Managing Director Forensic Resolutions Inc.
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How CPAs Can Help Stop Elder Financial Abuse

Mar 8th 2019
Managing Director Forensic Resolutions Inc.
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prevent elder financial abuse

Financial and fraud prevention professionals are acutely aware that employees, management, vendors, suppliers and competitors are among those with the ability to commit fraud. For older adults, the population of potential perpetrators of fraud is even closer, including family members, care providers and telephone scammers.

Elder fraud has been called the “crime of the 21st century.” With the changing demographics in North America, elder financial abuse is a growing concern, and it is expected to intensify in the coming years as, by 2031, one in five people living in the United States will be of retirement age.

Those who are close to retirement represent a part of the population that controls more than 70 percent of U.S. disposable income. The size of this segment is large, and it includes the baby boomer generation. Some have investable assets of over $500,000; however, due to the income gap, the average net worth (excluding home equity) for Americans age 55-64 is only $61,390.2 Therefore, for many, Social Security benefits are a valuable source of income.

Because of the diversity of this generation’s financial situations, elder abuse takes many forms. Combined, it has been estimated that the victims of elder financial abuse have lost over $2.9 billion. Although the statistics vary between studies and geographic regions, one thing that is consistent is that elder financial abuse is a serious problem on the rise. The first step in combating these types of crimes is awareness.

What Are the Top Sources of Scams?

To bolster awareness, the National Council on Aging has identified the top 10 financial scams targeting seniors:

1. Medicare/health insurance scams: In some cases, scammers pose as Medicare agents to solicit personal information. That information is then used to bill Medicare and pocket the funds.

2. Counterfeit prescription drugs: This is largely an internet-based scam that targets seniors when they try to find better prescription pricing than what is available at their local pharmacy. This poses a double threat: loss of funds and a potential health risk from unsafe drugs.

3. Funeral and cemetery scams: Scammers will read obituaries and prey on a grieving spouse. In some cases, they will claim the deceased owed them money; in others, unscrupulous funeral homes add unnecessary charges or up-charge for certain expenses.

4. Fraudulent anti-aging products: Bogus Botox treatments, homeopathic remedies and others are at the top of the list for supposed “remedies” aimed at those wishing to conceal their age and feel younger.

5. Telemarketing scams: This is the most common scheme that the elderly face. These efforts are impersonal and have no paper trail. They may include fake charities or the pretense that the person calling is from a bank or the IRS and seeking personal information such as bank account numbers, Social Security numbers or other important personal data. According to the Treasury Inspector General for Tax Administration, between October 2013 and September 2018, more than 2.4 million Americans were targeted by scammers impersonating IRS officials.

6. Internet fraud: Bogus virus-scanning software, malicious emails and phishing scams are among the most common efforts targeting senior citizens. Similar to telemarketing scams, these emails appear to be legitimate and ask for personal information to “verify” an account or transaction.

7. Investment schemes: Here, seniors are targeted with claims that they can get better returns than the market provides. The types of investment schemes vary, but they often employ sophisticated devices to “trick” the elderly into parting with equity in homes or retirement savings.

8. Homeowner/reverse mortgage scams: These frauds include bogus letters that claim to help seniors reduce their property taxes “for a fee” or scammers capitalizing on the reverse mortgage boom. In reverse mortgage fraud, seniors give up the title to their home in exchange for the promise of cash or another property, neither of which materialize.

9. Sweepstakes and lottery scams: In one type of sweepstakes scam, the scammer requests a payment to “unlock” a prize that the senior supposedly won. The senior receives a check and deposits it but finds out days later that it bounced. The unlocking payment and the perpetrator are long gone. One such scam occurred in 2017 in Lebanon County, where an 82-year-old man lost $30,000 after he wired money for taxes on the $10.5 million he was told he won from Publishers Clearing House.

10. Grandparent scams: In this scheme, a scammer will ask a senior citizen to guess which grandchild is on the phone, thus having the senior divulge a grandchild’s name. They will then ask for money in the form of a moneygram or similar payment.

AARP (formerly known as the American Association of Retired Persons) suggests that people over the age of 50 may be easier targets for such abuse because many are less knowledgeable about the complexities of scams, as well as not knowing their rights. In addition, they tend to expect everyone to be honest and are more likely to be home and available to target than younger people. The AARP Fraud Watch Network has IRS scams, tech support scams, grandparent scams and government grant scams at the top of their watch list.

AARP notes that the IRS scam – whereby a caller claims to be with the IRS and seeks out personal information to process a bogus refund or adjust the person’s tax return – is one of the biggest scams and had the most complaints directed toward AARP’s Fraud Watch Network.

While tech support scams affect everyone from 18 to 99 years of age, AARP believes the elderly are at a higher risk due to the perpetrator’s exploitation of a lack of understanding of technical computer issues and a general trust toward someone who claims to be able to assist them.

Grandparent scams are among the most egregious: They prey on an elderly person’s emotions and family ties. The perpetrator will usually say, “Please don’t tell mom (or dad). I don’t want them to know I am in trouble.” Many of these scams originate from perpetrators obtaining information from an unsecured Facebook page.

