One in five—that’s how many U.S. seniors are estimated to have been targeted in instances of financial fraud.
The challenges of financial exploitation will only grow more acute as the senior population expands in the years to come. With the observation of World Elder Abuse Awareness Day on Monday, June 15, it’s worth taking a closer look at how seniors are victimized by financial crime—and what we can do to stop it.
The scope of the problem
It’s difficult to put a precise number on how much seniors lose to financial fraud. The total has been estimated at least $2.9 billion per year, according to the 2011 MetLife Study of Elder Financial Abuse.
But the actual total may be much higher, since many victims may not report the fraud to authorities, out of embarrassment or fear of punishment. Indeed, some individuals who have been victimized may not even be aware of their loss, due to declining mental function. According to the National Adult Protective Services Association, only 1 in 44 cases of financial abuse are reported.
Who’s at risk? Many of the most tragic cases are those who are targeted for victimization due to isolation, loneliness, disability or mental infirmity. Lacking family or community connections, these individuals may be vulnerable targets for fraud perpetrators.
What may be the most troubling part of the trend is that more than half the cases of financial exploitation are perpetrated by friends, family members or trusted caregivers. This can be the most difficult exploitation to detect and prevent—and many seniors hesitate to report being victimized by a loved one.
Five common financial scams
While financial exploitation can take myriad forms, members of the financial industry report a few common frauds that turn up repeatedly:
Contest and Lottery Scams: A fraudster contacts a senior and tells them they have won a large sum of money, but must pay an upfront processing fee or taxes to collect their prize (the “Jamaican Lottery” is a common scam; the famous “Nigerian e-mail” scam is a variant). No such prize exists, but the interaction may grow increasingly aggressive and threatening.
Non-Existent Investment Products: A perpetrator contacts a senior offering a chance to put their money into an investment promising big returns. The victim provides the funds, but no investment vehicle exists.
The Granny Scam: The perpetrator calls an elderly individual on the phone, claiming to be the individual’s grandchild (some will glean open information from social media accounts to pull off the impersonation). They say they’re in trouble and need money, and ask to receive the funds by wire transfer.
The Sweetheart Scam: The perpetrator strikes up a “romance” with a victim and makes pleas for financial assistance. More up-to-date versions of this scam use fake profiles on dating websites and social media accounts to target victims online.
Power of Attorney Abuse: In this particularly insidious form of exploitation, someone close to the senior acquires power of attorney over their affairs, and uses it to drain their assets.
Spotting Fraud: How You Can Help
Many fraud attempts can be disrupted before they succeed—but knowing what to look for is key. If you have elder family members, friends or neighbors who might be vulnerable to financial exploitation, here are some common indicators of fraud, courtesy of Wells Fargo Advisors:
- Sudden reluctance to discuss financial matters
- Sudden, atypical or unexplained withdrawals, wire transfers, or other changes in their financial situations
- Utility or other bills not being paid
- New best friends and “sweethearts”
- Onset or worsening of illnesses or disability
- Behavioral changes, such as fear or submissiveness, social isolation, withdrawn behavior, disheveled appearance, and forgetfulness
- Changes in the will, especially when they might not fully understand the implications
- Sudden increase in spending by their family or friends
- Transfer of title of home or other assets to another person for no apparent reason
- Large, frequent “gifts” given to a caregiver
- Personal belongings are missing
- Large, unexplained loans taken out by an elder
Meanwhile, the financial industry also plays a front-line role in helping to combat financial abuse of seniors. That’s because many financial professionals are well-positioned to notice anomalous or suspicious activity in their clients’ transactions that could indicate fraud. They can also be alert to signs of diminished mental capacity that could make a senior vulnerable to exploitation.
“Our profession is, at its heart, about relationships,” Bill Benjamin, CEO of U.S. Bancorp Investments explains in a recent article. “Our clients bring us into one of the most private and significant spheres of their lives. Their family may not even know the details of their finances, but we are right there. With that trust comes a responsibility to do more than just process transactions, but to understand the person and the context, to notice and take appropriate action when a client’s cognitive impairment might be putting his or her financial stability at risk.”
The financial industry has also moved aggressively to police its own, working to identify and expel those who seek to victimize clients under the guise of providing financial advice and opportunity. Rick Ketchum, chairman and CEO of the Financial Industry Regulatory Authority, speaks for many in the industry when he says there’s no tolerance for bad actors in the industry.
“We want to get those people out of the industry and get them out quickly,” he said.
Finally, the industry is also advocating for legislative changes that will strengthen prosecutions against elder financial fraud perpetrators and heighten awareness and understanding of the crime.
Elder financial abuse “remains underreported, under-recognized and under-prosecuted,” the 2011 MetLife study concludes. That unfortunate reality should serve as a spur to action on all of our parts—the financial industry, law enforcement, and friends and family—to ensure that seniors are protected against all forms of financial abuse.