distances conspired to render it difficult to nab conmen , who could travel as quickly as information . But crimes of confidence continued even as the telegraph network grew into the Victorian era internet . In his 1857 novel , The Original Confidence Man , Herman Melville shows that misplaced trust constitutes the necessary cause of all forms of financial fraud . Because trust shackles skepticism , people are inclined to believe one another , lowering the chance the fraud gets discovered .
Two triangles characterize financial fraud , or white-collar crime , as Edwin H . Sutherland christened it in the 1940s . The Fraud Triangle contains three vertices : opportunity , financial pressure ( or motivation ) and rationalization . Swindlers see opportunity when they discern a weakness in their intended target , sometimes called a mark , and calculate a low probability of being caught . Pressure develops when a fraudster seeks a larger income than he can legitimately earn .
Rationalization occurs when the conman convinces himself that his actions do not constitute malicious harm . The Triangle of Fraud Action , which consists of the fraudulent act , its concealment and conversion , characterizes the criminal ’ s course of action . Concealment consists of stashing or destroying any evidence that may connect perpetrators to the crime . After concealment , conversion begins . The fraudster converts illegally acquired funds into legitimate businesses or assets through money laundering . The MICE acronym , which adds Ideology , Coercion and Ego to Monetary motive , also helps to explain financial fraud . Although the two-triangle fraud strategy maintains its relevance today , technologically sophisticated scammers employ new tactics .
Modern technology may make learning about and reporting financial fraud easier , but it also provides swindlers with new ways to employ strategies that have not changed from the 19th century . With the emergence of online meetings , swindlers have remained smooth talkers while expanding the realm of personas with fake backgrounds , presenting themselves as wealthier than they are in reality . To close deals , swindlers lie and employ other unethical tactics . The elegantly dressed fraudsters of the antebellum period and the smooth-talking cybercriminal sell the same thing : wealth . Wealth is a big driving force , as swindlers use the prospect of
Motivation
Concealment
Fraud Triangle
Rationalization
Triangle of Fraud Action
Conversion
Opportunity
Theft happiness through wealth to entice their victims by offering enough money to generate interest , but not enough to arouse suspicions . They also present a wide range of profits , including the “ average profits ” of previous “ customers .” Fraudsters promote old scams shined up as new opportunities because targets are more likely to fall for a scheme they have never heard of . They also show victims “ proven ” results . Then , a swindler will admit risks but divert the victim ’ s attention to the service ’ s purported benefits . Swindlers also employ a sense of urgency , convincing the client that time is of the essence and offering a chance to join before the crowd learns of the opportunity . By advocating rapid enrollment , the swindler minimizes recruiting costs and limits the time the victim has to research the scheme .
Swindlers today , like those of yore , sometimes scout their victims to win their confidence . William Braithwaite and William Warren tricked shipping tycoon Sir Walter Cockerline into investing in a 1923 horse betting scheme in Monaco that cost Cockerline £ 23,000 . By observing Cockerline ’ s frequent high-roll gambling on horse races , Braithwaite and Warren gained valuable information about Cockerline ’ s tendencies on which to build their pitch , ultimately settling on gentlemanly outfits and a slew of horse race knowledge to lure their victim into a deep sense of trust . Stuart Wood posed as a down-andout submarine captain , visiting various English port towns , using the charity of the inhabitants to benefit himself . Wood dove deep into what stories the former service members and port goers would relate to and learned an accent , enabling him to craft an appearance and pitch targeting the folks he faced with personal conviction .
Braithwaite , Warren and Wood were criminal aristocrats who used intellectual and skilled ploys — rather than the violence and bloodshed of traditional criminals — carefully scouting their victims and creating witty baits to reel them in . In modern times , cybercriminals use a modified method of scouting victims , mainly on social media . Scammers get valuable information about a person ’ s work , hobbies and movement patterns , allowing them to shadow a victim and create a personalized email that is more likely to gain a response than a generic one . Scammers will study an employee ’ s Instagram or Facebook and pretend to be friends , offering interesting travel knowledge or discussing a shared hobby . This builds the victim ’ s trust , as they believe they are connecting with a like-minded individual , resulting in lower awareness of possible fraud .
Scammers also scout in order to employ social engineering techniques more effectively . Social engineering has replaced the dress and speech ploys of historical scams to obtain victims ’ trust . The three principles of social engineering , or the manipulation of people , are social proof , scarcity and authority . Social proof refers to victims being more likely to accept offers believed to have been accepted by others ; scarcity refers to victims usually wanting something exclusive and limited ; and authority refers to victims as being more likely to comply with requests from persons in positions of power . Despite occurring mostly through telemarketing , these social engineering tactics attack the victim ’ s conscience in a method similar to elegant speech and dress , gaining the great equalizer of all frauds : trust .
www . MoAF . org | Winter 2025 | FINANCIAL HISTORY 29