Financial Crimes Against the Elderly
Guide No.20 (2003)
Translation(s): Crimes Financeiros Contra Idosos (Portuguese)PDF
The Problem of Financial Crimes Against the Elderly
This guide addresses the problem of financial crimes against the elderly. It begins by describing the problem and reviewing risk factors. It then identifies a series of questions to help you analyze your local problem. Finally, it reviews responses to the problem and describes the conditions under which they are most effective.
Financial crimes against the elderly fall under two general categories: fraud committed by strangers, and financial exploitation by relatives and caregivers. These categories sometimes overlap in terms of target selection and the means used to commit the crime. However, the differences in the offender-victim relationships suggest different methods for analyzing and responding to the problem.
Fraud Committed by Strangers
Fraud generally involves deliberately deceiving the victim with the promise of goods, services, or other benefits that are nonexistent, unnecessary, never intended to be provided, or grossly misrepresented. 1 There are hundreds of frauds, but offenders generally use a small subset of these against the elderly. The frauds typically occur within a few interactions.
- Prizes and sweepstakes. These frauds generally involve informing the victim that he or she could win, or has already won, a "valuable" prize or a lot of money. The victim is required to send in money to cover taxes, shipping, or processing fees. The prize may never be delivered or, if so, is usually costume jewelry or cheap electronic equipment worth less than the money paid to retrieve it.
- Investments. Because many seniors live on fixed incomes, they often want to increase the value of their estate and ensure they have sufficient funds to meet basic needs. In investment scams, offenders persuade the elderly to invest in precious gems, real estate, annuities, or stocks and bonds by promising unrealistically high rates of return. The investments often consist of fake gemstones, uninhabitable property, or shares in a nonexistent or unprofitable company.
- Charity contributions. Playing on some seniors' desire to help others, offenders solicit donations to nonexistent charities or religious organizations, often using sweepstakes or raffles to do so.
- Home and automobile repairs. Offenders may recommend an array of fraudulent "emergency" home repairs, often requiring an advance deposit. They may subsequently fail to do any work at all, start but not finish the work, or do substandard work that requires correction. Common frauds include roof repairs, driveway resurfacing, waterproofing, and pest control. The offenders are often transient, moving among neighborhoods, cities, and even states. Dishonest auto mechanics may falsely inform customers that certain repairs are needed, or they may bill for services or repairs that were not requested or were not completed.
- Loans and mortgages. Seniors may experience cash flow shortages in the face of needed medical care or home repairs. Predatory lenders may provide loans with exorbitant interest rates, hidden fees, and repayment schedules far exceeding the elderly's means, often at the risk of their home, which has been used as collateral.
- Health, funeral, and life insurance. Many seniors are concerned about having the funds to pay for needed medical care or a proper burial, or to bequeath to loved ones upon death. Unscrupulous salespeople take advantage of these concerns by selling the elderly policies that duplicate existing coverage, do not provide the coverage promised, or are altogether bogus.†
† Harshbarger (1993) commented on this problem as having "all of the factors which create an environment for fraud and exploitation…the need is great, the cost is high, even legitimate policies are complex and confusing, and the population is vulnerable and living in fear of the day the bill comes due." [Abstract only]
- Health remedies. The elderly often have health problems that require treatment. Preying on this vulnerability, offenders market a number of ineffective remedies, promising "miracle cures." Unfortunately, given this false hope, many seniors delay needed treatment, and their health deteriorates further.
- Travel. Compared with younger adults, seniors often have more leisure time and are attracted to low-cost travel packages. However, many of these packages cost far more than market rates, provide substandard accommodations, or do not provide the promised services.
- Confidence games. These frauds generally do not involve a product or service; instead, they include a broad array of deceitful scenarios to get cash from the elderly. The offender may pretend to be in a position of authority (e.g., a bank examiner), or otherwise trustworthy, concocting a story to get the victim to hand over cash, then disappearing.‡ For example, the perpetrators of "lottery scams" claim to have won the lottery but to have no bank account in which to deposit the winnings. The offender promises the victim a premium in exchange for use of his or her account. After the victim makes a "good faith" payment to the offender, the victim never hears from the offender again.
