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KICJ Research Reports

Trends in major crimes and establishing data on the facts (III): Fraud crimes 사진
Trends in major crimes and establishing data on the facts (III): Fraud crimes

Abstract

Research overview


  This study aims to collect and accumulate research data through probative studies such as investigation and trial record research, and interview surveys targeting six major crimes including murder, robbery and larceny, sexual assault, fraud, embezzlement, and breach of trust, and assault and injury, and to provide public services through the “Crime and Criminal Justice Statistics” (CCJS) system.


  This year’s study, the third year of the project, targeted fraud crimes, and analyzed the characteristics of crime and criminals through 1) a record search of 2,061 judgments 2) a questionnaire search of 910 fraud criminals in prison and on probation, and 3) in-depth analysis of “cyber financial fraud” and “romance scam.”


Research trends related to fraud crime


  The domestic research trends in the field of fraud crimes are characterized by interdisciplinary research carried out in various fields such as law, criminology, criminal policy, and public administration. In particular, research on fraud crimes began to gradually increase from the early 2000s onward, and research keywords such as “phone fraud” in 2007, and “voice phishing” in 2008 appeared. With the recent advancement of fraud crimes, keywords such as “virtual currency” and “blockchain” have appeared in the study of these crimes since 2019.


  In international research on fraud crimes, it was found that “fraud” and “scams” are the subjects that continue to receive high attention. Particularly, as fraud crimes have become more sophisticated with the development of technology, research on preventive detection has been conducted on one axis using related technologies such as computer science. On the other hand, emerging research points out that victims of fraud crimes have not received enough attention in terms of criminal policy compared to victims of other violent crimes, and research is being conducted to emphasize the characteristics and protection of victims of fraud.


Characteristics of fraud crimes


  To understand the characteristics of fraud crime cases, we conducted a verdict record investigation of fraud cases that were sentenced during the six-year period from 2016 to 2021. The number of cases used in the final analysis was 2,061, the number of defendants was 2,401, and the number of victims was 3,528. The main analysis results are as follows.


  The average number of defendants in fraud cases was 1.17, the average number of individual victims was 48.96, and the average amount of property damage caused by fraud was approximately 230 million won. Of the total defendants in fraud crimes, 67.5% had a criminal record, and among those with a criminal record, more than twice as many of the defendants had the fraud criminal record. In terms of the main motive of the crime, the highest was “liquidation” (32.0%). Additionally, in the case of fraud crimes, 58.9% of the defendants were sentenced to limited imprisonment, 23.9% were sentenced to probation and 16.9% were sentenced to fines. The average period of imprisonment was 13.37 months, the average period of probation was 23.78 months, and the average fine was 3 million won.


  When looking at the repetition of criminal acts committed by the defendants in the fraud crime analysis cases, 35.2% of the cases were one-off cases, and 64.8% of the cases were repeated crimes, indicating that the defendants often committed fraud crimes repeatedly, and the repeated cases were often committed with the same fraudulent methods and contents. According to the distribution of fraud crimes committed by the defendants, borrowing fraud such as borrowing cash or goods was the highest, seen in 23% of the cases, followed by transaction fraud such as false advanced payment (20.5%), telecommunication financial fraud, such as voice phishing (9.7%), insurance fraud such as self-injury/intentional collision to incur insurance money (8.6%), investment fraud in business, etc. (7.2%), dine and dash fraud (6.1%), and loan fraud (5.5) such as false collateral/guarantor. In addition, the most common method of committing fraud crimes was to use the deception method of “false promises and claims,” such as promising to repay borrowed money or loans or promising to pay for goods or services. When looking at the types of defendants, most of them committed fraud crimes individually rather than in groups or organizations, and 80.0% of the crimes were committed against a specific person, while about 30% were committed with accomplices, and the average number of accomplices was 3.84.


  Examining the damage caused by fraud crimes based on a victim’s experience in the verdict of a case revealed that more than half of the cases were committed by specific individuals, 63.7% of the cases were single incidents, and more than 90% of the cases were committed by the same defendant in the case of multiple victims due to repeated crimes. When looking at the victim’s recovery of money in fraud crime cases, the results revealed that the money was not recovered at all in more than half of the cases, and when looking at the victim’s relationship with the defendant, it was found that in more than 46% of the cases, victims were deceived by someone they already knew. On examining the formation period of the relationship with the defendant for each major type of fraud crime, we found that, unlike other types of fraud crimes, borrowing fraud and investment fraud were most often committed over a period of three months or more—a long-term relationship (borrowing fraud: 66.9%, investment fraud: 51.7%) was the most common, indicating that borrowing fraud and investment fraud crimes are often committed by taking advantage of friendship and trust with the victims.


Characteristics of fraud offenders


  To identify the characteristics of fraud offenders, a survey was conducted targeting correctional institution prisoners and probationers. We collected 973 questionnaires from 11 correctional facilities and 30 probation centers, of which 63 questionnaires were excluded due to low response reliability, and the final 910 questionnaires were used for analysis.


