How to Avoid and Detect Elder Fraud
Elder abuse is a growing problem which is magnified by our aging population. There are many forms of elder abuse ranging from neglect to physical abuse, and within that range of abuse is financial fraud. A significant number of elderly fraud incidents involve the use of the internet.
Seniors are disproportionately targeted as victims for fraud. AARP (formerly the American Association of Retired People) found that while only 35 percent of the American population is over 50 years old, fraud victims over the age of 50 accounted for 57% of all fraud. Millions of dollars are lost each year to criminals preying on elderly citizens. Unfortunately, much of the fraud goes unreported or under reported by our seniors.
Fraud and the Internet
Criminals play a numbers game. They know that most of their attempts to con people won’t work, but they also know that some will. To succeed, the con-man has to make as many tries as possible, thereby increasing their “odds”. Going door-to-door attempting to scam people has low odds because it takes a long time and it’s only possible to knock on so many doors in a given day.
The internet removed those problems for an offender intent on committing fraud. Offenders can now sit in the comfort of their own home, possibly countries away, and through the use of spam email attempt to con thousands of people per day, every day.
Elder fraud is a specific type of fraud aimed at seniors. The most common way seniors are targeted over the internet is through email. General phishing techniques are used against a large number of email addresses with content directed toward seniors. Content directed toward seniors generally falls into three categories:
- Financial support with regards to home equity or retirement savings
- Friendship or companionship
If a response is gained through general phishing, targeted spear phishing can take place in an attempt to defraud specific individuals.
Why are Elders Targeted?
Everyone wants to be safe, warm, fed, loved, and financially secure. Few people have all of those things all the time, and in our elder years the absence of some of those things can converge into a pattern of increasing stress and a feeling of isolation.
It’s easier to phish people if you know what their problems are. A general phishing attack may use low mortgage rates -at any given time there are millions of people looking for mortgages but there are billions who are not and don’t care about the mortgage email. Seniors, on the other hand, tend to have a smaller pool of things that are of greater concern. As a population, things like medication costs, proper health care coverage, financial security and providing for loved ones left behind tend to get more attention. It’s easier to craft phishing emails about a small number of subjects that a larger percentage of a population is likely to be interested in, again increasing the “odds” of a successful scam.
Other reasons may include the fact that many seniors are isolated and have nobody they can trust to run ideas by. Email did not become widely affordable to households until the late 1980’s. Anyone over 35 today has memories of a world without widespread internet use and many of our seniors have spent most of their lives without it. This can lead to confusion over how reliable email is, how safe email is, how much trust to assign it, and a lack of understanding of how to avoid some of the troubles associated with internet use.
It’s not uncommon to experience some level of diminished mental capacity as we age. That can negatively affect our decision-making abilities and lead to bad decisions while using the internet.
Common Types of Elder Fraud
An unfortunate statistic is that a large portion of elder fraud is committed by family members or caregivers! The North American Securities Administrators Association reports that 23% of elder fraud causes in 2015 were committed by family members, trustees, or people with powers of attorney. Generally, those types of fraud are not committed over the internet since the parties are already known to each other.Some of the more common internet scams may take the following forms:
Monetary scams aimed at seniors are attractive to criminals for two reasons. Many seniors are living on fixed or inadequate incomes and could use more money. Who couldn’t use more money? Some seniors have sizable nest eggs and large amounts of equity in their houses so they readily available access to a lot of money. The most beguiling and harmful scams play both angles.
Fraudulent investment or insurance schemes seek to bilk money out of people with the promise of some greater reward down the road. While it may be morbid to consider, it is important to think of how much time we have left for an investment to mature. Generally, older people would be focusing on short-term investments and there are very few legitimate lucrative short-term investments. The insurance scam plays the other angle – there is no concept of pulling any money out of the insurance policy. Rather, heart strings are played upon to invest money for those left behind. In some cases, the insurance agent actually is a legitimately licensed insurance agent, but is still trying to commit fraud against the elderly.