‡ See Whitlock (1994) for detailed descriptions of numerous confidence games.
In addition to variations in the type of product or service offered, frauds vary widely in the means used to commit them.
- Telemarketing. Offenders call people at home, using high-pressure tactics to solicit money for fraudulent investments, insurance policies, travel packages, charities, and sweepstakes. Fraudulent telemarketing operations are designed to limit the benefit to the customer while maximizing the profit for the telemarketer and for the highly efficient contact of a lot of potential customers.†
† See Schulte (1995) for detailed descriptions of a variety of telemarketing scams.
- Mail. Fraudulent prize and sweepstakes operations often mail materials to a wide audience, relying on potential victims to "self-select" by returning a postcard or calling to indicate their interest. The mailings often look official, use extensive personalization (e.g., repeating the recipient's name in the text), include claims of authenticity, have contradictory content or "double-talk," and make a seemingly low-key request for the recipient to submit a small fee. 2
- Face-to-face contact. Some frauds involving products and services (e.g., home and auto repairs) require face-to-face contact at either the victim's home or a business. Alternatively, a scammer gains entry to the victim's home by posing as a utility worker and distracts the victim while an accomplice burglarizes the home.
Successful frauds share common elements. The offenders gain trust and confidence through their charisma, by using a business name similar to that of a well-established organization, or by communicating a concern for the elder's well-being. They create the impression that the elder has been "chosen" or is "lucky" to receive the offer, and that such offers are rare. They encourage their victims to make an immediate decision or commitment to purchase products or services, which effectively limits the opportunity for consultation with others. Further, since the "special" offers are available to only a select group of customers, the offenders ask the victims to be discreet and not discuss the details, shrouding the transaction in secrecy and decreasing the chance of discovery by a family member, neighbor, or other concerned party. The frauds occur quickly, with little risk of exposure.
Financial Exploitation by Relatives and Caregivers
Unlike strangers, relatives and caregivers often have a position of trust and an ongoing relationship with the elderly. Financial exploitation occurs when the offender steals, withholds, or otherwise misuses their elderly victims' money, property, or valuables for personal advantage or profit, to the disadvantage of the elder. Their methods can include the following:
- Simply taking the elder's money, property, or valuables
- Borrowing money (sometimes repeatedly) and not paying it back
- Denying services or medical care to conserve funds
- Giving away or selling the elder's possessions without permission
- Signing or cashing pension or social security checks without permission
- Misusing ATM or credit cards, or using them without permission
- Doling out the elder's money to family or friends
- Forcing the elder to part with resources or to sign over property. 3
The tactics offenders use include deceit, coercion, intimidation, emotional abuse, or empty promises of lifelong care. Further, they usually try to isolate the victim from friends, family, and other concerned parties. By doing so, they prevent others from asking about the elder's well-being or relationship with the offender, prevent the elder from consulting with others on important financial decisions, and, perhaps most tragically, give the elder the impression that no one else cares about him or her.
In addition, relatives and caregivers sometimes exploit the following financial and legal arrangements:
- Joint bank accounts. Under the guise of helping the elder with his or her financial affairs, the offender has his or her name added to the elder's bank account, allowing the offender to deposit, withdraw, or transfer funds. The offender may threaten or coerce the elder into giving consent, or get consent despite the elder's limited capacity to make an informed decision.
- Deed or title transfer. The elder transfers ownership of property such as homes, real estate, or cars to the offender. This may occur as the result of force or intimidation, or as a "gift" or other transaction the elder does not fully comprehend.
- Power of attorney and durable power of attorney. These legal arrangements give a person the authority to manage the elder's affairs on the elder's behalf. When used properly, the legally appointed agent makes decisions that are in the elder's best interest. Misuse arises when the agent induces the elder to sign the document; makes decisions or transactions that benefit the agent, to the detriment of the elder; uses the power after it has been terminated; or uses the power for purposes other than what is intended.
