Protecting Seniors from Elder Financial Abuse and Fraud
It has taken older adults a lifetime of working hard and building savings to be able to retire. And it is precisely because of that nest egg that seniors are vulnerable to financial exploitation, the fastest growing form of elder abuse. The cases vary, from swindlers posing as trusted financial advisers to adult children taking advantage of parents' vulnerability and assets.
Elder financial fraud and abuse is estimated to cost victims about $3 billion a year, according to one study, though some say it's actually much higher. Shockingly, around 90 percent of perpetrators are people the victims know and trust — family members, neighbors, friends or caregivers, according to the National Center on Elder Abuse (NCEA).
This guide will help older adults, and their loved ones, understand the warning signs and schemes that pose a threat - and the moves to make to protect their bottom line.
At A Glance
Each year, 1 in 20 older adults is financially exploited by a family member.
The annual financial loss by victims is estimated to be at least $3 billion
The average loss by individual victims is about $41,800
Just 1 in 44 financial elder abuse cases is ever reported.
Women are nearly twice as likely as men to be victims.
Most victims are between ages 80 and 89 and live alone.
Learning to Detect Suspicious Activity
Family members who are managing relatives' finances or helping them pay bills might come across suspicious activity, such as unusually large bank account withdrawals or credit card statements that document expensive purchases. Perhaps quarterly investment account statements show uncharacteristic activity involving the buying and selling of stocks, racking up fees and broker commissions.
Whether they involve money management misdeeds or outright theft, one thing is certain: There is no shortage of financial schemes perpetrated against older adults. If you're helping mom and dad manage their money and recognize any of these signs of suspected abuse, here's how to proceed:
You've noticed unusual or frequent bank account activity, including large withdrawals, transfers between accounts, unusual purchases or unusual signatures on checks.
WHAT YOU CAN DO
Get the older adult's authorization to monitor his or her bank accounts, checkbook and spending activities. Consider going with mom to her bank and opening a joint checking account, or have her sign a power of attorney to grant you access to her account.
You're surprised by changes to bank accounts, power of attorney, wills, trusts, insurance or beneficiaries.
WHAT YOU CAN DO
Talk with mom and dad to determine whether those changes were authorized and why. Speak with their trusted attorney if necessary.
You suspect that a caregiver or family member is using mom's credit or debit card for unauthorized or unnecessary purchases.
WHAT YOU CAN DO
Suggest that mom give cash, rather than credit cards, to caregivers for purchases.
Most caregivers, whether they're relatives or hired helpers, are compassionate people dedicated to the safety and well-being of their charges. But some use their position to take financial advantage of older adults. Sadly, seniors are less likely to report wrongdoing by relatives or caregivers because they are dependent on them for care.
That's why it's important for other family members to remain involved in the senior's life and keep tabs on how he or she is doing. When going outside the family to hire a trusted caregiver, consider using a well-known agency that will vet candidates' credentials and training. If you're hiring a caregiver on your own, find candidates by asking friends, neighbors, coworkers or other caregivers you know for referrals.
A Checklist for Interviewing Candidates
Ask each applicant to bring a resume and contact information for at least two references. Make sure a family member takes part in the interview.
Describe the duties of the job as well as the health concerns of your loved one. Ask questions to help you decide whether the candidate is a good fit for the job and the older adult.
Ask to see proof of identity such as a social security card, driver's license or other photo ID.
Ask whether the person has ever been in trouble with the law. Consider hiring a reputable agency or service to run a background check.
Discuss the candidate's breadth and length of experience, training and certifications and why he or she left the last position.
Discuss salary, work schedule and paid time off. Encourage questions about the job and your expectations.
Guarding Against Dubious Financial Schemes
Seeking the services of a trusted financial adviser may be wise; however, requirements for credentials vary. Make sure the financial or investment advisers you do business with operate under the fiduciary standard, which requires them to put their clients' best interests first. If you're not sure whether your adviser is a fiduciary, ask. Make certain he or she is licensed to sell products in your state. Always check that person's background for possible disciplinary action.
Financial exploitation of older adults at the hands of financial professionals is not all that uncommon. According to the Investor Protection Trust, some 7 million people over age 65 have been the victims of financial swindles. Watch out for these situations in order to protect your bottom line:
A financial adviser you don't know is seeking to do business with you.
YOUR MONEY MOVE
It's best to work with people you know or who were referred by trusted friends or relatives. First, determine whether the adviser is a fiduciary or a broker-dealer who operates under a suitability standard, which requires the broker-dealer to offer investment products that are suitable but not necessarily the best for your financial situation. Check for any history of disciplinary action with licensing organizations' websites, such as Brokercheck, Certified Financial Planners Board or American Institute of CPAs.
You're invited to a free lunch or dinner by retirement planners offering free consultations.
