Friday, February 6, 2009

Affinity Fraud

"Con man" is short for "confidence man". To be an effective swindler, one generally needs to gain the confidence of one's marks. One effective shortcut to interpersonal trust is to share--even if only apparently--the same group identity as the people whose confidence you want. The North American Securities Administrators Association has posted a warning about affinity fraud:

In a world of increasing complexity, many people feel the need for a short-hand way of knowing who to trust. This is especially true when it comes to investing money. Unfamiliar with how our financial markets work, too many people don’t know how to thoroughly research an investment and its salesperson. So, many fall prey to affinity group fraud in which a con artist claims to be a member of the same ethnic, religious, career or community-based group.

"You can trust me," says the scamster, "because I’m like you. We share the same background and interests. And I can help you make money."

Group affinity can cause people to be led into bad investments by a coreligionist, such as Bernie Maddoff or Val Southwick. Or by someone of the same racial or ethnic group, like Filipina Liza Bautista, Hispanic Lazaro Rodriguez or African-American Ronald Randolph. There are even more examples at

LDS Church leaders have warned Mormons about affinity fraud, saying that they should keep three principles firmly in mind when investing money:
“First, avoid unnecessary debt, especially consumer debt; second, before investing, seek advice from a qualified and licensed financial advisor; and third, be wise.”
Sounds like good advice to me.

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