- Living trusts and wills. To avoid potentially expensive probate fees and estate taxes, an individual can transfer property and other assets into a trust. The effectiveness of this legitimate estate-planning tool depends, of course, on the trustworthiness of the person appointed to manage the trust. In addition, through a variety of emotional appeals, a perpetrator may induce an elder to change his or her will, making the perpetrator the sole beneficiary upon the elder's death.
Distinguishing between an unwise, but legitimate, financial transaction and an exploitative transaction resulting from undue influence, duress, fraud, or lack of informed consent can be difficult. 4 Suspicious transactions may be well-intentioned but guided by poor advice. Generally, financial exploitation involves a pattern of behaviors, rather than single incidents.
Financial crimes against the elderly share some characteristics with other crimes. Related problems requiring separate analysis and responses include
Financial exploitation of the elderly may also occur in concert with other types of elder abuse, including:
Factors Contributing to Financial Crimes Against the Elderly
Understanding the factors that contribute to your problem will help you frame your own local analysis questions, determine good effectiveness measures, recognize key intervention points, and select appropriate responses.
National Prevalence Estimates
As discussed above, there are many types of fraud and financial exploitation. In addition, states vary in terms of the age at which one is considered "elderly." These factors make it very difficult to estimate national prevalence. Typically, crime rates are listed in sources of official statistics, such as the FBI's Uniform Crime Reports and the Justice Department's National Crime Victimization Survey. However, neither of these sources provides information on victimization by fraud. Furthermore, studies relying on reports of victimization are particularly limited given the widespread agreement that fraud is dramatically underreported.
However, several national organizations have completed studies offering various ways to quantify the rate of financial crimes against the elderly. Some of these focus on consumer fraud, estimating that somewhere between 20 and 60 percent of adult Americans have reported being the victim, or attempted victim, of it. 5 These studies do not separate prevalence estimates across age. Within the general category of consumer fraud are estimates of losses due to telemarketing fraud. In 2000, the U.S. Senate Special Committee on Aging reported that, each year, consumers lose approximately $40 billion to telemarketing fraud, and estimated that approximately 10 percent of the nation's 14,000 telemarketing firms were fraudulent. 6 Some researchers estimate that only one in 10,000 fraud victims reports the crime to the authorities. 7
Other studies focus on the extent of financial exploitation by relatives or caregivers. In 1998, the National Center on Elder Abuse reported an estimated 21,427 substantiated cases of financial or material exploitation of an elder, accounting for approximately one-third of all substantiated elder abuse cases, including physical and sexual abuse and neglect. 8 In 1998, using data from 24 states, the National Aging Resource Center on Elder Abuse estimated that 20 percent of elder abuse victims were victims of financial exploitation. 9 State-level surveys have identified higher proportions of financial exploitation within reported elder abuse cases, with over 40 percent of elder abuse cases in California and North Carolina involving financial exploitation. 10
The usefulness of these studies in determining the scope of your local problem is rather limited. However, they show that the problem affects a large proportion of the population, regardless of age, and is likely to be underreported by victims and underrepresented in official statistics.
Researchers agree that elder fraud is dramatically underreported, which is problematic for several reasons. First, the failure to report means that the assistance of police, adult protective services, family members and others is not mobilized to stop the abuse. Second, even if intervention is not necessary, the underreporting of these crimes makes it very difficult for problem-oriented efforts to proceed because of a lack of information on the targets, methods and perpetrators. Finally, the lack of reporting may encourage the offenders to victimize others.
Many elderly victims do not report fraud because they feel ashamed, or they fear others will think they cannot care for themselves, which may trigger placement in a nursing home or long-term care facility. Significantly, many victims are not aware of support resources or do not know how to access them. In the case of financial exploitation, many victims have close ties to the offender and may feel protective. They may want to stop the exploitation and recover their assets, but not want the offender punished. In addition, many victims believe they are at least partially to blame.
