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What is an Affinity Fraud?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 08 September 2016
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Affinity fraud refers to different scams perpetuated on a group of people who are specifically connected to each other by race, religious background, occupation, family, gender or age. The person or people perpetuating affinity fraud exploit these connections, and in using the commonalities of a particular group, create a scheme that will be most appealing to that group. The end goal of the criminal is to steal money from participants, and it’s an unfortunate and frequent occurrence in many parts of the world.

There are varied types of affinity fraud. For instance, a criminal might target the families of people who have died in the armed services. He then might solicit donations on behalf of a monument to include all their names. Naturally, such a monument will never be built. This type of affinity fraud has occurred pretty frequently in the US, especially after or during wars. Criminals play on the emotional nature of this request and can take thousands of dollars in donations for phony or fictitious monuments. It’s one of the worst kind of fraud because it deliberately exploits the suffering of these people.

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Another type of affinity fraud involves what is called a Ponzi scheme. This offers an investment opportunity to a specific group, and in the beginning, it pays the first few investors a large sum of money. Ponzi schemers then target others to solicit more money. Early investors may benefit but are encouraged to invest more, and later investors usually have all their money stolen.

The returns come out of a bank account set aside for the purpose and are never actually the result of a real investment. A Ponzi scheme ends if the people involved are caught, if suspicion about the scheme grows and slows down investments, or if the schemers “run” with what money they’ve collected. This doesn’t necessarily have to be affinity fraud, but often, the criminal will target one group to secure initial investments because they want to give that specific group “a break they deserve.”

Another form of affinity fraud is based on the pyramid scheme. People make an initial investment, perhaps do well, and then are asked to recruit others. “Others” tend to be friends and family members or business associates. People at the top of the pyramid get money for recruiting others, and goods or services sold or offered are almost never of much value. The real money lies in the fees people pay to get in on the scheme. Top-level folks of the scheme make a percentage of not only their own recruits, but also every person their recruits enlist. The bottom investors are told stories of the fabulous amount of money to be made, but tend to make very little if any.

To avoid affinity fraud, always check the credentials of people asking you for money. Don’t take the person’s word for it or their credentials at face value. Be suspicious of businesses that don’t mention what products they sell and give you a big sales presentation first on what type of money you’ll make. Be especially wary if an investment garners huge returns at first, which seem disproportionate to moneys invested. Never trust a person who is offering you a “deal” on an investment because of your ethnic, social, religious or business circumstances.

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