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Avoid Affinity Fraud

Can you trust someone simply based on the fact you share a religion, neighborhood, or other commonality?

Affinity fraudsters want you to think so.

With affinity fraud, a scam artist preys upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are - or pretend to be - members of the group.

There is an increase in reports related to suspected affinity fraud. That is why we want to help you understand the psychology and sociology behind this type of fraud.

What Should You Know?

  • We tend to trust people like us. We assume they have the same values as we do. Any good salesperson can do this, but a salesperson within your own community increases the chance you will go along with it.
  • Affinity fraud cases are usually geographically-centric. We are inclined to feel comfortable in our own neighborhoods. Sometimes the most egregious offenders are hiding in plain sight.

Affinity Fraud Examples

A mortgage fraudster was sentenced to 30 to 99 years in prison and ordered to pay $400,000 in restitution for a “faith-based” mortgage assistance scam that was marketed through Christian networks and ministries.

Also, regulators have investigated reverse occupancy schemes that involve a common ethnicity and an investment scheme in which all the participants worked out at the same gym.

Four Tips to Avoid Affinity Fraud

Follow these four tips for avoiding this scam.

  • Do your research. Someone offers you a real estate opportunity. Check out the person's background, as well as the investment itself, no matter how trustworthy the person who brings the investment opportunity to your attention seems to be. When doing business with someone you know, it is wise to have an objective person review the transaction/documents before moving forward.
  • Do not make assumptions. Beware of making any investment based solely on a recommendation from a member of an organization or group to which you belong. Not everyone like you is on the up and up.
  • There is no free lunch. Be skeptical of any investment opportunity that promises risk-free returns or mortgage/default relief with fees. If it sounds too good to be true, it probably is.
  • Get it in writing. Avoid agreeing to anything you cannot get in writing and situations where you are told to keep the investment opportunity confidential or a secret.