Get Sorted: People's affinity for fraud

Scammers are often part of the group themselves - or they pretend to be - and start by targeting community or religious leaders to help them 'spread the word'.

It's one of life's beautiful things - that connectedness you can experience when you're part of a community. It can be your iwi, church, touch rugby team, or club of Hot Rod enthusiasts. (I'm thinking of starting one for fans of 25-year-old Ford Lasers.) When you belong, it can benefit everyone involved.

But communities can also be a target. And since it's Fraud Awareness Week, it's time to check in and make sure we're protected. There is simply no point in getting ahead financially if you suddenly become victim to a five-finger discount by a scammer!

You see, there is safety in numbers, but that doesn't mean you can let your guard down: fraudsters can take advantage of the trust and friendships people have in their community to prey on them. This is known as "affinity fraud" - and it can even affect professional associations or groups of retirees.

There's a history of this sort of thing. Māori groups, for example, were targeted in Nelson, the Hutt Valley and Tauranga in 1999, lured by promises of high returns. Investors ended up losing more than $8 million.

In 2002 and 2003, church groups in the Bay of Plenty were in the crosshairs and paid at least $14 million to Lakeland Wealth Creators. Who knows where that money ended up?

The scammers are often part of the group themselves - or they pretend to be - and start by targeting community or religious leaders to help them "spread the word", as it were. They deliberately put themselves in a place of trust within a social network and then betray it.

So how to steer clear of scams in our communities?

Basically, we need to stay vigilant and look out for each other. Here are some tips:

• Never invest solely on the recommendation of a member of your group. They may have been fooled into believing that the investment is legit. It's important to check for yourself.

• If an investment seems too good to be true, it probably is. Be wary of promises of unusually high returns!

• Avoid any investment that is said to have no risks. This is a classic sign of fraud. There's always a trade-off between risk and return - higher returns always come with higher risks.

• Get it in writing. Be particularly suspicious if you are told to keep the opportunity a secret. (That's usually to keep the authorities from knowing.)

• Take advice from an authorised financial adviser who is independent from your group and can focus on your interests.

• Do your own research. Not just to cover yourself, but to look out for your group, too. And don't feel pressured to rush into an investment before you have a chance to really look into the "opportunity".

Unfortunately, people's affinity for fraud runs far beyond scams just targeting groups. Get familiar with these other kinds of scams out there, and turn Fraud Awareness Week into something valuable for you.

Get Sorted is written by Sorted's resident blogger, Tom Hartmann. Check out the guides and calculators at Sorted – brought to you by the Commission for Financial Capability – at sorted.org.nz.