Professionals (e.g., bankers, attorneys, accountants, and doctors) are also often slow to report suspected abuse. 11 Their brief, episodic interactions with the elderly and their lack of expertise in undue influence and criminal conduct serve as barriers to reporting. Even if they suspect abuse, there often is no specific protocol for reporting it.
When elderly victims do report losses by fraud or financial exploitation, the report quality often makes investigation difficult. 12 If cognitively impaired, the victim may not remember important details or may not be able to recount the sequence of events. Victim interviewers should put victims at ease and provide sufficient time and cues for accurate recall, or else the reports may lack important details. (These issues are discussed more thoroughly in the "Responses" section of this guide). Finally, cognitively and physically impaired seniors may feel overwhelmed at the prospect of traveling to the police station, district attorney's office, or court. Given that complicated cases of fraud and financial exploitation may take years to go to trial, it is possible that a particularly frail victim's cognitive or physical health will decline to the point that he or she cannot testify.
Not only do these barriers to intervention make prevention that much more critical, but they also highlight the importance of developing investigative techniques that account for both the complexity of the crimes and the unique personal challenges of the victims.
The prevailing stereotype of elderly fraud victims is that they are poorly informed, socially isolated individuals—potentially suffering from mental deterioration—who cling to old-fashioned ideas of politeness and manners that interfere with their ability to detect fraud. It is true that dementia and other cognitive impairments sometimes play a role in elder fraud and financial exploitation. For seniors with advanced impairments, responses requiring their participation may have limited effectiveness. However, recent research has refuted prevailing stereotypes, characterizing the majority of potential victims as more educated, informed, and socially active than previously supposed. A major AARP (formerly known as the American Association of Retired Persons) survey identified fraud victims as relatively affluent and well-educated, with extensive networks of family and friends. 13 This survey identified several key points:
- Victims were likely to believe fraudulent sales pitches, thinking that their chances of winning were good and that the prizes offered for a fee were a good bargain.
- Over two-thirds of the respondents reported they had difficulty telling fraudulent and legitimate pitches apart, despite the fact that 90 percent had heard about telemarketing fraud.
- Many victims reported having difficulty ending a conversation with a telemarketer, even when they believed the offer was fraudulent.
There has been significant debate about the extent to which age affects the likelihood of consumer fraud victimization. That debate is beyond the scope of this guide. However, it is important to recognize that old age alone is not a reliable predictor of fraud victimization. Understanding the role of other risk factors can help you analyze your local problem and devise appropriately targeted responses. A number of researchers have noted that the following personal factors affect the extent to which people are likely to be victimized:
- Home ownership
- Likelihood of seeking advice before a purchase
- Knowledge of sources of consumer information and consumer rights
- Financial risk-taking behavior
- Openness to marketing appeals
- Knowledge of the existence of frauds, scams, and misleading practices
- Ability to hang up on telemarketers. 14
The research implies that a lack of knowledge and of certain consumer skills creates a susceptibility to fraud.
Victimization studies have found that seniors who have active social lives and experience a broad array of consumer situations may be vulnerable to fraud simply because of increased exposure. 15 On the other hand, those who are socially isolated may also be vulnerable because they are less likely to seek advice before a purchase, and because the sales pitch itself addresses an unmet need for social interaction, resulting in their feeling obligated to be friendly or compliant in return. 16
Although similar to elderly fraud victims in many respects, seniors exploited by relatives and caregivers differ in significant ways. There is no aspiration for monetary gain. They may fear what the offender may do if they do not comply with his or her demands. They may also have long-term emotional ties to the offender that create conflict about reporting abuse, and may cause them to feel protective of the offender once the abuse is discovered.
Although not studied empirically, there are abundant references in the literature to various lifestyle characteristics of the elderly believed to be linked to fraud victimization. Although many seniors live in poverty, home ownership is high among this group, and many have savings, pensions, and social security income. In addition, seniors are more likely than other demographic groups to be home during the day, and therefore available to telephone and in-person marketing efforts. These factors, combined with an assortment of anxieties specific to the elderly—the fear of outliving one's savings, of losing one's financial independence, of failing health—create fertile ground for all types of fraud and financial exploitation.