Another type of fraud involves offers to lend money that seem too good to be true. These types of scams are usually complicated to figure out because it’s hard to believe someone can fraudulently give someone else money. A complex example of this is the reverse mortgage. With a reverse mortgage, elderly homeowners with significant equity in their property can opt to receive a large portion of money for the estimated value of their property at the time they pass away or willingly move. It is important to remember this is an estimated value that may increase (or decrease) depending upon the economy. At that time, the lender takes possession of the house and the debt is paid. The danger lies in that the principal plus the interest over time can end up being more than the house is worth. Reverse mortgages are not inherently fraudulent, but be sure to obtain sound third-party financial and legal advice beforehand.
Lottery scams are targeted at people of all ages and elderly people are no exception. The basic framework of a lottery or sweepstakes scam is to tell the victim they’ve won a large prize of some kind, but some smaller amount of money has to be paid in order to claim the prize. The money to be paid is usually attributed to non-existent things like “international transfer fees” or “banking and processing fees”. It is a reasonable certainty to say that if you’ve never entered a lottery, you can’t win, so claims like this out of the blue are a red flag. Legitimate lotteries are tightly regulated to ensure there is no fraud.
As we age, and by the time we reach our elder years most people routinely take prescription medication of some sort. Depending on the type of drug and available health care, those bills can add up. This creates a rich environment for scammers to prey on.
The National Association of Boards of Pharmacy (https://nabp.pharmacy) of Mount Prospect, Illinois states that 96% of the online pharmacies it reviewed appear to be operating against the law or against standard practices. Government and industry organizations alike warn against purchasing drugs online for a variety of reasons; most of which boil down to a lack of accountability. There is no reasonable way to ensure:
- the drugs are correct
- of the correct dosage
- not expired
- or even if the drugs will be shipped to you at all.
Spam is estimated to account for over 70 % of all email on the internet. Of that, 65% is pharmacy related spam. With numbers like that, it’s almost certain that we’ve all received pharmacy spam at some point.
There are legitimate pharmacies that sell some drugs online. However, almost none of them would bother to send unsolicited email. If you’re going to order drugs online, the following guidelines are recommended:
- only use websites that belong to a verifiable “brick and mortar” pharmacy with a street address
- don’t purchase drugs from a pharmacy that will sell you prescription drugs without a prescription
- don’t purchase drugs from a pharmacy that will issue you a prescription based solely on a questionnaire on the site
Identities are very valuable because identities can be used to get credit cards, open bank accounts, and a wide variety of other illegal activities. Stealing an identity simply means pretending to be some other person in order to fraudulently obtain money or other items. Seniors represent about 15 percent of the U.S. population but disproportionately account for 22 percent of all identity theft.
Seniors are disproportionately targeted for identity theft. Some of the reasons include that seniors typically have:
- higher savings than the younger population who are still building their nest egg
- generally very good or excellent credit ratings
- more assets, and
- a higher net worth
Identity thieves are criminals of opportunity. Taking some basic steps can greatly increase your protection against becoming a victim.
- Protect your online privacy
- Avoid phishing scams
- Guard your social security number
- Monitor your accounts for unauthorized transactions
- Shred mail and paperwork with identifying information
- Create strong passwords
- In public places, be wary of shoulder surfers and skimmers
- Order your credit report at least once a year
- Consider investing in identity theft protection
An ongoing scam that targets seniors is the IRS Scam. It has been going on for years and specifically tries to identify seniors as victims. The caller pretends to be the from the IRS and states that you have a tax debt that must be immediately paid in order to avoid arrest. The IRS will always send a letter or certified letter requesting that you contact them directly.
How to Recognize Elder Fraud
Sometimes it can be painfully obvious when fraud has occurred. A suddenly empty bank account or a sweepstakes check that never arrived can make it pretty obvious that you’ve been scammed. In other cases, the fraud can be more of a long-term process which siphons off small amounts of money over time and is harder to detect. If you’re vigilant, you may be able to spot the signs of elder financial fraud happening to yourself, or someone you love.