  In terms of the socio-demographic characteristics of the participants, there were 702 males (77.1%) and 208 females (22.9%), and the average age at the time of the survey was 43.1 years, with most males in their 20s (26.5%) and females in their 50s (29.3%). The most common level of education at the time of the incident was college (44.4%), with 92.7% of all survey participants in high school or higher. The average monthly household income at the time of the incident was relatively high, with 42.9% of all respondents reporting an income of 5 million won or more. The most common occupations at the time of the incident were managers, professionals, and office workers (37.5%), 19.9% of all respondents were unemployed and 11.8% of women were stay-at-home moms. At the time of the incident, 41.1% of the respondents were married or had live-in spouses. Of the respondents, 17.4% reported that they had physical or mental illness at the time of the incident, and this ratio was 25.5% for women, which was higher than the ratio of 15.2% for men. In particular, depressive disorders were reported frequently.


  In terms of childhood characteristics, 70.7% of the respondents answered that their primary caregivers were their biological parents and 14.6% answered that it was one of their biological parents. More than 85% of respondents answered positively about the relationship with the primary caregiver and friendship. Regarding family circumstances while growing up, 56.4% responded that they were fair to good. 13.9% of the respondents said that they had experienced or witnessed domestic violence while growing up, and 42.1% of them said that they were victims of domestic violence themselves.


  When looking at delinquent behaviors and criminal history, the most common delinquent behaviors that participants reported experiencing in their adolescence were status offenses such as drinking, smoking, and truancy, etc., and 28.3% respondents had experienced being arrested by the police for delinquency or crime during adolescence. Among the survey participants, 42.9% had a criminal record, of which 73.5% reported having a fraud criminal record, and 50.8% had a record for a different crime. The average age of the first fraud offence regardless of disposal was 35.9 years old, and the average age of the first legal disposal, regardless of offense type, was 34.5 years old.


  In terms of psychological characteristics, self-esteem, and subjective well-being, which show the psychological health level of all participants, were above the “moderate” level. On the other hand, depression and drinking problems that measure negative factors of psychological health were lower than “normal.” Impulsiveness to measure the traits of psychopathy, deception, and superficiality, lack of perspective taking, and lack of empathy were all reported as below “moderate” while self-control was reported as above “moderate.” As for the types of fraud cases that resulted in prison sentence or probation at the time of the survey, telecommunications financial fraud was the most common (27.6%), followed by borrower fraud (27.6%), investment fraud (19.8%), and trading fraud (16.0%). Of the participants, 36.2% reported that they had accomplices in the main case, and 52.0% of them reported that they played a secondary role (accessory) such as aiding and abetting. Looking at the characteristics of the damage, 13.9% responded that they committed fraud against an organization, while if the victim was a natural person, 50.9% reported that the victim was the first person to know at the time of the incident. Of those cases when the victim was a natural person, the rate of two or more victims was 78.0%, and the number of cases with more than 10 victims was 23.9%. 35.5% of respondents said that the amount of property damage incurred in this incident was less than 100 million won, 33.5% reported between 100 million won and 500 million won, 23.9% reported between 500 million won and 5 billion won, and 7.1% reported more than 5 billion won.


  When looking at the distribution of fraud types according to socio-demographic characteristics, respondents whose age was 30 years or younger at the time of the incident showed the highest rate of telecommunication financial fraud, while those in their 40s or older had the highest rate of borrowing fraud and investment fraud. In terms of the level of education at the time of the incident, the highest rates were seen in borrowing fraud for respondents with a middle school education or lower, telecommunications financial fraud for respondents with a high school education, and borrowing fraud and investment fraud for respondents with a college or higher education. In particular, the rate of investment fraud increased as the level of education increased. The distribution of fraud types also varied depending on the average monthly household income at the time of the incident. As the income level increased, the rate of telecommunication financial fraud decreased, and the rate of investment fraud increased.


  Overall, compared to sexual assault offenders (Kang, Eun Young, et al. 2021), and robbery and larceny offenders (Kang, Eun Young, et al. 2022), fraud offenders had a higher level of education and average monthly household income at the time of the incident, relatively higher stability in their jobs and marital status, better family condition, relationships with primary caregivers, and friendships during their upbringing. In terms of juvenile delinquency and past criminal history, fraud offenders showed a good pattern compared to other categories. The rate of fraud offenders with criminal records was relatively low as was the rate of police contact experience such as juvenile regulation. In addition, the average age of first fraud offense and first legal disposal was in the mid-30s, indicating a higher age of entry into crime compared to sexual assault offenders and robbery and larceny offenders. In terms of psychological characteristics, fraud offenders showed better psychological health conditions than sexual assault offenders and robbers and larceny offenders, but psychopathic characteristics were similar to or higher than other categories.


  When interpreting the results of this survey, it is important to note the limitations of the survey method. First, the survey was a self-administered survey that took the form of retrospective questions, which can lead to recall error. In particular, psychological characteristics, including psychopathology-related scales, need to be interpreted in consideration of the fact that they are self-assessments subjectively perceived by the participants, not by independent uators. Additionally, it is also important to note that this survey used a non-probability sampling method and only targeted prisoners and probationers who agreed to collect and use personal information and participate in the survey.


