Financial fraud targets older adults. How to recognize it

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In an increasingly digital world, the specter of financial fraud looms, especially for older adults. My experience with an 81-year-old client is a striking example of this.

While assisting “Emma” (not her real name) with email issues, I witnessed firsthand her vulnerability to scams. Despite my repeated warnings over the years, she had readily shared personal information with unknown senders, believing she was conscientious or supporting noble causes.

This behavior soon led her to a fraudulent scheme, where she lost nearly $4,500 to a scammer posing as a computer service provider. This incident was not the first that Emma had experienced, but it was the most brutal.

Emma's story is not unique. It reflects a growing trend of elder fraud, which is both sophisticated and harmful.

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Elder fraud is becoming common – and expensive

Elder fraud is an escalating problem in the United States, with scammers becoming increasingly devious. They prey on the elderly, often taking advantage of their loneliness, social isolation and sometimes declining cognitive skills.

These individuals are the most vulnerable, it turns out. a recent study from the University of Michigan suggests that older adults who report feeling lonely or isolated are more susceptible to fraud than those who report being satisfied with their lives and social circles. Meanwhile, the National Library of Medicine has published research linking cognitive decline to a greater predisposition to scams.

Yet these criminals do not only target the very elderly; persons much younger than 80 years are also at risk. According to the latest figures, more than 88,000 adults over 60 will have fallen victim to financial scams in 2022 alone. FBI Fraud Report for the Elderly.

Women are more likely to be victims of elder fraud, according to the Women's Institute for a Secure Retirement, because more women than men are over age 65, and older women are more likely than older men to live alone and in poverty.

Americans 60 and older lost $3.1 billion to cyber fraud in 2022, FBI data shows, with an average loss of $35,101 per victim. More than 5,000 older adults lost more than $100,000 each.

Recognizing the signs of fraud

Legacy fraud schemes are diverse, ranging from email phishing to impersonation scams, all of which are designed to deceive and manipulate their targets into handing over sensitive personal and financial information. As fraud tactics become more sophisticated, avoiding them can become a challenge for those who don't recognize the warning signs, which often include:

  • Suspicious emails. Scam email addresses often contain spelling mistakes or strange characters and ask the recipient to click on links. These links may lead to phishing sites that impersonate a legitimate website and trick the user into entering sensitive information or may initiate the download of malware, adware, or scareware onto the user's computer.
  • Vague email signatures. Scammers' email signatures are usually simple, sometimes just a first and last name. Legitimate businesses provide detailed, verifiable contact information, including company name, address, website URL, and phone numbers.
  • Urgency and threats. Phishing attempts typically convey a false sense of urgency or threaten dire consequences to force action.
  • Requests for Personal Information. Scammers want personal information to hack into someone's financial accounts. No legitimate company will ask for credit card numbers, login information, or social security numbers over the phone or via email.
  • Out of character behavior. Some scammers pose as relatives or friends in dire need of money – a feat that has become easier with the rise of artificial intelligence.

Proactive measures to protect a loved one

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For older adults, especially those living in isolation or experiencing cognitive decline, ordinary caution may not be enough. Establishing a support network of trusted individuals who can intervene when financial decisions become confusing is critical. Consider the following proactive measures:

  • Plan early. Start organizing a support network around age 70, especially for people without extended family networks or who have a history of cognitive decline. For example, another client of mine preemptively engaged a professional home care management team to address her lack of local family support.
  • Security audits by adult children. Adult children can help by checking spam filters, setting up password managers, and automating bill payments.
  • Legal preparations. Drafting crucial legal documents and setting up trusts can protect against the inevitable challenges that cognitive decline brings. For example, a durable power of attorney for finances appoints a trusted individual to manage the financial affairs of someone with reduced capacity, while allowing a successor trustee to manage and distribute trust assets on their behalf according to the trust agreement. These legal instruments are essential for maintaining financial autonomy and security, even when direct management becomes impractical or impossible.

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Taking up the digital challenge

TransUnion research shows that the number of suspected digital fraud attempts increased by 80% globally between 2019 and 2022, mainly due to an increasing reliance on digital transactions during the Covid-19 pandemic. As our financial activities become more intertwined with digital platforms, the opportunities for scammers are likely to increase exponentially.

While financial institutions are becoming increasingly adept at detecting and preventing fraud, awareness and vigilance remain critical in the ongoing battle against elder fraud. By recognizing the signs of scams, taking protective legal and personal measures, and fostering a supportive community, we can help protect the financial well-being and independence of our older loved ones.

— By Cathy Curtis, certified financial planner and founder and CEO of Curtis Financial Planning. She is a member of CNBC's Financial Advisor Council.

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