Elder financial abuse often occurs within the family by adult children or grandchildren, but it can be perpetrated by anyone else who is in a position of power, trust, or authority. This can include other relatives, friends, neighbors, paid caregivers, landlords and even financial advisers.

Elders are often unable to understand what is happening to them due to advanced age or medical conditions. Elders may also not be familiar with more complex financial matters, or they could be lonely and isolated, making them more susceptible to becoming a victim. It is, therefore, critical to recognize the possible signs of elder financial abuse and to understand the current reporting options and resources available to investigate and prevent these crimes from occurring.

Signs of Potential Elder Financial Abuse

There are many indicators of potential elder financial abuse. If you have any reason to suspect that someone may be a victim of financial abuse or fraud, help them contact their local investigative authority so they can file a report. Some of the indicators include the following:

  • Unpaid bills
  • Sudden change in lifestyle
  • Forged signatures
  • Sudden accrual of debts
  • Sudden sale or change in title of home, land, or assets
  • Unexplained transfer of funds
  • Power of attorney or wills changed under unusual circumstances
  • Sudden changes in withdrawal amounts
  • Elder complains about missing money or assets
  • Elder reports financial abuse

Fraud detection can be hard because in many cases perpetrators are family members, friends, neighbors, or caregivers. According to the June 2011 MetLife Study of Elder Financial Abuse, more than 50 percent of all cases of senior financial abuse involve someone close to the victim. This aspect makes the fraud hard to detect and prosecute.

Sometimes, elder fraud is not reported because victims may be too embarrassed or afraid to talk about it. Some seniors may not recognize that they have been victimized by a fraud. According to the June 2018 Elder Financial Exploitation prepared by the U.S. Securities and Exchange Commission, for every documented case of elder financial exploitation, 44 went unreported.

If you see or sense any of the above indicators, it is recommended that you have somebody follow up to determine if there may be substance behind your concerns.

Countering the Problem

CPAs must remain aware of current frauds and scams. Falling for a scam is not necessarily linked to a person’s education level, but depends on their level of vulnerability. It is up to relatives and those with financial expertise, such as CPAs, to continually educate and inform elderly family members and clients (or clients with elderly family members).

Like any type of fraud, understanding the red flags and conducting due diligence is key. AARP notes that a person’s financial capability and decision-making are susceptible to brain changes, which is why it is key for a close family member or financial adviser to stay in touch and closely monitor elderly friends, family, and clients. When keeping in contact, here are a few pointers:

1. Safety: The first consideration for any suspected elder financial abuse is the safety of the elder. If there are visible signs of abuse or you are concerned that the elder may be in danger, consider reporting the incident to your local law enforcement agency.

2. Rapport: Developing a rapport with the elder is important; otherwise they may be reluctant to speak with you. In some situations, they may have been relying on and trusting an abuser for assistance with activities such as cooking and cleaning and do not have other sources of assistance. Take the time to build a bond with the elder and be respectful.

3. Documentation: As with any allegation of fraud, gather documentation. This may include bank statements, receipts, bills, power of attorney, wills and any other documents that you may be required to provide to authorities.

4. Take notes: Write down anything that the elder has told you regarding events that have taken place. It may assist with any follow-up that may be required at a later time. In some situations, there may be other elders that have been victimized or other people that may have been involved.

One recent case highlights the sad consequences that elder fraud can have. Marjorie Jones of Louisiana received calls from a scammer telling her she had won a sweepstakes. The caller told Jones (who was 82 and legally blind) that she could collect the winnings once she paid the taxes and fees. After she wired the first payment, the caller kept adding conditions to convince her to send more money.

As in many of these cases, Jones did not tell her family. She depleted her savings, took out a reverse mortgage, cashed in a life insurance policy and eventually called a family member to borrow money. After losing all her life savings – hundreds of thousands of dollars – she committed suicide.

Jones, it appears, had multiple conversations with strangers, as her family members did not recognize many of the caller IDs on her phone. Also found were three bags of wire transfer receipts in her closet.

Practice Tips

Education, training and overall awareness are keys to understanding these schemes and assisting clients in fighting them.

It is also important to understand and comply with various laws and regulations related to the handling of private information. For example, the Gramm-Leach-Bliley Act (GLBA) prohibits the disclosure of personal information to third parties unless consent is obtained. In 2013, supporting guidance was released as a joint effort of several regulation agencies (including the Consumer Financial Protection Bureau and the Federal Trade Commission) clarifying that one exception to the GLBA relates to situations when suspected abuse is reported. Still, the AICPA in its Code of Professional Conduct prevents CPAs from disclosing a client’s financial information to third parties, even if potential fraud or abuse is suspected. Such a prohibition obligates CPAs to obtain a client’s consent first, which may be complicated if the suspected perpetrator of fraud is an elder’s family member or caregiver. Obtaining consent to disclose is also problematic if the elder victim demonstrates early signs of cognitive decline.

Whether you are a tax preparer specializing in elder care or in general practice, it would be wise to learn more about current identity theft schemes, internet-based fraud schemes, and investment fraud angles, as well as fraud indicators and warning signs and the available government and private resources for victims of fraud.

Irina Balashova, CPA, CIA, CFE co-authored this article. The original version appeared on the PICPA Journal site.

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