The optics of fraud: affiliations that enhance offender credibility

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to illustrate how a financial fraud practice, known as affinity fraud, relies on building trust with victims based on shared affiliations or characteristics such as age, race, religion, ethnicity or professional designations, for the purpose of exploiting the trust factor for financial advantage. Design/methodology/approach -Sources of information consisted of scholarly articles and articles retrieved from the web. Findings -Findings suggest that these fraud offenders rely on a myriad of persuasion techniques to overcome offender skepticism coupled with victims engaging in a psychological concept known as projection bias to evaluate the credibility of these offenders. These factors create a negative synergy that dilutes the perceived need for due diligence normally required prior to engaging in securities transactions. In addition, these offenders display a predatory quality, debunking the myth that fraud offenders exhibit a homogenous crime group behavioral profile. Practical implications -Social institutions that include both for profit and not for profit should consider evaluating their interactions with those who share similar characteristics and affiliations that attempt to offer goods or services by considering some of the factors contained within this article that may dilute due diligence protocol. Originality/value -This paper serves to alert and educate anti-fraud professionals, law enforcement and policy makers of a predatory fraud practice that targets organizations exploiting the inherent trust that these organizations rely upon.

Gender and age-based investor affinities in a Ponzi scheme

“…Public media and regulators have long alleged that financial fraudsters often rely on investor trust and affinity and the interplay between the two to recruit investors. Financial fraudsters usually target specific groups sharing a common affinity, such as ethnicity, religion, age, gender, education, or profession (Perri and Brody, 2012;Deason et al, 2015). In fact, the US Securities and Exchange Commission (2013) specifically defines affinity fraud as "…investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups.…”

“…We fill this void. As argued at length below and pointed out by many studies, investor affinity is key to the diffusion and spread of Ponzi schemes (Perri and Brody, 2012;Deason et al, 2015;Gurun et al, 2018).…”

Financial Fraud: A Literature Review

“…Second, the scam might be promoted to investors through wort-of-mouth within social networks (Baker and Faulkner, 2003;Comet, 2011;Nash et al, 2013). Frequently, such scams take the form of an 'affinity fraud' (Perri and Brody, 2012;Blois, 2013), in which operators take advantage of a shared identity with the victims, be it as part of a religious organization (e.g. Bernard Madoff), an immigrant community (e.g.…”

Financial Fraud: A Literature Review

“…enticed to participate, that is, to either part with their money or to reveal identifying information. To undercut the marks' perceived need for due diligence, operators appeal to trust and visceral triggers (Perri/Brody 2012;Button et al 2014). They may, for example, appeal to the marks' greed or distressed financial situation by promising high returns and stressing the need to make the decision urgently.…”