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August 03, 2011
Fighting the rising tide of elder financial abuse
The successes and failures of law enforcement in fighting financial crime are big news here at the Retail Payments Risk Forum. Earlier this year, we highlighted the gains made in reducing identity theft in the United States. Unfortunately, one form of crime continues to grow despite law enforcement's best efforts: financial crimes targeting the elderly. Last month, MetLife released a report indicating that elder financial abuse is widespread and growing. The report estimated $2.9 billion in annual losses to victims. MetLife based these estimates on an analysis of news articles documenting crimes over two three-month periods in mid- and late 2010. Survey research conducted at Cornell confirms that this is a major problem in New York State, where an average 42 out of 1,000 elders were the victims of financial abuse. Furthermore, the report determined that victims reported fewer than 3 percent of incidents to authorities. While the rate of abuse remains subject to debate, fighting this grim crime is an ongoing battle for law enforcement and consumers.
Elder financial abuse encompasses a category of crimes including theft, confidence tricks, Medicare and Medicaid fraud, forgery, and coerced property transfers. AARP has broadly defined the crime as "the illegal or improper use of a vulnerable adult's funds or property for another person's profit or advantage." The abuse is often a betrayal of a trusted relationship, and the victims are left with emotional and psychological scars that leave them feeling even more vulnerable.
Older Americans at risk of telemarketing fraud
MetLife also conducted a literature review and victim interviews to determine why the elderly are particularly vulnerable to financial abuse. Factors include poor physical health and limited mobility, mental health weaknesses related to the onset of dementia or Alzheimer's, and social isolation. Those who are isolated may be particularly susceptible to manipulation by con artists, for example.
Older Americans disproportionately suffer from telemarketing fraud, a scam where the victim is tricked into agreeing to electronic payments for fraudulent transactions. The criminals on the other end of the line are completely shameless in their techniques to gain the victim's trust. Con artists have targeted victims by searching for surviving spouses in local obituary notices or by purchasing lists of contact information for those who have been previously victimized in similar attacks. Banks can also become entangled in this financial abuse if they are not vigilant. In 2008, Wachovia was forced to pay out $125 million to the victims of fraudulent telemarketing businesses.
Consumer education the best defense
Combating elder financial abuse requires educating potential victims about the risks. Part of Wachovia's settlement included funding for financial literacy programs aimed at seniors. However, it is clear from rising crime rates that education alone is not a cure-all. Regulators, law enforcement, and financial institutions must collaborate to create more effective preventative measures. As a starting point, MetLife has published some consumer tips for prevention, and I have consolidated the recommendations of several of the sources cited above:
- Review financial statements and bills for unauthorized transactions.
- Use direct deposit and online banking to prevent mail theft.
- Sign your own checks.
- Keep passwords and ATM/debit card PINs secret.
- Review important documents like wills and insurance policies annually.
- Do not send money to strangers contacting you over the phone or internet: if an offer sounds too good to be true, it probably is.
- Be aware that abusers may be charismatic individuals or even someone you trust.
- Do not be afraid or embarrassed to seek help if you've been the victim of financial abuse. The longer you wait, the worse the situation can become.
By Jennifer C. Windh, a payments risk analyst in the Retail Payments Risk Forum at the Atlanta Fed
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