  Policy issues related to fraud crime: Cyber financial fraud and romance scams Cyber financial fraud


  Although the definition of cyber financial fraud has not been established, there is a legal definition for telecommunications financial fraud. Telecommunications financial fraud can be classified as institutional impersonation (crime-related type), loan fraud, acquaintance impersonation type, and kidnapping fraud type according to the Deception Act, and can be divided into phishing, farming, smishing, memory hacking, body camming, and messenger fraud according to technical methods. Voice phishing far exceeds other new financial fraud in terms of the scale of damage and number of cases, and message phishing has been increasing in recent years. Telecommunication financial fraud is characterized by the use of organized crime, international crime, intelligence and cutting-edge crime, and information asymmetry.


  Voice phishing first occurred in 2006 and continued to increase, exceeding 30,000 cases for the first time in 2018, and reaching a record high of 37,667 cases in 2019. In 2020 and 2021, the number of cases decreased slightly and remained in the low 30,000 range, but in 2022, it returned to the low 20,000 range and switched to a downward trend. In terms of damage, it peaked at 774.4 billion won in 2021 and gradually decreased to 543.8 billion in 2022. From 2006 to 2022, the cumulative damage amount was approximately 4 trillion 411.9 billion won, and the average damage amount per case was about 25 million in 2022.


  Overall, there are more loan fraud cases, but according to the government’s measures, there is a balloon effect that occurs more in places where the response is weak. In terms of cash delivery, the face-to-face transfer method has increased significantly compared to the account transfer method since June 2019. Looking at gender, more men were found to be victims than women, and in terms of age, voice phishing occurs most often in people in their 50s and 40s who have a high demand for funds. In 2022, the number of victims in their 20s or younger accounts for 31.2%, showing a significant increase in the number of victims with little social experience.


  Although various agencies such as the National Police Agency, the Prosecutor’s Office, the Financial Service Commission, and the Ministry of Science and ICT are responding to voice phishing, the existing segmented and fragmented response had the limitation of not being able to effectively respond to criminal organizations that move in an orderly manner under the command of a head leader. Therefore, pre-emptive blocking and comprehensive responses are emphasized, and comprehensive and organic responses between agencies, such as international cooperation and information sharing are being emphasized to root out international money laundering. Particularly, from October 2023, the Telecommunication Financial Fraud Integrated Reporting Response Center began operating under the Prime Minister’s order, making it possible to handle one-stop integrated processing of investigations, account suspension, communication media blocking, and victim protection counseling through a single call to 112.


  The United Kingdom also established an integrated reporting channel for fraud and cybercrime called ACTION FRAUD in 2009, as fraud has emerged as a national threat, accounting for 45 percent of all crimes. In addition, the National Fraud Intelligence Bureau analyzes the reports and constructs a system that produces information useful for arresting and preventing criminals and disseminating it to relevant organizations. The United Kingdom government passed the Online Safety Bill in 2023 to make internet platform companies more accountable for fraud prevention and announced a fraud strategy to reduce fraud crimes by more than 10 percent every year.


  In Singapore, fraud accounts for 50 percent of all crimes, and both the number of incidents and the amount of money damage are rising rapidly. In response to this, the Anti-Scam Centre was established in the Singapore Police Department in 2019 and prepared a “6I” strategy to combat fraud. The Anti-Scam Centre systematically manages each type of fraud, including phishing, job fraud, and investment fraud, and has made it possible to suspend payments for accounts used in all types of fraud through the center.


Romance scam case study


  Romance scam is a compound word for romance and fraud and is a crime in which criminals approach victims online to build their trust with the victim through financial poser, appearance, etc., and then demand money for various reasons. The National Police Agency does not maintain or publish statistics related to romance scams. Victims of romance scams often conceal their damage due to psychological trauma as well as financial losses, resulting in increased isolation due to anger, frustration, embarrassment, and depression. According to Park, Bum-jin et al., romance scams have a two-layer scam structure, consisting of the six strategies of Whitty’s (2013) super-theoretical model, which consists of “relationship fraud” which creates strong personal intimacy and romance feelings, and “fund fraud,” which builds a false story to request payment of funds (Kopp, et al. 2016).


  As a result of ing and analyzing 10 cases of currency exchange-type romance scams that occurred in Korea, we arrived at a six-stage super-theoretical model and a double fraud structure. The psychological effect of romance scams is particularly significant compared to other crimes, as victims of romance scams continue to post monologues in chat rooms even after communication with the scammer ends.


  There is a lack of systematic classification criteria for all fraud crimes, including cyber-financial fraud and romance scams, making it difficult to conduct scientific research on fraud prevention and victim protection. Therefore, further research is needed to establish a systematic classification of fraud crimes. It is also necessary to expand and define the concept of telecommunications financial fraud under the current Telecommunications Financial Fraud Damage Refund Act. Fraud prevention education for the general public should be strengthened through research on s and scenarios of fraud crimes such as voice phishing and romance scams.

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