Victims of financial fraud incur varying degrees of indirect and direct financial costs as a result of the criminal activity. These costs can include legal and banking fees as well as stress and anger, according to a survey conducted for the FINRA Investor Education Foundation.

Notably, no single demographic was the prime target for the fraud, although the survey purposely included an equal number of men and women. Men and survey respondents with higher incomes (defined as over $75,000 per year) lost the largest amount of money in the fraudulent incident.

Personal relationships most commonly led the victim to be introduced to the perpetrator, signaling the presence of affinity fraud. The results show 18% of victims said a friend or family member introduced them to the perpetrator, while 13% were introduced through a professional contact. The introduction occurred for about 11% of victims either through a social networking website (e.g., Facebook) or through a social setting, such as a place of worship. It’s worth noting that unsolicited emails and telephone calls accounted for nearly a quarter of all introductions.

Once introduced, perpetrators seemed to limit the amount of interaction. Nearly 80% of victims said they communicated either just a few times or very little. Only 15% report having a great deal of interaction.

About half of all victims (47%) said they felt responsible for what happened. More than 60% said they were defrauded because they were too trusting and 51% say they should have trusted their instincts about an offer being too good to be true. Not surprisingly, 74% of survey respondents were angry about the incident, 70% were regretful, 69% felt victimized and 68% felt betrayed.

Indirect financial costs (late fees, bounced check fees, legal fees, etc.) were inversely correlated with age, with only about a third of victims over the age of 55 incurring them. Non-financial costs were evident across age groups, with stress and anxiety being most common.

The survey only measured the impact of the fraud, not how much money was lost in the scams themselves. Nonetheless, the results show the importance of asking questions and conducting a background check before engaging in a financial transaction or a new investment. The April 2011 AAII Journal lists a variety of questions to ask an investment adviser (“How to Check Out a Financial Advisor”). Also, be aware of the ongoing scams, such as “The ‘Dirty Dozen’ Tax Scams for 2015” highlighted in the March 2015 AAII Journal.

Source: “Non-Traditional Costs of Financial Fraud,” Applied Research and Consulting and FINRA Investor Education Foundation, March 2015.