In contrast to victims of most other forms of crime, consumer fraud victims have a participatory role that is critical to a successful transaction. Victim compliance can fall along a continuum. 17 At one end is the completely uninvolved victim, as in the case of identity theft or credit card fraud. Toward the middle is the victim who makes a purchase or financial arrangement that is not well-informed or well-researched. At the far end is the repeat victim. Even after victimization, many people repeat high-risk behaviors.
The following are key moments that put the victim at risk in the typical fraud transaction. They have clear relevance to points of intervention: 18
- The victim makes the initial contact, or takes steps that lead to the initial contact, indicating receptivity to the pitch.
- The victim provides information about him- or herself that helps the offender to carry out the fraud.
- The victim allows the conversion of a business relationship to one of trust, and waives customary safeguards.
- The victim believes the offender's scenario or pitch.
- The victim writes a check, gives a credit card number, or otherwise provides access to funds.
In addition, certain traits might make people prone to fraud or financial exploitation. 19 Some of these are considered positive, such as good citizenship, compassion, generosity, respect for authority, and a trusting nature. Others are less desirable, such as being careless, susceptible to flattery, or easily intimidated. Some factors that seem irrelevant on the surface may also contribute to the likelihood of fraud victimization, such as being on "junk mail" lists; belonging to organizations; making purchases over the phone or Internet; moving; buying a house, car, or appliance; investing; and donating to charity.
You should be aware of the various ways fraud and financial exploitation victims may unwittingly help offenders and, when possible, assign them an active role in responding to the problem.
It is a well-documented fact that fraudulent operations compile the names of fraud victims on "mooch" or "sucker" lists and sell them to one another. These lists offer a shortcut to the typical approach of "cold calling" or random-number dialing, as the people listed have already shown themselves susceptible to fraud.
Researchers have found that the strongest predictor of future victimization is past victimization. 20 Not only are past victims retargeted, as described above, but they also can fall prey to scammers offering to help them recoup their losses from previous frauds. Fraudulent operations called "recovery rooms" approach past victims and offer to investigate the original fraud and to return the lost funds—for a fee. Naturally, once victims pay the recovery fee, they never hear from the secondary scammer again.
The very nature of financial exploitation by relatives and caregivers implies a pattern of revictimization. Seldom are the perpetrators satisfied with a single bank withdrawal or forged check. Instead, the pattern is more likely to begin with small-value transactions, which escalate over time and, if undeterred, conclude with the transfer or expenditure of all the elder's assets, leaving the victim with no means of financial support.
Types of Influence
Consumer fraud relies on the manipulation of victims' emotions to get them to agree to a transaction. Emotional ploys include making the consumer feel he or she is part of a special group receiving VIP services, and creating a sense of urgency that prevents further research into the transaction. In addition, offenders may refuse to accept "no" for an answer, have an endless supply of rebuttals for any excuse the victim offers, and have an aggressive style that intimidates the victim into complying. These tactics are essential components of fraud and are effective primarily because of their appeal to the natural human desires to feel special, to find a bargain, and to please.
Particularly when investigating financial exploitation, vexing questions often arise as to whether the victim understood the transaction, appreciated the value of what he or she gave away or signed over, and comprehended the implications of the transaction. Three concepts are particularly critical when analyzing the range of frauds and associated crimes: 21
- Mental capacity. While a gradual decline in functional skills such as memory, calculation, and information-processing is natural as age advances, more pronounced declines can be brought on by particular illnesses, nutritional deficiencies, depression, and certain medications. Obviously, given the complex nature of many financial transactions, mental capacity plays an important role in making sound purchases and managing financial affairs.
- Consent. Essentially, the term means to accept or agree to the proposal of another. To be legally binding, the person giving consent must be able to understand the implications of the transaction.
