The psychology of scams: how fraudsters trick their victims

A new Which? report has revealed the tactics fraudsters use to lure people into falling victim to bank transfer scams.

Authorised Push Payment (APP) scams can have horrifying financial and emotional consequences for victims, with some losing their life savings in a matter of minutes. 

Here, we explain the methods fraudsters use to trick their victims, and call for a fairer reimbursement system for people who’ve lost money to these sophisticated scams.

What are APP scams?

APP scams occur when someone is tricked into sending money to a fraudster. One of the more common types of APP fraud involves the scammer calling a victim posing as a staff member from their bank. The scammer claims there has been suspicious activity on the victim’s account and tells them they must transfer their money into a ‘safe’ account.

Another example of an APP scam is romance fraud, where scammers pose as a romantic interest and ‘date’ their victim online, gaining their trust before asking for money. Experts say there's a clear link between romance fraud and coercive control. Someone might also have fallen victim to APP fraud if they've bought items that didn't exist or invested money in a fraudulent scheme.

Many major banks are signed up to a voluntary code, which pledges to reimburse victims of these types of scams. But this can be something of a lottery, with individual banks able to decide who gets their money back and who doesn’t. The Payment Systems Regulator (PSR) has proposed introducing a new reimbursement obligation for payment service providers. 

APP scams have been around for a long time. Which? made a super-complaint in 2016, highlighting the lack of protection for victims compared with other types of fraud. We've also researched the wellbeing cost of these scams, which amounts to £9.3bn a year.

The psychology of scams

As part of a new report on the psychology of scams, we commissioned the research agency Basis to conduct in-depth interviews with 20 victims of bank transfer scams. We wanted to learn about the common tools and tricks that led people into being scammed. We found the following:

• Scams commonly occurred when victims were emotionally vulnerable or feeling stressed, tired or distracted. This made the victim less able to check the legitimacy of a scam and therefore more susceptible.
• Scammers built relationships with victims. They imitated trusted people or institutions to manipulate victims into believing they were genuine. Victims were often doubtful about the scammer but were led into dismissing these doubts.
• Scammers created a sense of urgency to press victims into transferring money. They often coached and manipulated victims to ignore warnings from their bank.

The four stages of a scam

Our report also identified the common stages of an APP scam, from when the scammer first contacts a potential victim to the victim realising they’ve been defrauded.

1. The opportunity Scammers contact potential victims. They often have greater success if the victim is experiencing a vulnerable period in their life. The case studies interviewed as part of our research were often suffering significant distraction, acute stress or serious emotional strain, making it easier for fraudsters to scam them.
2. The scam Fraudsters create a credible fake story to target victims, such as being a bank staff member, an investment expert, a seller of goods or a romantic interest. Scammers use imitation to appear more believable. Tactics include spoofing phone numbers or using fake reviews to create credible online ads. Scammers build a relationship with the victim through appearing to be likeable and establishing similarities.
3. The payment Scammers create an overwhelming sense of urgency, leaving victims little time to double-check details and manipulating them into dismissing warnings from their bank, family members or friends.
4. The aftermath The victim realises that they’ve been scammed, often causing feelings of distress and shame. Too often, banks and the police don’t deal with the situation well, leaving the victim in a further state of stress. On many occasions, the victim isn't reimbursed for their losses.

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A fairer system for scam victims

We believe that urgent action is needed to create a fairer system of redress for scam victims. We've previously found that banks are denying refunds to victims in three quarters of cases.

We urge the PSR to proceed with its plans for all payment service providers to have an obligation to refund scam victims in all but exceptional circumstances. The new system should fully protect vulnerable victims and cover all types of APP scams.

We also recommend that the government carries out a broader review of consumer protections for different payment methods, passes an improved Online Safety Bill into law to prevent users from falling victim to fraudulent content online, and creates better systems for scam data sharing.

Finally, we want Ofcom to ensure that all telecommunication providers offer the same protections to consumers to prevent number spoofing.

New laws could provide greater protections

Two major pieces of legislation currently going through parliament will help to provide improved protections against scams.

The Online Safety Bill will hold online platforms responsible for fraudulent content and ads. The Financial Services and Markets Bill will help to make it mandatory for banks and other payment providers to reimburse victims of APP fraud. We have long campaigned for both of these reforms.

Which? commissioned the independent research agency Basis to conduct qualitative interviews with 20 victims of APP fraud in July and August 2022. Basis researchers also spoke with two Which? experts on APP fraud as well as speaking to an independent clinical psychologist to understand the theories that help to explain the psychology behind victims’ experiences.