To someone else
It can be very difficult to detect elder fraud unless you’re in frequent contact with the victim. As a caregiver or family member, you may be able to detect telltale signs that things may not be normal. Some signs can be:
- A change in daily habits that could indicate a loss of money. People who know they have been scammed are sometimes embarrassed to admit it. Someone who is confused or may be operating at a diminished mental capacity may not know they’ve been scammed and just can’t figure out where their money is going.
- If you have knowledge of their banking habits, you may find unpaid bills or unusual signatures on returned checks.
- Caregivers or other people close to the victim that seem to have items or a lifestyle above what you would expect to be affordable can be a red flag. They may be good savers, or they may be supplementing their income in other ways.
- Outright complaints from the victim that they are missing money. It’s entirely possible that the victim knows they’re being scammed somehow, but just can’t figure out how it’s being done.
- Review your credit card and bank statements at least monthly. Track down any unexplained charges and report them to your bank. Even very small charges should be explained. When credit card numbers are stolen, it is common for the credit card thieves to put through a small initial charge to ensure the card is still valid to increase its value on the credit card black market.
- Many credit card companies and some banks will allow you to set up activity alerts. This will let you keep track of banking activity in a more “real time” way than waiting for monthly statements. You’ll likely be able to set up online access to your accounts as well to monitor account activity.
- Credit monitoring companies are required to provide free credit reports at least annually. Ensure you take advantage of that and review your reports for accounts that you didn’t open. You can also review your credit report monthly for free at Credit Karma, (https://www.creditkarma.com), or at Annual Credit Report (https://www.annualcreditreport.com) .
How to Prevent Elder Fraud
Other steps you can take to prevent elder fraud include:
Never give out any information or money based on an email.
Email is a completely insecure means of communication and is used in a wide variety of scams. It is incredibly easy to craft an email to look like it came from a trusted entity, when in fact it did not. There should be no reason to send anyone money based solely on an email request, even to people who appear to be friends or family. Always follow up email requests with a phone call or some secondary method of communication to ensure it is a legitimate request.
Never give out any information or money based on a phone call unless you know and trust the person.
This sounds similar to the previous point, but it is slightly different. Criminals use email because it’s possible to hit an extremely large number of potential victims with almost no effort. But, that doesn’t mean all criminals are lazy. Some will take the time to identify victims and make telephone calls instead of sending emails. The scammer is not able to hit as many victims over the phone as he could over email, but the personal touch of a phone call makes the success rate higher.
If you do agree to send money to someone you know over the phone, ensure that they are who they purport to be. There can be warning signs that something is amiss such as:
- You’ve sent this person money before, but now they want it sent to a different bank or different bank account.
- The amount of money being requested seems out of line with the reason for it.
- The story behind the purpose of the money seems outlandish.
Designate a trusted person for your financial advisor to talk to
Financial advisors are in a good position to spot fraud attempts. If your money is invested and managed by an advisor, then fraudsters have to attempt to deceive the advisor which is (hopefully) hard to do.
In the event that your advisor does spot fraud but is unable to work with you directly due to illness or advanced age, the advisor should be able to work with someone else on your behalf. Your advisor generally won’t have the legal authority to disclose your financial information to anyone else unless you’ve specifically designated someone in advance. If your advisor does not ask you to fill out an authorization form for this purpose, ask how you can do that.
Set up powers of attorney and other legal documents in advance
The key phrase here is in advance. We don’t always see problems coming and if you suddenly become too infirm to deal with financial matters, it may not be possible to set up powers of attorney at that time. Much like designating a trusted person for your financial advisor to talk to, you should designate a trusted person to have your powers of attorney before you need them.
How to report elder fraud
The Olympia Fields Police Department, 708-503-8100 or www.olympia-fields.com is a good first point of contact in all cases.
To report suspected abuse, exploitation or neglect of an older person, call the statewide, 24-hour Adult Protective Services Hotline: 1-866-800-1409, 1-888-206-1327 (TTY).