- Undue influence. Perpetrators may use an array of techniques to gain power over the victim's decision-making and ensure compliance. These include isolating the victim, promoting dependency, and inducing fear and distrust of others. By threatening the victim, exerting pressure to act quickly, or deterring the victim from seeking advice from others, offenders use undue influence to prevent voluntary consent.
Experts in this area note that vulnerability to undue influence is unrelated to intelligence. However, if an elder is cognitively impaired, has sensory deficits (e.g., vision or hearing loss), or has nutritional deficits, he or she may be more easily manipulated because of a lack of faith in his or her own memories and perceptions. 22
The influence used to perpetrate financial crimes falls along a continuum. 23 On one end, the influence is rather benign, as the victim is not actually tricked or forced into doing something against his or her will. On the other end is the rather clear-cut case of theft in which the perpetrator takes something without the victim's consent. One step past benign, coercion involves undue influence using domination, intimidation, and threats. Further still, fraud involves swindling by deception, trickery, or misrepresentation.
Understanding the victim's mental status and the types of influence used is essential for devising appropriate responses to the problem.
The offender-victim relationship is the main criterion used to distinguish the major categories of financial crime in this guide.
Strangers. Consumer fraud offenders are usually strangers to their victims, although they may observe victims' patterns (e.g., times in or out of the house, spending habits, etc.) to identify them as a potential "mark." Telemarketers have no face-to-face contact with victims and may call from thousands of miles away. Given the attention that elder fraud has received in recent years, there are surprisingly few empirical studies of offenders, particularly in light of the extensive literature on victim characteristics. 24
Offenders vary greatly in terms of age, race, socioeconomic status, and education level. Most elder fraud offenders are male. They may be motivated by profit or a need to feel powerful and important. The challenge of the fraud itself may provide a "high," particularly when it is pulled off against wealthy or well-educated victims. In general, offenders are not bound by conventional norms or business ethics, and rationalize their behavior. In clinical studies, criminologists have found offenders to have all types of psychological dysfunctions, revealed in their distorted thinking processes and lack of regard for others. 25
In terms of behavior, those who perpetrate fraud against the elderly often present themselves as self-assured, friendly, and sophisticated. They are persistent, yet can often avoid raising suspicion. "What the con man does is an extreme expression of normal business dealings—salesmanship based on the ability to persuade others…the promise of gain is central to society…and it is not abnormal to offer opportunities to make money or improve one's health." 26
Fraudulent telemarketers frequently work out of "boiler rooms"—temporary, highly mobile operations that can be disassembled and reassembled quickly. Boiler-room operations typically have six stages: 27
- Solicitation. Telemarketers identify new prospects through either incoming mail (postcards or certificates returned by people responding to bulk mailing) or unsolicited outgoing calls. "Mooch" or "sucker" lists are critical for efficiency at this stage, and most calls are out of state.
- Sales. The pitch is usually a written script, although most callers are given wide latitude in what they can promise and in price negotiation. A "front room" contains less-experienced callers who make the initial contacts. Calls to consumers who do not accept the offer are transferred to a "no-sale room," where more-experienced callers pressure the consumers and explain away their concerns. Callers in a "reload room" target past victims, using an assortment of bogus promises to get them to buy again. Notably, the "reload room" callers usually solicit the bulk of the company's illicit income.
- Verification. Shortly after the sale is complete, a caller recontacts the customer, reviews the sales terms, and arranges for payment. At this stage, the caller attempts to obscure any misrepresentation made during the initial stage.
- Collection. To avoid buyer's remorse, the scammers must secure payment quickly. They do so by requiring overnight check mailing, bank draft authorization, or electronic funds transfer. Notably, because of their instability and illegal business practices, most boiler rooms cannot obtain bank merchant accounts for credit card sales.
- Shipping. While one might guess that the promised product is never shipped, successful boiler rooms have found that reliable shipping minimizes consumer complaints, which in turn decreases the likelihood of law enforcement intervention. Most boiler rooms use a "10 to 1" principle, awarding a prize valued at approximately one-tenth of the fee paid.
