarding the matter from
educational expenses. They were again approached to review their considerations while
they were listening to the message and to record as numerous arguments they recollect
from the message they heard. Participants were additionally approached to report how
much exertion they put into assessing the message. The examination found that people
low in 'need for cognition' were less segregating while assessing frail and solid
messages, were less influenced by contention quality and reviewed less contentions
when inquired. They additionally announced using less exertion assessing contentions
than those high in need for cognition.

Review Related Literature

Investment scams are otherwise called 'boiler room fraud' because of the way
that scammers target casualties with high-pressure strategies, frequently imitating or
cloning genuine organizations to add credibility to the scheme. Investment scams falling
under this classification incorporate high-risk investments, property speculation plans

2
(Catch et al., 2009a; Kerr et al., 2013) with casualties of this sort of scam frequently
having some level of financial knowledge, making them feel certain enough about their
decicions (Lea et al., 2009).
The expenses related with scams cannot be summed up just as financial loss.
Titus and Gover (2001) contended that scam often causes considerable harm to victims
as it involves deception and this degrades the 'moral fibre' of the society.
Notwithstanding this, the mental impacts of scam are oftentimes not taken seriously and
fraud victims are less likely to receive sympathy or support from others, something that
is often extended to crime victims with visible injuries (Titus and Gover, 2001).
Scam has devastatingly affects on the victims. Oftentimes, fraud victimisation
influences person's self-esteem. For instance, Cross (2015) led interviews with elderly
fraud victims and near victims and found that the discourse around fraud victimisation
tends to concentrate heavily on victim blame and that even the victims themselves
participated in this discourse. Many did not fully appreciate the fact that scammers
utilise highly sophisticated methods in identifying and targeting vulnerable victims
(Cross, 2015).
Research conducted by (Cross, Richards and Smith, 2016) tracked down that
extensive loss of assets may affect the personal quality of life as victims are left unfit to
manage the cost of extravagances or even food. In different cases, it may lead to
bankruptcy or issues with credit (Button et al., 2009a). Therefore, scam have an indirect
but detrimental effect on psychological wellbeing and health through the pressure
associated with money loss.
Pyramid scheme is another sort of a business opportunity scam. Victims are
approached to pay an expense to enter a pyramid and by encouraging others, they
would earn considerable amounts of cash. Both these sorts of scams attempt to bring
out fervor by offering huge awards for little exertion of effort some work from home
freedoms keep the sum offered unobtrusive, potentially so that it would not arouse
doubt. Scammers regularly portray themselves as having been in a comparative
circumstance to the casualty to seem comparative and frequently target individuals who
may experience issues getting a traditional line of work, either because of handicap or
family responsibilities (Lea et al., 2009). Button et al. (2009a) recommends that pyramid

3
or Ponzi schemes will in general objective gatherings of individuals who work, mingle or
go to similar gatherings and exercises together to target one casualty who might then
enroll others, exploiting the social impact companions or collaborators may have on
each other.
Scammers are regularly talented at appearing likeable and pretend to like their
victims in order to persuade them; as individuals like the individuals who like them (Lea
et al., 2009). Offering praises and having incessant contact with a victim is also thought
to facilitate liking. Since individuals are thought to like those like them some way,
scammers may dress or act like to their potential victim or claim to have same interests,
issues or foundation (Cialdini, 2001).
Whitty (2013) found that scammers frequently told their casualties that they had
similar interests as them or liked exactly the same things and this similarity improved
the sensation of closeness. Dissecting scam communication trick, Lea et al. (2009)
tracked down that a few sorts of scams use similarity to influence the potential victim, by
utilizing phrases, such as, 'I was actually similar to you' or 'I was in your circumstance'.
Moreover, when similarity was high, the communication was seen as less
coercive than when the similarity was low. Similarity, Silvia (2005) contends, can reduce
the perceived threat as well as enhance liking, which can influence compliance by
minimising the difference in opinions.
Scammers are thought to highlights the uniqueness of the scam offer and desire
the potential victim to settle on an immediate arrangement to try not to lose the chance.
Stajano and Wilson (2010) explored various scams to analize techniques utilized by
scammers, as well as behavioural patterns of the victims. They found that scammers
often emphasise that the offer is a 'one time offer' and the potential victim needs to act
instantly.
Individuals shape their beliefs and behaviour by looking at how others act and
what they believe, in this way, scam offers that have bogus testimonies or the backing
of other people tend to be more fruitful. (Cialdini, 2001; Stajano and Wilson, 2011).
Lea et al. (2009) tracked down that social proof can be a component of some
business opportunity scams as they contain fake testimonials of individuals who have
recently profited by the chance. Stajano and Wilson (2011) tracked down that social

