How to Detect and Avoid Elder Financial Fraud: The Complete Guide for Seniors, Caregivers, and Relatives

Elder fraud is the financial exploitation or misappropriation of financial resources of an elderly victim by someone who is in a position of trust. Scammers can include lawyers, caretakers, salespeople, home repairmen, and sadly, a victim’s own relatives.

A recent study by Comparitech revealed that over 200,000 incidents of elder fraud are reported to authorities in the United States each year, adding up to an estimated $1.17 billion in damages. However, it is estimated that the real number of elder fraud cases is as high as 5 million per year in the U.S., resulting in $27.4 billion in losses.

In this article, I’ll cover what elder fraud is, why and how the elderly are targeted by scammers, and how you can detect and help prevent fraud of this type.

What Is Elder Fraud?

Elder fraud is a certain type of financial fraud targeting seniors. The perpetrator of such fraud can be a complete stranger or a friend or family member.

In the case of strangers, the predator can make initial contact with a victim via email, text message, letter or phone call.

Meanwhile, elder financial exploitation can come from trusted individuals who should be protecting the seniors – such as the aforementioned friends and family members – who take advantage of the elderly person’s trust to exploit them for financial gain.

Fraud schemes can include such targeted schemes as medical or health fraud (including prescription and health coverage), financial schemes (such as investments and home equity), and friendship schemes (offering friendship or romance to a senior in order to defraud them).

What Are the Costs of Elder Fraud?

AARP says older Americans who have been exploited have suffered an average loss of $34,200. Folks ages 70 – 79 were hit the hardest, with an average loss of $45,300; those 80 and older lost an average of $39,200; ages 60 – 69 on average lost $33,700; and victims aged 50 – 59 lost an average of $13,400.

In 51% of elder fraud cases, a victim was defrauded by a stranger, 14% of victims didn’t specify the responsible party, and in 36% of cases, the victim knew the bad guy, which included family members, caretakers, fiduciaries or other trusted individuals.

Losses were greatest when a fiduciary was behind the loss, averaging $83,600 per victim. Non-family caregivers hit victims the second-hardest, stealing an average of $57,800. Family members bilked victims out of an average of $42,700, while complete strangers stole $17,000 on average.

Why Do Scammers Target Elders?

1 in 10 seniors in the United States fell victim to fraud during 2018. Comparitech’s study found that 38% of all fraud cases target senior citizens. But why are elders such an attractive target for scammers?

First of all, seniors are a popular target because basically everyone knows what issues they face. Exploitable issues include health coverage and medication costs, financial security, shelter and more. Scammers look for low-hanging fruit, so it makes sense to target a small number of issues that a large number of people would be interested in.

Sadly, another reason seniors are an easy target is that they are often isolated from friends and family. This means they don’t have anyone to run things by, leaving them to make decisions on their own.

Seniors are also more trusting. They remember a world before the internet, and have spent most of their lives without access to the internet or email. This can lead to seniors trusting the validity of emails, text messages, and web links much more than they should.

Last but not least, seniors are popular targets for scammers because it’s a sad but true fact our mental capacity diminishes as we age, leading to poor decisions.

What Are the Most Common Types of Online Elder Fraud?

Since just over half of elder fraud cases are perpetrated by strangers, it makes sense that many of these schemes are carried out online via emails, text and websites.

There are various types of online elder fraud. In the sections below, I’ll explain what each type of fraud consists of and explain why it is popular with the bad guys.

Elder Investment Fraud

Investment schemes are a popular racket among scammers that target the elderly for two main reasons. First, many senior citizens are on fixed incomes and living on an inadequate amount of money, making the possibility of additional income an attractive lure.

On the other end of the retirement income spectrum, many other seniors have sizable nest eggs, meaning they have much more disposable income than younger folks. They also in many cases have paid off or paid down the mortgage on their homes, resulting in a large amount of home equity, making bad actors drool over the fraud possibilities.

Many elder investment fraud schemes are of the “large return on investment in a short time” type. These types of investment “opportunities” are attractive to seniors because, let’s face it, elders don’t often have a long time left.

Insurance Scams

Insurance scams are popular among elder fraud perpetrators as they take advantage of seniors who are looking to leave something behind for the next generation. Fraudsters pull at the heart strings of older folks, convincing them that by investing in “insurance” they’ll leave something behind for their children and grandchildren.

Sadly, many times this type of fraud is committed by licensed insurance agents! For example, one licensed insurance agent based in the U.S. has been arrested for insurance fraud three times (so far).

Grandparent Scams

This one is so simple that it almost seems ridiculous. “Grandparent scammers” take advantage of an elder’s love of family (specifically that of their grandchildren) and pose on the phone as a grandchild or a person of authority to convince them to send money to supposedly get the grandchild out of jail or help them out of some other predicament.

