Last week I was talking to an Editor of ETNow and realized that there was not much literature on frauds. In general or much of frauds in India.

One fraud which we have all seen is the Affinity fraud. In this the company which wants to run away with a lot of money makes people belonging to a community. So they would go into a army cantonment and make a few army men their agents. Or make a celebrity an agent (remember a world class Billiards player becoming an agent?). Companies have used cricketers, members of a particular linguistic community, or religious community to become agents.

These scams exploit the trust and friendship that exists in groups of people. For example it is easy for an army man to sell to an army man. There are groups of business men who meet regularly – called BNI – Business Network International, picking students from reputed colleges, religious communities, …etc. These are tight- knit groups and the outsiders will not even know about such a scheme! Victims will not be willing to talk to the outside world (omg my community will get a bad name), but they would be willing (and hoping) to find a solution within the community.

How to handle:

When a person approaches you to sell anything tell them that you will consider the product ONLY if it is approved by your financial adviser.

Check out the competence of that person. You are not expecting a Field Marshall to be selling such products. So if you are an army man check out the back ground of the person.

Remember that you need a very few products in life – a simple term insurance, one credit card, one index fund…and after that you have to say NO.

See whether it is an aggressive sale or one with deadlines. “Sir this scheme is closing on 30 April ….”, if that is happening it should be a red flag.