YOUR MONEY MOVE
Don't go. These free meals typically are nothing more than pressured sales pitches, not opportunities for financial investment advice tailored to each attendee. If you do go, resist any temptation or pressure to share your personal information.
A friend recommends a financial adviser who attends your place of worship.
YOUR MONEY MOVE
Don't assume this person is trustworthy just because he is a member of your community. Check his background and disciplinary history.
An adviser wants to sell you an annuity or other financial product but insists it is too complex to explain in detail.
YOUR MONEY MOVE
Don't buy anything you don't understand. Get a second opinion.
If it sounds too good to be true, it probably is.
Know the Scams that Prey on Older Adults
Con artists look for victims they believe are vulnerable. Understanding how and what types of scams impact seniors can help you avoid common rip-offs. The more you know, the better you can protect yourself or a loved one. The following are some of the most common schemes perpetrated against seniors, and advice for taking action so you don't become a victim.
A victim receives a call from a young adult pretending to be a grandchild who is in trouble, perhaps in jail in another city or country while on spring break. The imposter tells grandma not to tell his parents because he doesn't want them to know. He tells grandma to send money immediately.
First, call the child's parents to determine whether the situation is real. Never give financial or personal information over the telephone.
Women and men over age 60 are the number one targets of sweetheart scams, which can happen in person or online. Con artists convince the victims that they are in love and proceed to extract money from them over a period of time. The scam usually ends when the victim's retirement savings account has been drained.
Use common sense. Know the risks of online dating. Be honest with yourself about whether the relationship can actually be real. Keep friends and family apprised of your new social interests. Never transfer money to someone you've never met. If you suspect fraud, consult a law enforcement official.
Callers trick victims into thinking they've won money or prizes, but in order to get it, they need to send money to cover taxes, insurance or bank fees first.
Never send money to people or organizations you don't know.
Callers or mail solicitations ask for donations to fund humanitarian causes. This scam is particularly common after disasters and tragedies, pulling on victims' heartstrings to fund criminals' own greed.
Check with your local or state consumer protection agency or the Better Business Bureau Wise Giving Alliance.
Unscrupulous contractors or traveling con men convince victims they are in dire need of various home repairs. Then they overcharge them or take money before the projects are completed and run. Older homeowners are at risk because they often live in older homes and often can't do repairs themselves.
Choose a contractor through references. Don't do business with someone just because they've solicited you. Research vendors, ask for references and don't make a full payment up front.
Helping Loved Ones When Cognitive Changes Affect Financial Decisions
As people age, cognitive changes can affect their financial literacy along with their ability to make wise money decisions. This leaves them open to preventable mistakes at best, and at worst, to financial devastation at the hands of predators. By the time a swindle is discovered, it may be too late to recover the financial losses.
That's why it's important to take precautionary measures. If you're an adult with elderly parents or relatives who may be showing signs of confusion, consider initiating a frank conversation to gain their trust and create a plan of action. You may want to undertake this effort with the support of another trusted family member or enlist the help of a lawyer or financial adviser to work under your supervision.
Consider these tips:
First, be present in your relatives' lives and encourage them to stay socially connected with others. That makes it more difficult for would-be predators to act.
Locate important documents such as wills, financial account information (banks, investments, insurance and other accounts), debt statements and tax returns, along with names and contact information for their advisers, such as lawyers and accountants.
Help your relatives gradually. Start by setting up a bill payment schedule and automatic bill paying. Eventually, consider becoming a cosigner for their financial accounts.
Help them get copies of their credit reports at Annualcreditreport.com to ensure they are not victims of identity theft.
You may wish to seek power of attorney or guardianship before any older relative becomes incapacitated.
To help older relatives avoid telephone scams, put their home and cell phone numbers on the national Do Not Call Registry at www.donotcall.gov or by calling 888-382-1222.
It Happened to Me: Lessons from the Front Lines
Sally Balch Hurme has spent her entire professional career as an elder law attorney and consumer fraud expert, helping to educate and protect the public. And yet her husband fell victim to an impostor scheme. He received an urgent call from an "attorney" requesting that he send $3,000 to get his daughter out of a Los Angeles County jail.
For Hurme's husband, it was simple. "He really loves our daughter and wanted to help her," Hurme said. "He got caught up in the moment. The caller was adept at pushing buttons and convinced him of the emergency, the need to act promptly, and the importance of not telling anybody."
While their daughter was safe in Virginia, teaching biology like any other workday, Hurme's husband was instructed to rush to the bank to withdraw funds, then rush to the store to get a prepaid card to wire cash, and then rush home to wait for a follow-up call. He did as he was told, reading to the caller the numbers off the prepaid card. And just like that, $3,000 was gone forever. Although Hurme and her husband reported the theft, the cash card and the scammer's disposable phones could not be traced.