While some would believe a grandparent would recognize a grandchild’s voice, the combination of possible hearing issues, and the possibility of being remote from their family, may lead an elder to believe a caller is indeed a grandchild in trouble.

Many times a scam caller will say something to the effect of “Grandma, do you know who this is?” and the grandparent will respond with “is this Becky?” or the name of another grandchild. That’s all the scammer needs to be off and running in convincing Grandma that the black sheep of the family, Becky, is once again in trouble.

While financial scams like this reportedly work only 1 in 50 times, scammers can still steal a pretty penny when it is successful. After all, all they need is a disposable cell phone and a list of phone numbers.

In some cases, a caller will pose as a law enforcement officer, medical professional, lawyer, bail bond agent, or other person in a position of authority who is reaching out on behalf of the grandchild.

Lottery and Sweepstakes Scams

You’ve probably heard the phrase “you can’t win if you don’t play.” Lottery and sweepstakes scams attempt to convince a patsy that they have indeed won even though they didn’t play.

Most sweepstakes and lottery scams consist of a scammer telling the targeted person that they’ve won a large prize of some sort, but a smaller fee needs to be paid in order to claim the big prize. These are usually played off as “transfer fees” or some other sort of official-sounding fee or tax.

Remember, if you haven’t entered a lottery or sweepstakes drawing, you aren’t going to win it. Plus, legitimate lotteries will never contact you out of the blue by email or phone to tell you that you’ve won, and you’ll never have to pay a fee to collect your winnings.

Health Scams

Seniors are attractive targets for health scammers, as by the time many of us reach our golden years, we’re taking prescription medications on a daily basis. Depending on the drugs you’re taking and what type of healthcare insurance coverage you have, those meds can be darned expensive.

This makes online pharmacies an attractive option for elders. These online dispensaries claim to offer name-brand and generic prescription drugs at a fraction of the cost of your local pharmacy.

However, a recent study by the National Association of Boards of Pharmacy (NABP) found that more than 96% of online pharmacies operate illegally.

Buying drugs online poses a number of risks. These include the fact that you can’t know for sure you will actually receive the drugs, whether the contents will be labeled, whether the drugs are actually what they are claimed to be, that the drugs are in the correct dosage, and that they are not expired.

This is not to say that there are not genuine online pharmacies you can trust. Make sure the online website is owned by a verifiable pharmacy, such as CVS Pharmacy and Walgreens.

Don’t purchase drugs from a pharmacy that supplies them without a prescription. Never purchase drugs from an online pharmacy that will dispense them based solely on an online questionnaire.

For more information about safely buying drugs online, visit the NABP’s Safe Pharmacy website.

Identity Theft

Identity theft is an ever-growing problem for all persons, but it is an especially large problem for seniors. A stolen identity can be used to apply for loans and credit cards, fraudulent access to a victim’s bank accounts and online accounts, investment account, and much more.

Seniors make attractive targets for identity thieves, as they generally have larger amounts in the bank than younger folks, they on average have higher credit scores, and they generally have more assets and a higher net worth.

Identity thieves use various methods to obtain information that can be used to steal a victim’s identity. These can include:

• Shoulder surfing, which is watching over a victim’s shoulder as they enter a phone number, or credit card or bank account number, on a phone or laptop or other connected device.
• Monitoring other users’ online activity when they are connected to unprotected WiFi hotspots, such as those found in coffee shops, airports and other public places. This allows hackers to steal credit card numbers, banking information and more. This is why I always recommend using a VPN when connected to a public hotspot.
• Going through a victim’s mailbox or trash, looking for “pre-approved” credit card offers. When you receive these, before throwing them away, shred them or tear them up into tiny pieces. This is very common with identity theft victims.
• Sending “spam” emails, promising easy loans, new credit cards and other enticing services. These emails will request personal information, then use that info to open financial accounts in the victim’s name.

IRS Tax Scams

IRS tax scams are quite popular with the bad guys in the United States, and I’m sure that similar schemes are perpetrated in other countries using those regions’ income tax collection agencies.

The U.S. Internal Revenue Service (IRS) says millions of dollars have been lost to tax scams. Scammers contact targets via email and regular mail, and over the phone.

The IRS will never contact you via email, text messages, or social media networks to request personal or financial information.

The IRS initiates contact via regular mail, delivered by the U.S. Postal Service. While the IRS will call or come to a home or place of business, you will have generally received numerous notices in the mail first, sometimes via registered mail.

The IRS will never request payment be made immediately via wire transfers, gift cards, or prepaid debit cards. They will never demand that you pay taxes without offering an opportunity to question or appeal the amount they say you owe.

They will also not threaten to have you arrested by local authorities or revoke your immigration status, driver’s license or business license. These are common tactics that scam artists use.

For more information on how to tell if the IRS is actually contacting you, visit the IRS website.

