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Translation(s): Crimes Financeiros Contra Idosos (Portuguese) PDF
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 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.
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]
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.
See Schulte (1995) for detailed descriptions of a variety of telemarketing scams.
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.
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:
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:
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:
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.
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:
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:
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
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.
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
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
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]
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.
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:
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.
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.
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.
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
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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