With the RRSP season bringing savings and investing to mind for many people, securities regulators are alerting Canadians about the alarming growth of affinity frauds across the country.

In an affinity fraud, scam artists take advantage of the common bonds people develop through their religious, professional, or ethnic affiliations to gain their victim’s trust. T

Typically, fraudsters target a respected member of an affinity group and through that person attempt to meet and gain the trust of other group members to convince them to invest in their schemes.

Affinity scams usually involve a pyramid or ponzi scheme where a part of the money from new investors is used to make payments to earlier investors. The flow of money gives the illusion of a high return and builds credibility for the scheme. This helps to lure more investors and convinces the earlier investors to leave their money in, or even invest more. Inevitably the supply of new investors dwindles and the scheme collapses and the investors lose most, if not all, of their money.

“More and more people are falling prey to this type of fraud,” said Doug Hyndman, chair of the Canadian Securities Administrators. “What’s even worse is that in many cases the victims feel such a strong affiliation with the group that they will often not report their loss to the authorities but rather try to deal with the matter within their group.”