4
proof or what they call 'herd principle' is frequently utilized as techniques as individuals
let their guard down when they see others facing challenges.
Research by Modic and Lea (2013) additionally tracked down that the individuals
who scored more highly on a measure of social influence (i.e. being influenced by their
peers or social circle) were more likely to respond to fraud offers. They suggested that
scammers might exploit this by pretending to have a close relationship with potential
victims in order to prompt compliance.
Theoretical Framework
The underlying premise of Interpersonal Deception Theory (Buller and Burgoon
1994, 1996; Burgoon and Buller 2015) is that social interactions involve a dynamic
exchange of both verbal (i.e. linguistic and content cues (Carlson et al. 2004)) and non-
verbal messages between senders and receivers, who influence each other in an
interdependent fashion (White and Burgoon 2001). Deception, in this sense, occurs
when a deceiver controls the presentation of information (including 5 the transmission of
verbal and non-verbal messages, as well as the manipulation of situational cues) in an
effort to change a target’s beliefs in a way that the deceiver knows is dishonest (Buller
and Burgoon 1994). In line of this study the person represents the victim of scams.
Therefore, a person engages to an interpersonal communication and focuses on
intentional strategic communication of the sender knowingly that it transmits messages
to foster a false belief to the receiver.

Statement of the Problem

The study sought to accomplish two goals.
1. The first was to identify common themes related to the persuasion techniques
used by scammers.
2. And discuss what techniques are widely used by scammers to gain compliance.

Research Design
The researchers will use narrative research as the research design in the study.
Narrative research is a design of inquiry from the humanities in which the researcher

5
studies the lives of individuals and asks one or more individuals to provide stories about
their lives (Riessman, 2008).

Sampling
The researchers will be using purposive sampling method in this study.
According to Cresswell and Plano Clark (2011), purposive sampling is identifying and
selecting individuals or group of individuals that are knowledgeable about or
experienced with a phenomena of interest. Thus, the researchers selected individuals
are person who experienced investment scam. In this study, participants must be able
to meet at least 2 of the following criteria: a) ages 25 years old and above, b) residing in
the Province of Antique, c) who experienced investment scam and d) willing to
participate in the study.

Instrument
Considering our safety, we opt to utilized semi-structured interviews through
phonecalls in order to gather data. Also utilizing online questionaire in Google Forms.
The form is web-based and can be shared with respondents by sending a link, emailing
a message or embedding it into a web page. A qualitative research approach was
taken as part of this study in order to gather their statements. Two sets of interview
questions were used, the first one focusing on the participant’s basic information and
the second one designed to discuss their experience on investment scam and how they
had been persuaded. The questions were given in the native dialect of the interviewees
and worded in the simplest way possible to not limit their understanding and responses
to the questions. Participants were given the liberty to share any statement with regards
to their experienced on investment scam and how they had been persuaded as long as
it was of relation to the current question. Depending on the responses of the
interviewee, probing questions were provided.

Interview questions:

1. Please can you tell me about what happened in the scam in as much detail as
possible, starting with what was going on in your life at the time?

6
 2. What form did the communication take? (verbal/nonverbal?)
3. What were your thoughts about the information you were given at the time?
4. How long did it go on for?
5. What were your thoughts about the person you were dealing with?
6. How was it when you had contacts with them?
7. What was the tone of the exchange with them?
8. Can you remember your feelings, emotions, gut feelings at the time?
9. What do you think led you to trust the situation/scammer?
10. Looking back at the events, what might have helped you to avoid it?
11. Do you feel changed by the experience? In what way? (Feelings, thoughts,
attitudes)
12. How do you feel now about speaking about your experience to others?
13. Is there anything else you would like to tell me about your experience?

