Overview of elder fraud
Elder fraud occurs when older adults are targeted and deceived with promises of benefits that do not exist or were never intended to be provided. It can be perpetrated by close family members, friends, trusted advisors, and strangers. This article explains the different types of elder fraud and who is likely to be most vulnerable. The article then identifies ways to spot the most common scams and fraudulent activities.
What is elder fraud?
Elder fraud, as defined by the U.S. Justice Department, is “an act targeting older adults in which attempts are made to deceive with promises of goods, services, or financial benefits that do not exist, were never intended to be provided, or were misrepresented.”1 At its heart, elder fraud is what happens when an older adult is deceived into giving away money or property. Elder fraud caused by financial exploitation costs older adults an estimated $4.8 billion a year.2
Who may carry out elder fraud?
Many people think that online scams are the only types of elder fraud to watch out for. In truth, in addition to financial scams by strangers, elder fraud may be carried out by friends or family or trusted financial advisors.
Fraud by friends or family
Unfortunately, the most damaging forms of elder fraud stem from cases where the older adult knows the individual defrauding them.3 Friends, family, or neighbors have access to the older person’s home or financial products and can weasel their way into getting money or property. Some of the most common forms of elder fraud committed by family or friends are:
- Misuse of credit or ATM cards
- Forging an older person’s signature on banking or legal documents
- Theft or use of funds or property without the elder person’s informed consent
- Convincing an older person to change a will, deed, power of attorney, or conservatorship document
- Overcharging for or not delivering caregiver or other services
Fraud by trusted financial advisors
Many professional financial advisors have a fiduciary duty to act in the best interests of their clients. Sometimes, though, a financial advisor will betray that trust and push get-rich-quick schemes for their own profit, or recommend transactions based on the commission or percentage that the advisor receives, rather than the long-term profit of the client. Some of the ways this elder financial abuse manifests are:
- Churning. Excessive trading in an account in order to gain more commissions can be costly to older clients on fixed incomes.
- Unauthorized trading or withdrawals. Making unauthorized transactions is a breach of trust between a client and advisor.
- Unsuitable investments. When an advisor makes investments based on their own commission or profit and without taking into account the client’s goals or risk tolerance, it is unethical.
- Negligence. In cases of negligence, the broker might not have intended to cause harm, but by poor management or neglect does so.
Financial scams by strangers
From 2015 to 2020, the U.S. Senate Special Committee on Aging Fraud Hotline received more than 8,000 calls reporting suspected elder fraud. The following five scams made up more than 65% of all calls.4
- Grandparent scam. Fraudsters will call an older person and impersonate their grandchild. The scam usually begins with something like, “Hi Grandma, it’s your favorite grandson and I need your help.” From there, the scammer will convince the victim to wire money or give away financial information. Often the scammer will appeal to their “grandparent” to not share this information with family members because they are embarrassed or don’t want to get into trouble. Playing on a family member’s love and empathy is an especially nasty—but unfortunately effective—way to extract money quickly from a vulnerable older adult.
- Government impersonation scam. Pretending they are from the IRS, Social Security Administration, Medicare, or another “official” organization, scammers will threaten legal action over nonexistent unpaid taxes or bills. These scammers use scare tactics and may even threaten jail or deportation. They may demand money or require the victim to give them personal information like bank account numbers or social security numbers, which they then use to commit identity theft.
- Fake lottery or sweepstakes scam. Who doesn’t want to hear the phrase “You’ve won money”? To generations of people accustomed to seeing major international sweepstakes companies show up at people’s doors unannounced, the idea of winning money out of the blue isn’t too farfetched. But these scammers insist that in order to claim their prize, the victim must cover processing fees or taxes. They’ll ask for bank account information, gift cards, or other forms of payment, and the supposed winnings never materialize.
- Computer support scam. Older adults might not be fully up-to-date on the latest technology. Scammers know this and are eager to capitalize on it. Some fraudsters will call or email their victims, claiming to be from tech support at a person’s bank, or be a representative of their antivirus software, and are reaching out to fix a problem or prevent one. From there, they will gain access to their victim’s computer password or bank accounts.
- Robocalls. “Can you hear me?” That’s the first line of many robocalls aimed at getting the voice of the victim saying “Yes.” Using this recording, scammers can then use that voice signature to authorize purchases or credit card charges.
Who is most vulnerable to elder fraud?
Women, especially women over 80 years old, are the most likely to fall victim to fraud. Several reasons account for this, including the fact that women on average live longer than men, and might therefore be more likely to live alone. Historically, many women have not always handled their financial affairs and might be more vulnerable to confusion about finances. Regardless of gender, though, lack of awareness about their personal finances, and how transactions are conducted, is the most common factor in victims of elder fraud. Social isolation and the recent loss of a loved one also leaves elders vulnerable. Finally, family members experiencing unemployment or substance abuse problems can also present an added danger to older adults.
How do you spot elder fraud?
Whether an older adult is being defrauded by a close family member or has fallen victim to an anonymous online scam, there are some common behaviors that can help spot fraud. Here are some examples of red flags.
- Priorities change. A new person is suddenly very important to an older adult, or someone who is known starts playing a much bigger role in their life. This could be a family member who takes a sudden interest in helping out, a new romantic interest, or a new “best friend.”
- Gatekeeping. Someone else is controlling communication between you and your loved one. People committting fraud and theft from older adults will often act as “gatekeepers” and inhibit access to the person they’re defrauding from concerned friends or family.
- Unusual activity. Using an ATM or credit card that they don’t normally use, making higher than usual withdrawal amounts, new accounts opening or new debt taken on can all signal the involvement of another person trying to scam the older adult.
- Altered legal documents. Changes to legal documents like wills, estate plans, and powers of attorney without discussing them with loved ones could indicate that a new person has started to take control of an older adult’s finances.
- Your loved one changes how they talk about their finances. Everyone is different when money is involved, so if they’re normally an open book when it comes to banking and suddenly refuse to discuss it or evade questions, this might indicate fear and concern over fraud. Conversely, if a person who normally does not discuss money is suddenly voicing concern over how much items cost, it could point to abuse.
Having the elder fraud talk
Preventing elder fraud
1Elder Fraud and Financial Exploitation. U.S. Justice Department.
2Elder Financial Abuse: Stopping Fraud in the Family. AARP.
3Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends. Office of Financial Protection for Older Americans.
4The Top Five Financial Scams Targeting Older Adults. National Council on Aging.