By Kristen Arute
Hingham – Every year millions of older adults fall victim to financial fraud. Some estimate that it affects 1 in 18 people. Around 4.5% of this population are victims of “financial fraud in relationships of trust.” However these numbers are very likely underestimated. The real toll could potentially be considerably higher. There are a variety of reasons why these cases go unreported. They may involve family or friends; the victim may be cognitively impaired; or the shame and guilt of being taken advantage of by a trusted individual is too much to bear, and so it is kept secret. Quite often the financial losses are unable to be recovered. Situations involving fraud are difficult to prove, and they can also necessitate costly and time-consuming proceedings.
As a preventative measure, there are those who advocate for the use of screening tools in physicians’ offices to help identify individuals who may suffer from what’s been termed “age-associated financial vulnerability.” Those at risk exhibit signs of diminished ability to manage basic tasks with their personal finances, like writing a check or balancing a checkbook, as well as a pattern of risky behavior that is inconsistent with decisions they made in younger years.
Many gerontologists use screening tools to gauge an individual’s overall physical health, and some of these include aspects of cognitive functioning. For example the Saint Louis University Mental Status Examination used by the Department of Veterans Affairs is designed to detect mild cognitive impairment and dementia. However very few of these tools screen for financial capacity, and next to none screen for susceptibility to scams and fraud.
But cognitive impairment is only one risk factor for financial fraud. Social isolation increases significantly with age and also makes older adults, regardless of cognitive ability, vulnerable. Older individuals who are experiencing hardship based on their economic needs are more likely to be preyed upon too. Quite often perpetrators of financial fraud in relationships of trust tailor their pitch to the psychological needs of the victim and cater to their specific financial woes.
Of particular concern is fraud in the investment services industry. By its very nature it is complex and requires experienced and licensed individuals to navigate. However the lack of reporting requirements on the part of investment bankers and the unique ways in which investment tools are regulated make it difficult to determine whether an advisor is one who can be trusted and whether appropriate, best-practice decisions are being made.
The American Bankers Association created a list of warning signs for family and friends to use to help spot signs of potential financial abuse. Among these are withdrawals or transfers that cannot be explained, suspicious signatures on checks, checks written as loans or gifts, the closing of CDs without regard for penalties and new friends accompanying an older person to the bank. It’s suggested that if any of these activities is identified, a conversation with the loved one should take place.
Becoming educated on the warning signs and getting comfortable with the idea of playing a more active and personal role in the life of a family member or friend is important, but we can do more to protect seniors from this type of abuse. At the State level, we can tighten our Elder Abuse Statute to include more stringent standards with regard to financial fraud. We can simplify the process for achieving restitution, and we can hold the industry to higher standards. We can also insist that all forms of financial fraud be disclosed on Central Registration Depository (CRD) licenses so that consumers are able to make informed decisions with regard to whom they would like managing their money. We can also work with experts in the field to craft an appropriate screening mechanism for physicians to implement.
Our aging population is growing rapidly, and seniors have a unique set of needs and concerns that must be properly addressed if they are to be protected from financial predators. Conversations with the medical community and lawmakers should take place in order to design a multi-faceted approach to safeguarding seniors against fraudulent behavior. We owe it to our older loved ones; we owe it to ourselves; and we owe it to future generations.
About the Author
Kristen Arute is a native of the South Shore. She is licensed to teach middle school math and has worked for an educational software company, been a remedial math instructor in local schools and is a private math tutor. She has also run her own small business. For the past 4 years, Kristen has managed the affairs of an elderly widow with Alzheimer’s. During that time she has actively pursued a case involving elder financial abuse. It is a real pleasure for her that eh case has recently been presented before FINRA. Kristen is co-chair of Hingham CARES, the substance misuse prevention coalition in Hingham, and also sits on the Board of the Hingham Council on Aging. She is a candidate for State Representative in the 3rd Plymouth District of Hingham, Hull, Cohasset and North Scituate and looks forward to bringing her knowledge and expertise to Beacon Hill to affect change for seniors in the areas of tax relief, expanded options for senior housing and Alzheimer’s care. Of high priority to Kristen is to ensure that our Elder Abuse Statue is tightened in order to protect seniors from financial fraud and abuse, and she has already initiated conversations with experts in the industry.