Fraudsters come in all shapes and sizes, but there are a few con artists who integrate themselves into your community, or religious, professional or social group, like ‘a thief in the night’, and influence your leaders, and by extension your peers, to invest in a fake investment. At the time you do not realise that the “investment” is actually a scam, and you subsequently become unwitting victims of the fraud.
These fraudsters exploit the trust and friendship that exist in groups of people who have something in common. They target any group that they think they can convince to trust them with the group members’ hard-earned savings. The group could be a religious group, such as a particular denomination or church, or an ethnic group, community, or even members of a particular workforce.
This type of fraud is called affinity fraud. Affinity fraud occurs when investment scams are targeted at specific groups of people. These groups usually include the elderly, the religious or professionals.
Affinity fraud almost always involves either a fake investment or an investment where the fraudster lies about important details, such as, the risk of loss, the track record of the investment, or the background of the promoter of the scheme.
Many affinity frauds are Ponzi or pyramid schemes, where money given to the promoter by new investors is paid to earlier investors to create the illusion that the so-called investment is successful. In reality, even if there really is an actual investment, the investment typically makes little or no profit. The fraudster simply takes new investors’ money for the fraudster’s own personal use, often using some of it to pay off existing investors who may be growing suspicious. Eventually, when the supply of investor money dries up and current investors demand to be paid, the scheme collapses and investors discover that most or all of their money is gone.
Because of the tight-knit structure of many groups, it can be difficult for regulators or law enforcement officials to detect an affinity scam. Victims often fail to notify authorities or pursue legal remedies. Instead, they try to work things out within the group. This is particularly true where the fraudsters have used respected community or religious leaders to convince others to join the investment.
Recap – Basics of Affinity Fraud
What can I do to protect myself from affinity fraud?
The Trinidad and Tobago Securities and Exchange Commission is not an investment adviser nor is it a brokerage house. This article is intended solely to provide you with the information you need to help you make sound investment decisions and to ensure that you are familiar with and understand your rights and responsibilities as a consumer of financial services. To lodge a complaint, ensure that you complete the prescribed complaint form located on the TTSEC website www.ttsec.org.tt.
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