- Customer service, harassment, and intimidation. Ongoing availability to customers is important to handle problems. In fraudulent operations, scammers may belittle or berate complainants, or use delay tactics and empty promises to frustrate them into giving up the pursuit of recovery. These organizations generally provide refunds only with the threat of law enforcement action.
Understanding boiler-room mobility and structure is essential to intervention efforts targeting the operations themselves.
Relatives and caregivers. Financial exploiters of the elderly rely on the nature of their relationships with them to support the abuse. The victim has often formed a close bond with the offender, and may be unaware of or deny the abuse. In addition, the victim may fear being alone or being placed in a nursing home if the offender is removed. These dynamics are important to understand in addressing the emotional impact on the victim.
A national survey found that offenders tend to be significantly younger than their victims, with 40 percent age 40 or younger, and another 40 percent age 41 to 59. Nearly 60 percent are male, and nearly 60 percent are relatives. 28
There are three general categories of offenders:†
† Sklar's (2000) typology actually includes a fourth category—professional crime groups, which are not discussed here. [Abstract only]
- Adult children, grandchildren, and other relatives. While an elder might generally believe that a relative is providing financial assistance, the relative may be withdrawing cash from joint bank accounts for personal use, using the elder's credit card to make unauthorized purchases, or embezzling money by refinancing the elder's home. This is the largest category of offenders, and, sadly, the abuse is often not discovered until after the elder's assets have been depleted.
- Professional caregivers. Home health aides offer invaluable assistance to seniors who need help to live independently. However, they sometimes abuse an elder's trust by intercepting and activating unsolicited credit cards in the elder's name; taking jewelry, cash, or other valuables; forging or altering checks for their own use; or tricking the elder into transferring titles and deeds to the caregiver.
- Close friends or others in a position of trust. This group can include neighbors, handymen, bank tellers, real estate agents, or investment advisors. In general, such offenders may encourage investments and expenditures that benefit only themselves, steal money or property, or arrange for changes to wills, trusts, or mortgage financing for their own benefit.
Questions of consent or voluntary gift-giving make the investigation of potential abuse cases difficult. Gift-giving habits vary across families, as do cultural expectations regarding elderly care; thus it is essential that you examine each situation within the appropriate context. 29 Further, you should examine any business relationship an elder may have in terms of the nature of the arrangement. 30 For example, a relationship with a gardener or housekeeper may be based on a "good faith" exchange in which each party negotiates in his or her own self-interest (barring deception and misrepresentation). However, some business relationships, such as those with financial planners, bankers, or health care workers, require the professional to act in the elder's best interest. Sometimes, a "good faith" relationship evolves beyond the original intent (e.g., the housekeeper begins to help the elder with finances). These relationships become abusive when the perpetrator continues to act in a self-serving way, rather than make decisions based on the elder's best interest.31
Regardless of the category of offender, there are two basic types. 32 The first type includes dysfunctional people with low self-esteem who may be abusing substances, feeling stressed, or feeling the weight of their caregiver responsibilities. They do not generally seek out victims, but instead passively take advantage of opportunities that arise. The second type includes those who methodically target vulnerable seniors, establish power, and obtain control over their assets.
Warning Signs and Indicators
Crime prevention efforts have identified a number of warning signs and indicators of both consumer fraud and financial exploitation of the elderly. Because the means of committing the two types of crime are different, the signs and indicators are listed separately here.
Warning signs of consumer fraud. 33 These include the following:
- Stacks of unsolicited mail proclaiming the recipient to be a "guaranteed winner"
- Unusual number of packages containing inexpensive costume jewelry, plastic cameras, watches, etc.
- Excessive numbers of magazine subscriptions
- Unsolicited phone calls from operators offering "fantastic opportunities" to claim prizes or invest
- Difficulty covering basic expenses such as food, utilities, etc., when income should support these needs
- At the bank, accompaniment of the elder by a stranger who encourages a large withdrawal
- Checks and withdrawals for individuals, marketing companies, or other businesses, or transactions that the elder cannot explain.