Hurme's advice: Don't answer calls from numbers you don't recognize. If you do and the caller describes an emergency involving a loved one, independently verify this claim.
Sally Hurme is a national expert on consumer fraud and a long-time member of the National Academy of Elder Law Attorneys. She taught elder law for eight years at George Washington University Law School and has written two books to help consumers understand the law, including the ABA/AARP Checklist for My Family: A Guide to My History, Financial Plans and Final Wishes.
Richard Brody is a Certified Fraud Examiner, a Certified Public Accountant, a Chartered Global Management Accountant and a Forensic Certified Public Accountant. He also holds the Certified in Financial Forensics designation. He is a Regent Emeritus of the Association of Certified Fraud Examiners (ACFE) and was the 2012 ACFE Educator of the Year.
What are the types of financial exploitation that prey on older adults?
Sally Balch Hurme:
There are at least three different categories of financial abuse aimed at different vulnerabilities of elders and requiring different strategies of response and prevention.
The first category involves various frauds and scams, in person or via the telephone or internet. These include the scams we call "grandparent," "lottery or sweepstakes," "sweetheart," "charity" or "natural disaster" and schemes by unscrupulous house repair contractors.
The second category is perpetrated under the guise of investment advice. Professionals peddle financial products that they claim will benefit the investor but in reality are unsuitable. These professional scammers work to develop a sense of trust, but in actuality they are looking to pad their own pockets.
The third subset of elder financial exploitation is perhaps the saddest and most under-reported: acts committed by people the individuals know, such as family members, neighbors, caregivers and newfound "friends."
Richard Brody, PhD:
Elder fraud is a subset of white-collar crime. While certain frauds are directed at the elderly, younger victims are also targeted by some of these same frauds. As the elderly population grows, victims of elder abuse will increase. According to the Financial Crimes Enforcement Network, more than 1 in 10 elderly people in the U.S. were victims of elder fraud. Despite the fact that there are an increasing number of victims, few cases of financial exploitation against the elderly are reported (likely due to concerns that they will be judged as being incapable of handling their own affairs and/or embarrassment and/or fear of forced institutionalization).
Common Types (by no means an exhaustive list):
Identity theft – criminals use personal information (i.e., name, address, Social Security number) to apply for credit in the victim’s name. By the time the victim figures this out, bill collectors may be already be pursuing them and their credit rating may have already been damaged.
- Destroy documents with Social Security numbers or other personally identifiable information (do not just throw in the garbage).
- Do not carry your Social Security card with you.
- Keep a photo of credit cards in case they are stolen so you have easy access to the phone numbers to call in order to cancel the cards.
- Be careful where you put outgoing mail.
- Place a freeze through the three credit bureaus.
- Review your credit reports on a regular basis.
Lottery, prizes and sweepstakes scams - The fraudster really plays on the victim’s emotions by telling them how exciting this is, how lucky they are, and how they deserve it. Notified by an enthusiastic phone caller, an email, or an exciting letter, all of which can be made to look very authentic.
- Mail from strangers should always be considered suspicious. If a bulk rate was used for mailing, it tells you that the same notification was sent to numerous people. You can’t win if you didn’t enter. Also, note that lotteries do not contact winners directly
Grandparents scam - A grandmother or grandfather gets a call from someone who they think is their grandchild. The grandchild is frantic and the grandparent agrees to help. Typically, the grandchild says that he or she is in trouble in a foreign country and needs money to be wired internationally.
- Prevention is as simple as checking with other family members but elderly often do not do this.
How can older adults protect themselves against these scams?
Sally Balch Hurme:
Phone scams especially target the elderly because they are more likely to be home to answer the phone. But if they are aware of how these scams happen, they are more likely to resist the come-on, so talk to your seniors about this. Stress to your older adults to slow down the transaction and take the time to independently verify that the information is legitimate.
Richard Brody, PhD:
Financial exploitation often takes place by relatives and caregivers; that is, it is not always unknown third parties exploiting the elderly. For example, these “insiders” may take money, property or valuable, borrow money and not pay it back, give away or sell possessions without permission, misuse ATM or credit cards or use without permission and/or sign or cash pension or social security checks without permission.
Limit powers of attorney
Use direct deposit for Social Security or other benefit checks
Use automatic bill paying
Communicate with the bank about suspicious activity
Check caregiver references carefully
It can be difficult for seniors to protect themselves from fraud. Some are lonely and glad to have someone to talk to while others are experiencing cognitive issues. Further, older generations tend to be more courteous and are often taken advantage of by fraudsters who exploit these good manners. We often rely on education to help individuals understand/avoid fraud, but elder fraud presents an extra challenge in that the potential victims may not be the appropriate ones to receive the training – the responsibility is like going to fall on their children (if applicable) or other trusted individuals (but they must also be subject to oversight).
