The People They Trust, Rip Off Seniors the Most

Seniors are frequent victims of financial abuse, whether the crook is a stranger or someone the older adult knows. Sadly, the people they trust rip off seniors the most. The Consumer Financial Protection Bureau (CFPB) analyzed the financial exploitation of older Americans, by poring through government reports that looked into suspicious financial activity.

During a recent four-year period, fraudsters stole or tried to steal more than $6 billion from seniors. The criminal activity is increasing, as shown by the fact that the number of annual reports of financial abuse quadrupled during that time. Since many people do not realize they have been the victim of theft or do not report it, the CFPB estimates that the actual losses could be between $2.9 billion and $36.5 billion every year.

The Older You Are, the More They Steal from You

When the victim was between the ages of 70 and 79, the average loss was $45,300. The average amount stolen from people between 60 and 69 was $22,700. Those in their 50s, sustained average losses of $13,400.

Who Is Stealing from Older Americans?

Strangers account for 51 percent of the scams that take money away from seniors. This category includes thing like:

  • Emails that say the older adult owes money to the government or the electric company;
  • Telephone calls claiming that a grandchild has an emergency in another country and needs money wired; or
  • “Romance” scams in which people in other countries have a fake relationship with the lonely senior, just to get him to send them thousands of dollars for the “fiancé” to fly to the United States for a visit. Of course, the person takes the money and breaks off communication with the senior.

The government does not know who the exploiter was in every case. In about 14 percent of the reports, the victim did not identify the perpetrator.

Family members, caregivers, and fiduciaries account for 36 percent of the financial abuse of seniors. A fiduciary is someone who has the authority to manage the older adult’s money, such as a broker, accountant, trustee, guardian, conservator, or someone who has a power of attorney to act on the senior’s behalf.

Who Steals the Most from the Elderly?

The sad truth is that the people they should be able to trust the most, take the lion’s share of the money from older adults. Here is how the amount of theft breaks down, by perpetrator groups:

  • Strangers swipe $17,000 per victim on the average;
  • Family members wrongfully take an average of $42,700 from seniors;
  • The average loss from non-relative caregivers was $57,000; and
  • Fiduciaries stole an average of $83,600 per victim.

How to Prevent Elder Financial Abuse

These tips can help you to shield your aging friends and relatives from becoming victims of financial abuse:

  • Talk with your older loved ones and make sure they understand how to safeguard themselves from the well-known types of rip-offs from strangers. Educate at-risk relatives about suspicious emails, telephone calls, online scams and mail.
  • Set up a system of checks and balances for your loved one’s finances. Never allow the person who provides the caregiving, to manage the person’s money. Have one person perform one task and someone else oversee the finances.
  • Have a two-factor authentication system for any fiduciaries, so someone else always reviews the financial transactions that these people make.
  • Be extremely careful when selecting a fiduciary, whether for yourself or a loved one.

References:

AARP. “Older Americans Hit Hard by Financial Fraud.” (accessed March 23, 2019) https://www.aarp.org/money/scams-fraud/info-2019/cfpb-report-financial-elder-abuse.html

How to Combat Elder Financial Abuse

One estimate is that the amount of elder financial fraud is $30 billion a year, defining it as the theft of money by thieves who include con artists, strangers, caregivers or trusted friends or family members. According to Consumer Reports, in the article “3 Critical Ways to Prevent Elder Financial Abuse,” these crimes are often not reported. Sometimes, the seniors are too embarrassed to admit that they were fooled, or they don’t want to put a family member at risk. They often don’t know they have been scammed, or are physically unable to articulate what has happened to them.

This is starting to change, as banks are starting to increase their reporting of suspected elder financial abuse. Last year, U.S. banks reported roughly 25,000 cases of suspected elder financial abuse to the U.S. Treasury. That’s more than double the amount reported in 2013, as reflected in data from the U.S. Treasury department’s Financial Crimes Enforcement Bureau.

One reason behind the surge is demographics: although the baby boomers are getting older, they have a tremendous amount of assets and are vulnerable to being defrauded.

However, the increase in reported cases may also be bolstered by big pushes from the federal government, states, and the financial industry to fight elder financial abuse. New regulations are now in place to encourage people who are on the front lines for elder abuse: brokers, bankers and financial advisors.

FINRA, the self-regulatory agency that oversees brokers, now requires them to ask clients, no matter how young or old, to provide the name and contact information for a trusted family member or friend. If the broker believes that person is being exploited, they have someone to contact. The new regulations also allow brokers to put a hold on withdrawals from a client’s account, if they believe there may be elder financial abuse occurring. The hold is for 15 days but can be extended 10 more days.

From the federal government, the Senior Safe Act became law in 2018. It enables the employees of any financial institutions to report concerns about elder abuse, without fear of being held liable for disclosing private information. To qualify for this protection, financial institutions are required to provide training to staff about recognizing the abuse. At the state level, NASAA (the North American Securities Administrators Association, a group of state regulators) adopted a rule in 2016 which mandates that brokers and financial advisors report any suspected abuse to state authorities. The rule also allows them to stop withdrawals on accounts and protects brokers and advisors from liability, if they stop account disbursement. Sixteen states have enacted versions of the rule, and there are six more states working on legislation.

On a more personal level, there are three things family members and friends can do to prevent elder financial abuse. One is to stay in touch and ask questions of aging parents. Isolation and cognitive impairment are the biggest risk factors. Make sure that your parent is keeping up with bill paying, and whether he or she is in contact with new friends, strangers who may not have their best interests in mind.

If your parent is willing, start by offering to help with a few financial tasks, like bill paying. Keep it low key, by including a visit with the task. If you see things are not being handled well, stay on top of it.

Another step is to set up checks and balances, by making sure that critical legal documents are in place. There should be a will, a healthcare proxy, a HIPAA release form and a durable power of attorney. The durable power of attorney will let you pay bills and manage finances, if and when they can no longer manage. If there is no will or estate plan in place, make an appointment for your parent with a qualified estate planning attorney as soon as possible.

Consider streamlining aging parent’s finances. If they have too many credit cards and too many bank accounts, it may make things easier if they can pare things down to one bank and one credit card. Be very careful with retirement accounts, like 401(k)s and IRAs, to avoid any taxes and penalties.

Simplifying money management and being involved with your parent’s finances and their lives can help prevent financial elder abuse.

Reference: Consumer Reports (Feb. 22, 2019) “3 Critical Ways to Prevent Elder Financial Abuse”