Indicators of financial abuse.34 These include the following:
- A recent acquaintance expresses an interest in finances, promises to provide care, or ingratiates him- or herself with the elder.
- A relative or caregiver has no visible means of support and is overly interested in the elder's financial affairs.
- A relative or caregiver expresses concern over the cost of caring for the elder, or is reluctant to spend money for needed medical treatment.
- The utility and other bills are not being paid.
- The elder's placement, care, or possessions are inconsistent with the size of his or her estate.
- A relative or caregiver isolates the elder, makes excuses when friends or family call or visit, and does not give the elder messages.
- A relative or caregiver gives implausible explanations about finances, and the elder is unaware of or unable to explain the arrangements made.
- Checking account and credit card statements are sent to a relative or caregiver and are not accessible to the elder.
- At the bank, the elder is accompanied by a relative or caregiver who refuses to let the elder speak for him- or herself, and/or the elder appears nervous or afraid of the person accompanying him or her.
- The elder is concerned or confused about "missing money."
- There are suspicious signatures on the elder's checks, or the elder signs checks and another party fills in the payee and amount sections.
- There is an unusual amount of banking activity, particularly just after joint accounts are set up or someone new starts helping with the elder's finances.
- A will, power of attorney, or other legal document is drafted, but the elder does not understand its implications.
These warning signs and indicators have been incorporated into a variety of education tools targeting family members, banks, attorneys, and other concerned parties. These are discussed in the "Responses" section of this guide.
Lack of Oversight of Legal Documents
Given that legal documents such as trusts, joint bank accounts, and powers of attorney give a third party such enormous decision-making power, it is surprising that the preparation and execution of these documents is not more closely regulated. With regard to powers of attorney, very few states require them to be registered, few require a lawyer's involvement in drafting the document, and witnesses are not required to ensure the elder's signature is voluntary. 35 Although most states require notaries, they are not trained to assess mental capacity and therefore cannot protect an impaired elder from abuse. No record of ongoing use is provided to the elder, so even fully competent seniors are not able to monitor transactions made on their accounts. Finally, few states have formal procedures for revoking the authority granted under power of attorney, which allows the offender to continue abusing this power even after intervention.
Laws and Agencies Involved
Every state has adopted laws to prohibit particular types of fraud and, often, to enhance penalties for fraud against the elderly. Older consumers are, of course, protected by general consumer protection laws, telemarketing laws, and other statutes governing theft, embezzlement, fraud, etc. However, given that each state crafts its own laws, there are significant differences that make a description of national legislation concerning elder financial abuse impossible. These differences tend to apply in the following six areas: 36
- Definition of "elderly"
- Definition of abuse, whether physical abuse, sexual abuse, financial abuse, or neglect
- Classification of abuse as criminal or civil
- Standards for reporting abuse
- Methods for investigating abuse
- Recommended sanctions.
Not only do these differences make it difficult to describe the various legislative approaches, but they also make it difficult to investigate and prosecute fraud offenders who may have victimized people in several states, all of which have different statutory requirements.
Further, fraud and financial abuse cases come under the jurisdiction of several agencies. Federal agencies such as the FBI, Postal Inspection Service, and Secret Service, as well as state and local police, may be involved in investigating large-scale consumer fraud operations. The lack of information-sharing across these agencies has been identified as a significant barrier to effective intervention. 37
When a financial crime involves the misuse or abuse of legal documents, the case may also be classified as a civil matter, requiring additional cooperation with the prosecutor and court of jurisdiction. Banks and phone companies are also critical partners in investigating fraud or financial exploitation. Finally, given that the senior's welfare is paramount, social service agencies, such as adult protective services and medical and mental health services, must also be included in a coordinated effort to protect the senior from further harm.
Fraud and financial exploitation cases present a complicated web of behavior, intent, and consequences. The scope of jurisdiction and various areas of expertise required are unlikely to be found in any one agency, requiring cooperation across traditional jurisdictions and professional boundaries.
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Financial Crimes Against the Elderly
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