Procedure
After the research adviser has given her permission to collect data. The
researchers will send an invitation letter to the purposely selected participants. When
they said yes to the invitation, we will issue the consent letter through Gmail or
messenger. The researcher will personally administer the interview through google
meet, phone call or by any means of electronic media. Before the interview begins, the
researchers will ask permission to the participants if they can audio/video record the
interview. The researchers will also inform the participants that their answers in the
interview will be treated with outmost confidentiality.

Data Analysis
The collected data will be systematically reviewed and transcribe. The
transcription will guarantee that every detail of the data is accessible for everyone, this
will also be a help in finding and arranging themes. The themes will be analyzed using
the thematic analysis. According to Braun and Clark (2006), thematic analysis is a
method of identifying, analyzing and reporting patterns (themes) within data. The study
also follows transcription process of interview and follows coding stages.

7
 Braun and Clark (2006) provide a six-phase guide which is helpful framework for
analyzing the data.
The Phases are the following:
Phase 1: Familiarizing with the data. This phase involves immersing yourself in
the data by reading and re-reading textual data (e.g., transcripts of interviews,
responses to qualitative surveys), and listening to audio-recordings.
Phase 2: Generating initial codes. The phase wherein the researchers’ begins
the systematic analysis of the data, through coding. Codes are the building blocks of
analysis.
Phase 3: Searching for themes. In this phase, the analysis starts to take shape
as you shift from codes to themes. A theme captures something important about the
data in relation to the research question, and represents some level of patterned
response or meaning within the data set.
Phase 4: Reviewing potential themes. This phase involves a recursive process
whereby the developing themes are reviewed in relation to the coded data and entire
dataset.
Phase 5: Defining and naming themes. This phase involves the deep analytic
work involved in thematic analysis, the crucial shaping up of analysis into its fine-
grained detail. As analysis now necessarily involves writing, the separation between
Phase 5 and 6 is often slightly blurry.
Phase 6: Producing the report. The final phase of analysis is the production of a
report such as a journal article.

Result
There are four main themes that are being identified that represent the
investment scam compliance and susceptibility to persuasion. The first theme is about
the techniques that the scammer used which are credibility, liking, good communication
skills and social proof. The second theme is about the psychologicial effects that may
lead them to experience anxiety and depression, scarcity and trust issues. The third
theme is about the social effects is about the social effects that may lead them to
experience social judgement and commitment. The final theme is about the

8
realizations/learning of the victim and these are cautiousness and feeling of relief. The
table 1 presents these main themes with their corresponding subthemes.

Table 1. Main Themes and Sub Themes Investment Scam Compliance and
Susceptibility to Persuasion
Main themes Subthemes

Techniques Credibility
Liking
Good Communication Skills
Social Proof
Psychological Effects Anxiety and Depression
Scarcity
Trust Issues
Social Effects Social Judgement
Commitment
Realizations/Learning Cautiousness
Feeling of Relief

Theme 1: Techniques

According to the participants of the study scammers uses different techniques to

persuade each target. These include a) Credibility, b) Liking c) Good Communication
Skills and d) Social Proof.
Credibility. The participant said that one of the techniques that the scammers used
is credibility. According to Brad, “I was reached over the phone by an online trader who
specialized in crypto currency. He said his company was on the cutting edge and used
the latest technology and could offer guaranteed returns. So, I invested and everything
seemed to work very well at first. I could see my trades already having a good profit.”
Liking. The participant said that one of the techniques that the scammers used is
liking. According to Brad, “Manamian ka gid kay very convincing and mahambal mo gid
nga daw very professional gid sila.” (I found it amusing because they were very
convincing and I can say that they are very professional.)
Good Communication Skills. The participants said that one of the techniques that
the scammers used is good communication skills. According to Brad, “Tungod sa

9
promise na nga ang e-invest ko will result in good profits in no time.” (Because he
promised me that if I will invest it will result in good profits in no time.) This is also true in
the case of Mae, “I trusted her because she is good in speaking like she had a lot of
experiences in life and a successful one.” Also in the case of Jenny, “Malumanay tana
mag hambal daw hindi kabasag pinggan bala.” (She speaks gently like she can’t break
plates.)
Social Proof. The participant said that one of the techniques that the scammers
used is social proof. According to Brad, “Very smooth and almost casual lang ang
conversation. That, I thought everything is well.” (The conversation was very smooth
and almost casual. That, I thought everything is well.)

