What is affinity fraud?

Affinity fraud is a a type of investment scam that preys on a specific group such as a religious sect, ethnic community or professional group. Often, it is the leaders or prominent members of these groups that perpetrate these scams. Fraudsters prey on victims by exploiting the explicit trust shared among group members. You may recognize affinity frauds most commonly associated with cults or pseudo-religions, however some of the most vicious and damaging cases of affinity fraud target established groups. In the case of the recent SEC allegations, the pastor named in the complaint is the senior pastor of a large and established protestant church. Affinity fraud is such a widespread issue because it preys on our vulnerabilities. If you identify with a group, whether it’s a religious institution or a cultural sect, then you put a certain degree of trust and faith into it. In many ways, we let our guards down. And that’s a good thing; that’s why we are a part of these groups. Unfortunately, this also means that we leave ourselves exposed to certain risks.

Affinity fraud and the elderly

Unfortunately, senior citizens are one of the largest groups targeted by scammers in affinity fraud schemes. The elderly are generally more predisposed to investment scams as fraudsters are able to prey on decreased mental acuity or hearing and vision impairments. Here in Florida, affinity fraud is a prevalent issue. Florida is a breeding ground for scams like this and other forms of elder financial abuse, because of the state’s senior population. If you are a senior citizen or you have an elderly loved one that you believe may be at risk of investment fraud, there are a few measures you can take.

Preventing Elder Financial Abuse

• Be in the know
  • Make it a point of talking to your senior relative(s) about their finances, even if you are not a named trustee or account manager. Even casual discussion about investment plans or opportunities can go a along way in informing your loved one about potential risks.
• Understand contracts and statements
  • Make sure that you have completely read and understand all contract terms before signing any agreements.
• Check broker/advisor backgrounds
  • Know your or your loved one’s financial advisor or stock broker. Make sure they are trustworthy. You can check broker backgrounds on Investor.gov
• Review financial statements
  • Make sure you are not letting your financial statements go by without taking time to carefully review them. Look for any inconsistencies, erroneous charges or fees that you can’t account for.
• Inform them of common investment scams and how to spot them
  • You can check out a list of some of the most common types of senior scams here.
• Advise your loved one to appoint an account trustee or custodian

Protecting yourself against affinity fraud

It can seem difficult – especially if you belong to a religious group – to separate your allegiance to the group from your own personal welfare. However, you need to always be aware of potential risks when approached with any investment opportunity.

Here are some things to know in order to avoid falling victim to affinity fraud.

• Never just ‘take somebody’s word for it’
  • No matter what the investment opportunity is or who is offering it, you should never just accept it at their word. Even if it is the pastor of your church, group chapter president or any other respected individual making the offer; investigate the investment before you commit. Before you agree to any investment, make sure your know it inside and out.
• Don’t fall for “risk-free” or “guaranteed” investments
  • Any investor can tell you that there is no such thing as guaranteed returns or a 100% risk-free investment. Always keep this in mind even if an investment is being offered as an exclusive opportunity to your group.
• Get the details in writing
  • If any investment opportunity that can’t provide a detailed outline of the offering in writing, then you should be extremely skeptical. As with many a case, opportunities that seem to appear out of thin air will often vanish just as suddenly and without a trace. This can leave you holding the bag and no one being held accountable.
• You are in no rush to invest your money
  • Remember that if anyone pressures you to act on an investment opportunity. Make sure you first gain a proper understanding of the opportunity being offered. Give yourself time to investigate and consider an investment opportunity. Be especially wary of “once-in-a-lifetime” investments. You should never feel obligated to commit to an investment without proper knowledge.
• Practice cyber security
  • Fraudsters are increasingly using e-mail to perpetrate investment scams. As such, you need to be extra vigilant of reporting unsolicited e-mail offering “can’t-miss” investment. You can forward spam e-mails containing fraudulent investment opportunities to the SEC directly at enforcement@sec.gov.

Victim of affinity fraud? Know your recovery options

If you believe you or a loved one has been the victim of affinity fraud or other investment scam, then you have the right to recourse. You may even have recovery options. If you have questions about investment-loss recovery options after affinity fraud, then contact our team. We can discuss your options with you and provide guidance in recovering your assets. You can report suspected fraud to the SEC directly by following this link. You can also read more about protecting yourself from affinity fraud here.

8 Tips for Protecting Online Investments

• Password
  • You should choose a strong password for your online investment account. It should not be easy to guess and should feature capital letters, numbers and special characters. Never use your name or any other personal information such as date-of-birth or social security numbers in your password. Never share or send your password to anyone electronically.
• Use Two-Step Verification Methods, When Possible
  • A two-step verification method is an extra security method provided by most online investments platforms. When an investor logs in to an unrecognized device, it sends an additional access code to the user’s phone or email that must be entered before access is granted.
• Biometric Safeguards
  • If you have online investments, ask your broker or firm if biometric security measures are offered. Biometric security measures can include features like voice-recognition, fingerprint-scanning or face-recognition.
• Use Different Passwords for Different Accounts
  • Its never a good idea to use the same password for all your online investments. For each investment account, you should use a different, complex password.
• Avoid Public Computers
  • It is best if you can avoid using public computers to check on your online investments. If you must, never leave the computer unattended, make sure your login information is not saved and that you do not remain logged in after use.
• Be Careful on Wifi Connections
  • Even if you use a wifi connection at home, make sure you have proper security and anti-fraud measures in place for your network.
• Avoid Unverified Email Links
  • Never click a link in an email if you can not verify the firm or institution that sent it to you. Links from unverified or illegitimate sources can contain malware or viruses.
• Check Your Account Statements
  • You should always regularly check your account statements for your online investments. Review any trade confirmations and contact your broker or firm immediately if any discrepancies arise.

Additional Resources

• Investors can access more tools and resources for protecting their online investments on the SEC’s website
• If you believe you have been a victim of investment fraud, contact Savage Villoch Law to find out your recovery options.

Preventing Elder Financial Abuse

• Be in the Know
  • Whether or not you are named as a trustee or account manager, it is important to talk to your senior relatives about their finances. Even casual discussion about investment plans or opportunities can go along way in informing your loved one about potential risks.
• Understand Contracts and Statements
  • If your are managing your own financial records or you are a loved one managing for an elderly relative, make sure you completely read and understand all contract terms before signing any agreements.
• Check Broker/Advisor Backgrounds
  • Know your or your loved one’s financial advisor or stock broker. Make sure they are trustworthy. You can check broker backgrounds on Investor.gov
• Be Wary of Sweepstakes/No-Risk Scams
  • Offers through mail, email or over the phone promising over-the-top rewards or returns on investment with little to no risk should be avoided. If you are a trustee or account manager, make sure you speak with your loved one about these scams.
• Review Financial Statements
  • Make sure you are not letting your financial statements go by without taking time to carefully review them. Look for any inconsistencies, erroneous charges or fees that can’t be accounted for.

Educational Resources

• If you or a loved one believe you have been made victim to elder financial abuse, contact Savage Villoch Law to find out your recovery options.
• Check out this recent article on the top 10 senior scams to avoid