COVID-19 Coronavirus-Related Scams

Scammers never miss a chance to turn a disaster into an opportunity for illegal gain, and the COVID-19 coronavirus pandemic is no exception. Bad actors are targeting seniors by offering them fake COVID-19 testing kits and “help” in obtaining economic stimulus and Paycheck Protection Program Funds.

Reverse Mortgages

While reverse mortgages are legal, they really aren’t a good idea. A reverse mortgage allows homeowners to borrow against their home’s equity, with the borrowed sum not being due to pay until the homeowner dies, sells the home, or moves out of the home.

Unfortunately, reverse mortgages can be complicated to understand, can be expensive, and have a high risk of fraud and other types of scams.

Zillow.com offers excellent information about reverse mortgage scams, and it is recommended reading.

How to Spot Elder Fraud

When it comes to spotting elder fraud, it may mean that you’re trying to look out for someone else, perhaps a parent or grandparent. However, some of my readers may be nearing the age where they are considered a “senior citizen,” and may be looking for advice on how to spot when they are personally being defrauded.

In this section, we’ll take a look at how to detect when an older relative or friend may have been the victim of fraud. We’ll also take a look at ways you can stay vigilant to protect yourself from fraud, which is good advice for any age.

How to Spot Elder Fraud Happening to Someone Else

Admittedly, the steps I’ll be listing below will be easier if you are in frequent contact with the suspected elderly victim. If you are not a caregiver or a relative of the senior, you may want to suggest the following to the caregiver or family member.

There can be telltale signs that things aren’t normal with your favorite senior citizen, including the following:

• A change in habits that could indicate they’re running low on money. Sometimes, folks that have been scammed are reluctant to admit it. So look for changes in behavior that are telltale signs of financial issues, such as changes in spending habits, or remarks about not being able to afford certain things.
• If you have (authorized) access to the elder’s mail, look for things like checks returned unpaid, banking statements, and unusual purchases or payments to unknown parties.
• If the senior is operating under diminished mental capacity, they may be confused and not know money is missing, or simply don’t know how it is coming up missing. Look for complaints from the elder that they are missing money.
• Watch out for family members or caregivers that appear to have unexpectedly come into money. If they’re living above their paygrade, they may simply be thrifty savers, or they’re getting extra money from somewhere.

How to Spot If Elder Financial Fraud Is Happening to You

While we would all like to think that we’re sharp enough to detect when we’re being ripped off, it still happens to the best of us, no matter how old you are. Unless you check every transaction from your credit cards, checking accounts and loans, fraud can happen without your noticing it.

Do the following on a regular basis to protect against fraud:

• Look for unexplained charges on your credit card or bank accounts. Even if it’s just a small one, beware. When bad actors steal credit or debit card numbers or gain financial access to a bank account, they will charge a small amount to confirm the account is still valid. Valid card numbers sell for more money on the black market.
• Set up and monitor fraud and activity alerts from your credit card companies and banks. This allows you to monitor your financial accounts in real time instead of waiting for a statement at the end of the month. Take advantage of secure mobile apps offered by credit card companies and banks. These allow you to check your account activity whenever you’d like.
• Monitor your credit reports with your bank or credit bureau. Free credit reports are available from credit monitoring companies on an annual basis. Plus, many credit card companies and banks will offer free credit score reports any time you want to view them. Credit Karma is also a good source for free credit score monitoring. Monitoring your credit score is a good way to detect if someone is racking up debt in your name.

How to Prevent Elder Fraud

There are numerous ways to help prevent elder fraud. Keep these tips in mind and they’ll help you prevent elder fraud.

Stay Socially Active

By staying socially active, communicating on a regular basis with friends and family, you’ll have a group of peers to bounce ideas off of and to ask questions when something seems suspicious. Also, by having someone in your daily life, they’ll become familiar with your lifestyle and may be able to recognize if something is wrong.

Never Provide Personal Information or Pay Money Based on an Email or Text Message

Email and text messages are a popular vehicle for a wide variety of financial scams. There is no reason to make a payment to anyone because of an email or text request. And that goes for people who appear to be family or friends.

That same overly-cautious approach goes for requests for personal information. Never provide your full name, address, date of birth, social security number, or credit card or banking information to a request by email or text message.

Before you even consider providing information or paying money due to an email request, do some research first. Investigate the company or sender that is making the request. Find a phone number for the company and give it a call. (NEVER call any numbers supplied in the email! Instead, use a search engine to find the correct phone number.)

Even if the emails from the requesting party become more frequent, or if they include an increased sense of urgency, never respond. These are merely signs that you should consider the sender as a scammer.

Never Offer Information or Money Over the Phone Unless You Know and Trust the Party on the Other End

If a scammer isn’t emailing or text messaging you, chances are, he’ll call you on the phone. While phone scams aren’t as easy or as high-volume as email and text scams, the personal touch of a call does provide improved returns to the bad guy.

