Affinity fraud and trust within financial markets

Abstract

PurposeThe purpose of this paper is to illustrate how a financial fraud which originates as an affinity fraud can utilise the interpersonal trust, which is a central feature of an affinity fraud, to move the fraud into situations such as organizational markets, where personal relationships are much less dominant.Design/methodology/approachSources of information consisted of scholarly articles and articles retrieved from the web.FindingsThe trust which develops naturally between members of a community with common interests can be exploited by a fraudster who is, or purports to be, a member of that community. This trust can then be used as the basis of creating trust within other types of relationships – especially where some people are active in more than one relationship – where personal relationships play a minor role.Practical implicationsBoth individuals and organizations when making investments should regularly formally evaluate their relationship with the organization in whom they are investing; constantly evaluate alternative relationship opportunities; and, calculate how divergent the partner's behaviour can be from the expected before dissolving the relationship.Originality/valueThis paper, by utilizing Fiske's Relational Models Theory, argues that trust that has been developed in a communal situation can be used to build up a momentum of trust. This enables the perpetrator of a fraud to extend the fraud into situations where different types (and possibly impersonal) relationships operate.