Theme 2: Psychological Effects

According to the participants of the study being a scam victim has a
psychological effect. These include a) Anxiety and Depression b) Scarcity and c) Trust
Issues
Anxiety and Depression. The participants said that being scammed led them to
experience anxiety and depression. According to Brad, “Mejo frustrated pero
nevertheless, accept ko na man ang natabo.” This is also true in the case of Cardo, “I
can’t deny the fact that I was going to hurt myself for not being investigating first or
knowing that person who really she is. I feel down, depressed and angry not only to that
scammer but also to myself.” Also in the case of Mae, “I felt ashamed to myself, na
frustrate ako, na depressed ako nga daw maumang ako.” (I felt ashamed to myself, I
was frustrated and depressed like I was going crazy.) It also true in the case of Pearl
Joy, “Kang nabal-an ko nga nascam ako, nabagsak gid tana kalibutan ko. HIbi lang ko
nga hibi.” (When I found out that I was scammed, I felt like even the world gave up on
me. I just cried and cried.) Jenny also said that, “Naghinulsol gid ako sa natabo. Naghibi
kay nasayangan ako sa kwarta nga pinangabudlayan ko.” (I really regret what
happened. I cried because the money that I worked hard for got wasted.)
Scarcity. The participant said that being scammed led him to experience
scarcity. According to Brad, “They advised me to invest more so that I could reverse the

10
situation by increasing my trade’s volume. They said I would lose everything unless I
invested more as an emergency.”
Trust Issues. The participants said that being scammed led them to have trust
issues. According to Brad. “Yes. Wara na ko kaja ga interest pa sa mga gina offer kang
mga recruiter. Wala na man ko ga padara-dara or gasalig bisan sa ano pa nga mga
promise.” (Yes I don’t have interest in the recruiter’s offer. And I also don’t trust easily in
any promises.) This is also true in the case of Cardo, “Yes, I should confirm first that it
was not scam or it is legit cause after that experience I’ve git trust issues.” Also in the
case of Mae, “Yes, for now I have a trust issue na kailangan nga I critique ko gid kag I
want or to be sure that someone is legit or not.) Also in the case of Pearl Joy,“Hindi gid
kita magsarig dayon porket mayad sanda. (Do not trust easily even though they are
good.

Theme 3: Social Effects

According to the participants of the study being a scam victim has a social effect.
These include a) Social Judgement and b) Commitment.
Social Judgement. The participant said that being scammed led them to
experience social judgement. According to Mae, “Sa una ko nga na experience gid is
namayha ako nga mag share at the same time kulbaan kay nahadlok ako ma judge kag
masakitan.” (At first, I felt ashamed to share about my experience at the same time I
felt nervous and scared that I will be judge and get hurt.)
Commitment. The participant said that being scammed led them to commitment.
According to Brad, “Until I invested a lot to their insistence and the promised that I
would earn even more.”

