Affinity fraud and trust within financial markets

Keith Blois and Annmarie Ryan

Journal of Financial Crime, 2013, vol. 20, issue 2, 186-202

Abstract: Purpose - The 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/approach - Sources of information consisted of scholarly articles and articles retrieved from the web. Findings - The 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 implications - Both 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/value - This 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.

Keywords: Trust; Finance; Relationships; Fraud; Affinity groups (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:13590791311322364

DOI: 10.1108/13590791311322364

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