Affinity Scams

One of the most common tactics used by scammers is to trigger a panic reaction. Grandparent scams pivot on a tale of family members being in danger. Malicious emails will often include “URGENT” in the subject line to get someone to click a link or download an attachment as quickly as possible. 

A lesser-known tactic uses the opposite approach, where a scammer poses as a member of a group, community or religion or they exploit their pre-existing status within a group to lull targets into a false sense of security and trust. These are called affinity scams, or affinity fraud.

How do affinity scams work?

Affinity scams will often be focused on raising money for specific causes or providing investment opportunities that appeal to the common identity of a particular group.

“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),” states the SEC website. 

Case in point: notorious Ponzi schemer Bernie Madoff specifically targeted affluent Jewish communities and non-profit organizations despite what researchers Greg Gregoriou and Francois Lhabitant referred to as a “riot of red flags” in a report on his crimes. 

“Such crimes would not have been possible without the cultural ease and social entre Madoff enjoyed in the Jewish community,” wrote author Harold A. Pollack in an article in the Atlantic exploring affinity fraud. 

Affinity scams don’t rely solely on the greater trust within communities; they also exploit the tendency for their members to have access to one another, which can provide scammers with a ready list of convenient targets.

“Members, for instance, carry their contact list — the ward (congregation) directory — in an app on their phones…It’s a strong and instant network,” stated an article in the Salt Lake Tribune examining the prevalence of scams within the Church of Latter-Day Saints. The state of Utah, where roughly sixty percent of its residents are members of the LDS church, has one of the highest rates of affinity fraud in the nation:  

Why do they work?

Affinity scams work according because humans are ultimately herd animals. Having spent most of our history as a species in groups of roughly 150 members (or less), people have an instilled tendency to self-categorize and self-identify with specific groups and exclude others. 

From an evolutionary standpoint, tribalism has its advantages. 

“We have a tendency to trust our tribe mates and authorities, especially when it comes to danger,” writes Arash Javanbakht, a professor of psychology. “It is adaptive: Parents and wise old men told us not to eat a special plant, or not to go to an area in the woods, or we would be hurt. By trusting them, we would not die like a great-grandfather who died eating that plant. This way we accumulated knowledge.”

Leaving out the downsides of inter-tribal conflict, one of the main disadvantages is that people tend to trust people within their groups and are less likely to view them with the same level of skepticism that they would treat those of an outsider. Scammers will regularly exploit this tendency.

What can be done to fight affinity fraud?

One of the biggest problems posed by affinity fraud is that the best way to avoid it tends to weaken the fabric of the communities they exploit; increased skepticism can lead to weaker social ties. It is possible however, to learn to identify the types of investment scams that typically accompany affinity fraud:

  • Have potential investments been reviewed by an external third party: Independent analysis by an objective party helps to reduce the peer pressure within groups to go along with ill-advised or suspicious investment opportunities.
  • Discuss investment “opportunities” with members of your community: Affinity fraud or not, scammers will often seek to isolate their targets to coerce them into making rushed or ill-informed decisions. A request to keep an investment or financial plan secret should be regarded as a major red flag. 
  • If a deal sounds too good to be true, it almost certainly is: Whether or not a deal or opportunity is being offered by someone within your group or by a complete stranger, if the benefits massively exceed the risk, it’s probably a scam.