Theme 4: Realizations/Learning
According to the participants of the study being a scam brought these
realizations and lesson. These include a) Cautiousness and b) Feeling of Relief
Cautiousness. The participants said that being scammed led them to be
cautious. According to Mae, “Sara lang ang mahambal ko hindi gid anay mag sarig
kapin pa kung di mo gid kilala.” (I can only say one thing, not to trust easily especially a

11
stranger.) This is also true in the case of Pearl Joy, “Sa kalibutan ngaja duro manug
tunto amu rah along gid kita pirmi.” (The world today has a lot of fools that’s why we
should always be careful.) Also in the case of Jenny, “Hindi run lagi magsarig sa
pahulas nga paraan. Pangabudlayan mo anay antis mo makabuol ang handom mo nga
mabahol kwarta mo.” (We shouldn’t trust in an easy way. You need to strive first before
you can expand your money.)
Feeling of Relief. The participants said that being scammed has brought a
lesson and led them to feel relieve. According to Cardo, “I feel glad and happy that
despite of it, I learned a lot and I can help othe people through my experience.” This is
also true in the case of Mae, “I feel happy because I was able to share what I had
experience.” Also in the case of Pearl Joy, “Daw tawhay, ay bisan budlay kag sakit
naagyan ko nalampuwasan ko man gyapon.” (I felt relieved, though is was hard and
painful I still overcome it.) Jenny also said, “Daw nabunotan ko ka tinik ang nabatyag ko
kay samtang temprano na man-an ko nga gina into na lang ko. Nasayangan ko pero
atleast natugruan ako ka lesson sa natabo.” (I felt relieved because I found it early that I
was being fooled. I felt wasted but at least I learned a lesson.)

Discussion
Based on the premise of Interpersonal Deception Theory (Buller and Burgoon
1994, 1996; Burgoon and Buller 2015) it explain the social interactions involve a
dynamic exchange of both verbal (i.e. linguistic and content cues (Carlson et al. 2004))
and non-verbal messages between senders and receivers, who influence each other in
an interdependent fashion (White and Burgoon 2001). Deception, in this sense, occurs
when a deceiver controls the presentation of information and it includes the
transmission of verbal and non-verbal messages, as well as the manipulation of
situational cues in an effort to change a target’s beliefs in a way that the deceiver knows
is dishonest (Buller and Burgoon 1994). This study aims to narrate the lived
experiences of those people who experienced investment scam. Results revealed that
the primary source of persuasion are Social Proof and Source Credibility as a
foundation of trust. This trust is not based on friendship. Instead, it is based on an
evaluation of how the community or well-respected experts view the individual or

12
organization, the experiences of the individual or organization, as well as things like the
perceived confidence or bias of the individual or organization.

The victim experience psychologicial effects that may lead them to experience
anxiety and depression, scarcity and trust issues. Furthermore, the victims’ social
effects can lead them to experience social judgement and commitment. Enventually
both psychologicial and social effects that brought a lesson to the victims will made
them feel relieve.

Conclusion

Seven social influence tactics, based on cognitive heuristics or short-cuts, were

discussed. These tactics, commitment and consistency, scarcity, social proof and
source credibility are all based on common rules for judging situations and making
decisions. Different tactics is revealed which manipulates and used by the scammers as
a tool of persuasion.

Application

This study is beneficial for the field of educational psychology. This implies that
this could be a basis for an educational intervention for the victims who were scammed
by the use of the scammers’ strategies and techniques. This current study will add to
the existing literature of scammed victims. The result of the study also implied that the
future researchers will be exploring other techniques used by the scammers on the
victim.
Limitation
The limitation is due to the limited time that the researchers only conducted the
study with five participants that experienced on investment scam. For the scope of the
area, researchers considered participants that are residing in the province of Antique.
Recommendation
This study reveals the need for future research and focus on exploring the
various techniques use by scammers. There are no simple answers for fighting scams.
In any case, our exploration has recognized great practice by some government
agencies, consumer security specialists and organizations that, whenever applied

13
efficiently, could assist with engaging and ensure buyers and improve trust in online
media stages. Develop consistent guidelines for consumer protection can be a
successful device to help implementation against scam, empowering definitive activity
by regulators and enforcement agencies. Characterizing great practice for business like
monetary specialist co-ops, have an ideal situation to raise awareness to light of current
scams and limit the danger of fake exchanges. Working with predictable and successful
reporting for point by point data about the scale and nature of scams is vital to advise
methodologies for precaution and remedial action. Lastly, raising customer mindfulness
like empowering discussions around scams is tremendously significant, as one of the
greatest barriers to comprehension and forestalling scams is the hesitance to report.

14