Never agree to send money to a party on a phone call unless you can totally confirm they are who they claim to be. Warning signs can include:

• The amount of money or the amount of information being requested seems unusual for the stated reason for the transfer.
• The caller tells an outlandish story to justify the money or information request.
• The caller insists the situation is urgent.
• The caller tells you to keep the request quiet, not sharing information about the situation with others.

Don’t be afraid to ask plenty of questions. Many times this will spook the caller and they will hang up. However, many fraudsters are well-prepared and will have answers at the ready. But don’t be afraid to ask all the questions you want – maybe you can trip them up.

Designate a Trusted Party for Your Financial Advisor to Communicate With

If you use the services of a trusted financial advisor, be sure to designate a trusted third party for your advisor to communicate with if you become incapacitated by illness, accident or advanced age.

A qualified financial advisor will be in a good position to recognize fraud attempts. If a fraudster contacts a financial advisor in an attempt to collect money, the advisor will know what to do.

Plus, communication between the financial advisor and your trusted third party will put both parties in a good position to possibly recognize fraud on the part of the other party. (In other words, they’ll keep an eye on each other.) This can be the best form of financial protection when set up correctly.

Designate a Person to Hold Power of Attorney and Prepare Legal Documents in Advance

God forbid you ever do become too incapacitated to take care of your own medical or financial decisions, but it certainly may happen someday. This is why it is important to designate a trusted someone to have power of attorney over your financial matters if needed and to prepare any necessary documents ahead of time.

Use a VPN

Bad guys will monitor a user’s online activities, gleaning information that can later be used to defraud the user. A Virtual Private Network (VPN) protects your online activities from the prying eyes of others (including hackers), preventing your internet travels from being monitored and having your personal information stolen.

While setting up and using a VPN may prove to be too technical for some elderly online users, they can be configured to automatically turn on whenever an internet connection is detected, making it easier to protect an elder from hackers.

How to Report Elder Fraud

Elder fraud is considered as abuse and is illegal in most countries around the globe. Your first point of contact when you suspect or know of elder fraud is your local police department. In many countries, there are also other organizations available to aid you.

Canada

Elder abuse in Canada (including financial abuse) is investigated by the Royal Canadian Mounted Police. The Mounties can be contacted directly or through your local police department.

United States

Each state in the U.S. operates an Adult Protective Services agency. To find the agency in your state, visit Google or another search engine and enter your state and the phrase “adult protective services.” You can also visit your state government’s official website (such sites’ addresses end in a “.gov” domain name) and search there.

AARP (also known as the American Association of Retired People) is a helpful resource and offers a program called “ElderWatch.” It maintains a list of agencies in various industries that can help, and offers helpful tips on how to avoid elder fraud, both online and offline.

You can also visit the National Elder Fraud Hotline website, or call the hotline at: 1-833-FRAUD-11 (1-833-372-8311).

United Kingdom

Elder fraud and abuse cases are handled by local police forces in the U.K. The U.K. government website offers information about what to do in case of elder fraud or abuse.

Also available to report fraud is the Action on Elder Abuse Helpline, at: 0808 808 8141.

The Action Fraud website – which acts as the country’s national fraud and cyber crime reporting center – is also available, as is the Action Fraud helpline at: 0300 123 2040.

Financial Management and Money Management for Elders

What if you’re concerned about financial management for an elderly relative or close friend but don’t have the bandwidth or are located too far away from the elder to assist them yourself? I suggest that you strongly consider the services of a daily money management program (DMM) for seniors.

DMMs provide financial management for seniors that can no longer handle certain aspects of their own money management. Services can range from providing simple monthly reminders to pay bills all the way up to comprehensive assistance in managing every aspect of the seniors financial management.

DMMs provide numerous services, including:

• Bill paying
• Maintaining financial records
• Budget creation
• Balancing checkbooks
• Negotiating terms with creditors.

DMM programs can be vital service for elder Americans who:

• Have trouble keeping track of their bills and financial documents
• Regularly forget to pay bills
• Have problems writing checks due to arthritis or other health problems
• Cannot get to the bank on their own
• Cannot manage money or finances
• That are vulnerable to financial schemes

For more information, or to find an agency that provides DMM services, contact your local Area Agency on Aging (AAA).

In Closing

As we’ve seen in this article, elder fraud is a growing problem in today’s world. The willingness of bad guys to exploit the vulnerability of senior citizens is a chilling commentary on the state of the world.

Luckily, we have covered steps you can take to protect yourself and your loved ones from predators, both online and offline. By following the helpful tips I’ve outlined in this article, you can prevent the bad actors of the world from claiming another fraud victim.

Elder Financial Fraud FAQ