The pattern is usually the same.
An affable man or woman endears themselves to a community, be it a church or temple and gains the trust of its members.
In time, he convinces many to invest in a scheme, but eventually walks away with most of the money.
“It’s the kind of fraud that happens to you when you least expect it,” says Brenda Lea Brown, with the B.C. Securities Commission, an independent provincial agency responsible for regulating trading in securities.
Called affinity fraud, it’s one of the fastest-growing types of fraud in Maple Ridge and Pitt Meadows.
“It’s a kind of investment fraud in your own community. It happens with people you know and you trust,” Brown explains.
One of the biggest affinity cases in Canada involved the closely-knit Ismaili community, many of whom were duped by one of their own into investing $75 million in a scheme that involved a teeth whitening product.
In 2012, former notary public Rashida Samji was accused of masterminding a Ponzi scheme that raised $83-million from 218 people who believed they were investing in a winery.
Samji was a “prominent figure in the South Asian community in Vancouver and had attracted numerous investors,” RCMP said in a statement.
She has since been charged with 28 counts of fraud and theft.
In 2010, the British Columbia Securities Commission handed out its highest penalty ever to Sung Wan (Sean) Kim, an investment dealer who targeted members of a Korean religious community.
Kim was ordered to pay penalties totalling $47-million for stealing money from 36 investors.
Brown says affinity fraud often happens in what might be called a “closed community” – a small town, a church community, a temple, a mosque.
“It can happen anywhere where people come together because they share the beliefs, the same language or culture,” she added.
It could be a professional group or target the team mates on your hockey team.
It can often take years to execute the scam. In the Samji case, police allege the scheme dated back to 2003.
“A good fraudster can be quite patient,” said Brown.
“He or she will take their time to build trust because the potential returns can be so great.”
As part of Fraud Prevention Month, British Columbia Securities Commission advises people to cast a skeptical eye on all investment proposals and always remember: if it sounds too good to be true, it probably is.
Spot the scam
• Promises of high returns with little or no risk (there are no exceptions to the rule that higher returns mean higher risk).
• Someone (often someone new) in your group starts talking about how to build wealth through special investments only they know about.
• The person is ‘just like you’—whether through ethnicity, religion, occupation,interests, or other common bond—and uses that connection to foster your trust.
• Sometimes signs of conspicuous wealth can tip you off. And, any suggestion that you should keep the investment a secret is a sure give-away.