Posted by KLSM CPA Firm PLLC

Financial Exploitation of the Elderly: Red Flags, Prevention & Reporting

Financial Exploitation of the Elderly: Red Flags, Prevention & Reporting

Financial abuse of the elderly population has increased, with financial institutions claiming to have quadrupled the number of such incidents between 2013 and 2017, according to the Office of Consumer Financial Protection or CFPB.

Regardless of the size of the fraud, it can leave the elderly and their families financially and emotionally devastated.

What can you do to protect your loved ones? It all starts with understanding the financial abuse of older adults, learning to identify warning signs, taking preventative action, and reporting suspicious activity.


What is elder financial abuse and exploitation?

As people get older, it is common for them to involve other people in their financial matters. Many older people ask their children, grandchildren, friends, and others to help them with their money. But family members, neighbors, strangers, and even professionals can sometimes cross the line of financial abuse.

Elder financial abuse occurs when someone abuses or misappropriates the assets of a vulnerable adult for their own benefit. It is often done without the knowledge or consent of the vulnerable adult and may leave them without the necessary financial resources.

This can be done at home, in a specialized health center, or in a retirement home. Although some cases appear to be sleight of hand, false pretenses, or deception, it is not uncommon for abuses to include duress, harassment, coercion, and threats.


Why financial abuse of older people go unreported

With losses estimated at billions of dollars a year, financial abuse of seniors is a significant crime that affects seniors in many communities daily. So why isn't it often reported?

Financial abuse can be more difficult to detect than physical abuse of the elderly. Circumstances may vary, and the warning signs are not always obvious.

But four scenarios explain why the vast majority of cases go unreported:

  • The abuser is a trusted family member or caregiver.

  • The victim does not know what has happened until the damage occurs.

  • The victim does not know who to talk to or where to report.

  • The victim is ashamed.

Older people may depend on the abuser for basic care and needs and may fear retaliation. The victim's lack of physical or mental capacity can also make the situation unreported.

The laws of many states require reporting elder abuse. But some loopholes allow exploration to escape. For example, the CFPB has guidelines to urge financial institutions to report suspicions of senior financial abuse. Still, only 26 states and the District of Columbia require financial institutions or financial professionals to report financial statements of seniors from April 2019.

Although nearly half of the states in the United States do not have laws in place that require reporting, there are many resources available to educate and encourage such acts. One of them is the Elderly Financial Exploitation and Investment Fraud Prevention Program (EIFFE).

EIFFE educates healthcare professionals, finance professionals, and healthcare professionals who interact with older adults to recognize older clients' vulnerability and report potential victims of financial abuse to securities regulators, local adult security services, or other detection resources.

Reporting abuse can be overwhelming, and the process for reporting abuse varies from state to state. Adult protection services in your area can walk you through the process and connect you with local resources to get the help you need.


Who is at risk for elderly financial exploitation?

The National Center for Elder Abuse reports that 1 in 10 people aged 60 and over have experienced elderly abuse. But many adults are unaware of the abuse.

Cognitive impairment and physical limitations that require assistance with activities of daily living can increase the vulnerability of older people. But it's not always the case. Elderly people with superior cognitive and physical abilities may also be victims of financial exploitation.

It is not uncommon for older Americans to manage their money and make their own financial decisions. But the risk of financial abuse can increase without a financial advisor overseeing financial transactions and decisions.

Suppose an elderly person depends on a financial professional. In that case, the Financial Sector Regulatory Authority (FINRA) may allow them to withhold payments for up to 15 days if they suspect that an elderly person has been financially exploited.

An extra layer of protection can make all the difference. According to a CFPB report, seniors have lost an average of $41,800 due to the financial abuse of seniors, and the risk is highest when dealing with a friend or family member. Seniors exploited by strangers lost an average of $17,000. But the average loss was $50,200 when the scammer was a friend or relative.

It is essential to be on the lookout for warning signs that a client or loved one may be in trouble. However, it is not always easy to spot the signs of financial exploitation and abuse by older people. Common warning signs that can signal financial fraud against the elderly can include:

  • Checks are written to "cash" or unauthorized withdrawals at ATMs

  • The disappearance of money, valuables, or financial statements

  • Sudden changes in bank accounts or banking practices.

  • Sudden changes in the mood or behavior of an elderly person

  • Telephone, water, electricity, or other utilities being shut off

  • Transfer of funding or transfer of assets to third parties without explanation or consent.

  • Unexplained changes to wills or other financial documents

  • Unpaid invoices, foreclosure fees, or execution notifications, despite sufficient income

  • Unusual use of credit cards

To help you identify red flags, keep in touch with other members of the senior support network. Don't be afraid to ask questions or follow up on complaints about behavior changes or comments that could indicate financial abuse.


Tips for preventing financial abuse of the elderly

The best way to prevent financial abuse of seniors is to avoid it before it starts. If you are a senior, try to protect yourself from financial abuse.

Family members, health workers, community members, and professionals can also identify actions to protect seniors in the United States. For example, take steps to plan for diminished capacity. Talk about how seniors want to manage their money and property if they can't do it independently, such as establishing a power of attorney or a trust.

You can set up automatic bill payment and direct check deposit to reduce the risk of abuse of your senior's checking or savings account. Examine your financial statements monthly and periodically check credit reports for any signs of fraud.

Because it is more difficult to commit fraud with an audience, do not isolate the elderly. Make sure to keep in touch with your family and friends. You can connect with close friends and neighbors of vulnerable adults if they live far away.

Older people are the most vulnerable, and family members, neighbors, friends, and community members need to take care of them.

Isolation increases the risk of financial abuse for seniors, so having a network of family and friends can be a great way to prevent abuse. Keep your eyes open and trust your instincts. You can stop elder abuse and prevent abusers from harming others.


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