Inside the Nanning Ponzi scheme: Why smart people get scammed

SPEAKER_1 (0:02)

This is a podcast by The Straits Times.

Lynda Hong (0:09)

Hello, I'm Lynda Hong, Assistant Podcast Editor at The Straits Times. The common saying goes, if it sounds too good to be true, it probably is.

So why do people still fall for frauds like the Nanning Ponzi scheme, which caused 52 Singaporeans to be arrested in China? In this episode, I'm speaking with a behavioural scientist to find out what were they thinking. Dr Serene Koh, Director of the Behavioural Insights Team in Singapore. Welcome to the show.

Serene Koh (0:36)

Hi, Lynda. Thanks for having me.

Lynda Hong (0:37)

Serene, before BIT, you were a researcher leading behavioural and social research in the Singapore government. And now at BIT, you work with various government agencies to tackle the psychology of scams. How did you and BIT come to focus so heavily on studying the psychology of scams?

And how does behavioural science help us understand this problem differently?

Serene Koh (1:00)

Yeah. So I think scams is a global problem.

All of our offices around the world are looking at scams and misinformation one way or another.

I think the global loss to scams has now exceeded billions of dollars and has grown exponentially. And so I think because scams are about human decision making and behaviours, I think trying to understand why it is and how people find themselves in those situations, lends itself to Behavioural Science quite a lot. I think the conventional idea is that scams is about an individual being fallible, an individual falling for something. But I think where Behavioural Science comes in is slightly a little bit more empathetical to understand how did the person find themselves in that situation. What was the context like? Who did they meet? What did they see? What were they led to believe? And therefore, what kinds of decisions they made as a result of that? And the behaviours that ensued. And so I was trying to see things from a more holistic perspective and just looking at the individual person. And I think because of that, behavioural science is a particularly helpful lens to understand scams and the psychology behind it.

Lynda Hong (2:02)

And how was this Nanning Ponzi scheme different from the other scams that you've come across?

Serene Koh (2:08)

Together with things like impersonation scams or love scams, a lot of pig butchering scams for instance, the con is a long one, right? It isn't a one-off, very urgent call from DHL for instance. Like if you think about the early days of scams, they called you to tell you that you had a package that was stuck in customs. I think like a lot of pig butchering scams, the Nanning scam, I guess, exploited people's relationships. It gave you a sense that this was something that was genuine, therefore it took a long time. And so the typical story that we've been told about how, oh, if it's too urgent, if they ask you to make a decision very quickly, it must be a scam. This counted that this is actually a flip side, which it took its time.

If you ask someone, can I think about it? They would be like, sure, take all the time that you need. And so that is different from maybe how we used to think about scams. We also been told that scams tend to come from strangers.

Love scams in particular are a fake identity, or investment scams show you a fake dashboard of your earnings, for instance. But the thing about the Naning scam is that elements of it were real, and the people who brought you into the scheme or the program or the investment are people that you knew, right? Business partners, some of them could be friends of friends, but they felt authentic. It wasn't like a fake profile that you saw on the internet.

And when they brought these people to China, the buildings that they were shown, the restaurants they were at, the hotels, the condos that you could buy, these are all real. And so contrary to, I guess, some of the prevailing MO that other scams used, there was enough about the Naning scam that made it not feel like a scam. And so I guess some of the people felt that they were actually in it for the real deal. So it's not, I guess, that surprising. Elements of it did feel like it was true and authentic.

Lynda Hong (4:03)

Sounds like paid butchering scam and ponzi scam are quite similar to each other from what you've said.

Serene Koh (4:10)

I guess they use similar threads.

Lynda Hong (4:12)

Right.

Serene Koh (4:13)

Yeah.

Lynda Hong (4:13)

But what's actually paid butchering scam?