How do nefarious financial professionals rope their victims in?
Sally Balch Hurme:
They play on older adults' fears that their money will not last to support them through their lifetimes, and they offer tantalizing low-risk, high-return investments, from annuities to life insurance products. These products either sound very simple, so of course people trust their authenticity, or very complex, so people can't understand them. They basically say, "Trust me. I know how to make you rich." If you cannot accurately describe in a couple sentences how your investment is going to earn you money, then shy away from that investment.
How do you avoid falling prey to these bogus investment offers?
Sally Balch Hurme:
The best advice is to verify, verify, verify. Talk to others, compare products, take your time. The bad guys don't want you to take the time to verify. They want you to act fast, so they may pressure you by saying the "deal" is only available for the next 24 hours, and, by the way, don't tell anybody about it because this deal is just for you.
How do unscrupulous relatives tend to take advantage of their elders financially?
Sally Balch Hurme:
Financial abuse by close family members is the most common and devastating of all for older adults. It is hard to track because victims are often unaware they are being victimized, or, if they are aware, they are embarrassed or reluctant to report that family members are abusing them. Most frequently, the people exploiting them tell them something like, "I can take care of you better than anyone else." Such a person will often keep the victim isolated so no one knows when he or she has obtained power of attorney, taken control of their senior's financial accounts or had the senior sign over the deed to a home. There really is a need for communication among concerned family members so everyone is apprised of what the designated family caregiver is actually doing. Regular communication alleviates suspicion among family members and does not allow anything to happen secretly.
Expert Interview: Naomi Karp
Naomi Karp, J.D., is a senior policy analyst at the Consumer Financial Protection Bureau's Office for Older Americans. She focuses on elder financial exploitation and the impact of diminished decision-making capacity on financial security. She had also worked at AARP's Public Policy Institute and had served on the staff of the ABA Commission on Law and Aging.
If elder fraud and exploitation are expected to grow as the population ages, what can individuals and their loved ones do to minimize their risk?
The growth of the aging population is ensuring that the number of victims will increase even if the number of incidences of fraud remains steady. Everyone needs to protect themselves and their loved ones because anyone can be the victim of financial exploitation. Awareness is the first step. Our Money Smart for Older Adults publication and Managing Someone Else's Money guide offer tips on how to spot financial exploitation and avoid scams, as well as resources for assistance.
If you do suspect exploitation or a scam, get help. Report financial exploitation to your local or state adult protective services agency, including law enforcement, because financial exploitation and scams are frequently criminal acts. Other local agencies to call are the long-term care ombudsman program and your local Better Business Bureau office.
The federal effort to prosecute these cases has been disjointed. What changes can we expect in the near future?
The federal Elder Justice Coordinating Council, which is made up of 12 federal agencies, has made increased prosecution a priority. While the CFPB does not prosecute these cases, our Office for Older Americans has several initiatives that we believe may increase and enhance prosecution, such as facilitating collaboration among financial institutions, adult protective services and law enforcement.
Bank officials and others who come into contact with older adults' finances are now receiving training on how to spot abuse. Will this training become a standard for all bank employees and other financial service professionals?
Our research suggests that many financial institutions, from small community banks and credit unions to large national banks, currently train their staff to spot elder financial exploitation. Other organizations, such as state government agencies and national and state trade associations, are encouraging widespread training efforts. Several states have mandated training. For example, Connecticut recently enacted such a requirement, and its Council on Aging posted numerous training resources. It appears likely that training will become more widespread as a result of these varied efforts and requirements. Similar activities are underway for other professionals — for example, broker-dealers, other financial advisers and attorneys.
Resources for More Information or to Report Suspected Crimes
There are many organizations and structures in place to serve seniors, whether you're looking for day-to-day resources or seeking specific guidance or assistance in response to fraud. These resources can help you protect your loved ones.
National Adult Protective Services Association
Click your state on the U.S. map to be taken to your state's APS.
Provided by the U.S. Administration on Aging to connect you with services for older adults; 1-800-677-1116.
National Center on Elder Abuse
Offers a wealth of information and resources about elder abuse, including financial exploitation, but is not for reporting suspected abuse; 1-855-500-3537.
Consumer Financial Protection Bureau
Its Office of Financial Protection for Older Americans page offers information for safely navigating financial challenges.
A U.S. Department of Justice website containing information on how to report elder abuse and financial exploitation. Just enter your zip code to find local resources.
National Association of Area Agencies on Aging
Simply type in your zip code to find resources for aging adults in your area.
National Long-Term Care Ombudsman Resource Center
To report suspected abuse in a nursing home or long-term care facility, contact your local ombudsman via this website.
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