Cognitive Factors to Financial Crime Victimization

Abstract

This chapter will address cognitive factors that result in susceptibility to financial crimes including financial literacy, numeracy, and deliberative reasoning. Financial literacy has been found to be a strong predictor of retirement savings, FICO scores, and savings accounts. Perhaps more importantly, financial literacy has been found to be a strong predictor of debt and vulnerability to predatory lending. Individuals low in numeracy, or literacy for numbers, tend to be more likely to employ heuristics such as loss aversion, sunk costs, and confirmatory bias in the financial decision making. Dual process models of decision making explain that decision making can be deliberative and analytical or emotional and impulsive. In general, investment schemers tend to employ techniques to engage more emotional or impulsive decision making. Factors that increase the likelihood of impulsive decision-making versus deliberative decision-making will be discussed (stress, ego depletion, cognitive impairment). (PsycINFO Database Record (c) 2016 APA, all rights reserved)