By Howard Silverstone, MBE, CPA, CFF | Sep 14, 2022
Reprinted courtesy of the Pennsylvania CPA Journal
According to the U.S. Census Bureau, the 65-and-older population has grown rapidly since 2010, and, according to forecasts, by 2040 the older population in the United States will reach almost 81 million. Subsequently, elder fraud and abuse will increase with the growing demographic. It’s up to all of us to try and stem the tide of exploitation.
Elder abuse takes different forms, but it can be broadly defined as action (or lack of appropriate action) toward an elderly person that intentionally harms them or puts them at risk of harm. The U.S. National Council on Aging recognizes seven types of elder abuse: physical, sexual, financial, emotional, neglect, self-neglect, and abandonment. Financial abuse occurs when someone takes money or assets from an older person without their consent, full knowledge, or understanding.
Those who are over 65 tend to be more vulnerable to fraud. Some may have accumulated wealth through savings for retirement, pensions, or other investment income, and have little or no debt. Others may be dependent on their income from Social Security payments and other benefits. Regardless of where their income is derived, this money is a target for fraudsters.
In addition to financial concerns, many elder Americans also face health-related difficulties, including cognitive decline. A reduced capacity for judgment could result in flawed financial choices, putting the older population at risk of fraud. A decline in mental capabilities can be a gradual process, so those affected and those around them may not immediately realize there has been a change in the ability to make decisions. The Alzheimer’s Association estimates that about 12% to 18% of people aged 60 or older have some type of mild cognitive impairment. This could result in forgetfulness or a sense of feeling overwhelmed when making financial decisions. These impairments have been compounded by additional challenges brought about by the COVID-19 pandemic. The additional risks include isolation, technology dependence, and medical misinformation.
Increased Isolation, Anxiety, and Depression
COVID-19 brought with it a new level of isolation for all of us. According to the Centers for Disease Control and Prevention, social distancing and isolation affected our elders the most.
Psychology Today cites several studies linking increased isolation with the onset or increase of depression and anxiety. The link seems to be related to the fact that those who are isolated will not experience affection, validation, or a sense of connection. These emotional gaps, in turn, may result in an increased risk of financial exploitation and fraud vulnerability.
Increased Reliance on Technology
With the increased isolation from family, friends, and work colleagues, there was an increased reliance on technology. This has become another avenue where fraudsters have sought opportunities to defraud our elders. The increased exposure to fraud is brought about by such things as inadequate passwords, connecting to infected links, trusting fraudulent promotions, and providing bank or credit card information.
In addition, COVID-19 has led to an increase in the use of telehealth, which has become a new target for fraudsters. According to the U.S. Department of Justice (DOJ), health care fraud resulted in about $1.4 billion in losses by the end of 2021, with the majority of reported cases related to telemedicine. Some of these schemes have involved the unauthorized ordering of equipment, testing, and medicines in return for illegal kickbacks and bribes.
Increased Need for Medical Information
Following the outbreak of COVID-19, many closely followed the news regarding the spread of the virus, the development of vaccines, and social distancing guidelines. Unfortunately, not all outlets genuinely served to inform the public, but rather offered fraudsters various channels to use to their benefit.
The FBI, in its 2021 Elder Fraud Report, estimated financial abuse losses totaled $1.7 billion, which represented a 74% increase from 2020. According to the October 2021 Annual Report to Congress on Department of Justice Activities to Combat Elder Fraud and Abuse and the 2021 report of the U.S. Senate Special Committee on Aging, the fraud schemes listed below (among others) became more prevalent in 2020 and 2021 as we all were trying to manage the COVID-19 health care crisis.
Prominent Types of Elder Fraud
Technical support fraud – The first point of contact with a potential victim is usually through a phone call or email. The perpetrator pretends to be a computer technician associated with a well-known company or provider, and claims the victim’s computer has been infected with malware or has other technical difficulties. A solution is then offered by asking the victim to grant the perpetrator remote access to the victim’s computer. They then “diagnose” a nonexistent problem and either ask for payment for unnecessary services, install malware, or both. Another potential loss associated with this type of scam is related to sensitive information, such as Social Security number or banking details.
In June 2021, Romana Leyva pled guilty to conspiracy to commit wire fraud and conspiracy to intentionally damage a protected computer. He admitted that he was a leader of an organization that defrauded at least 7,500 victims for over $10 million over a period of four years. He used pop-up messages to get victims’ attention. The messages led them to believe that their computer was infected with malware. A linked phone number connected the victim to a member of the fraudster’s team.
Romance fraud – This type of fraud has been around for a long time, but cases increased during the pandemic. This type of fraud preys on the sense of increased loneliness and isolation that many among the older generation endured during the pandemic. The Federal Trade Commission estimates that losses from 2020 romance scams increased by about $50 million from the previous year. Primarily through social media, fraudsters focus on establishing relationships built on trust, then using this trust to persuade potential victims to provide money, including fake hospital bills, plane trips to facilitate an in-person meeting, or to address personal financial problems.
Grandparent fraud – This type of fraud against seniors also has been around a while. It takes advantage of family relationships, but, once again, the isolation brought about by COVID-19 added fuel to the fire. With the pandemic, fraudsters impersonating close relatives modified the scheme. While traditional grandparent fraud relies on asking for money to get out of a financial predicament, those related to COVID-19 now ask for help for an emergent health situation, such as being in the hospital or needing expensive treatment. The fraud relies on the victim not questioning if the voice sounds familiar or if the fact pattern seems odd. The only thing the victim focuses on is that the caller – who claims to be family – needs help, typically immediately.
While this type of fraud could easily be countered by a simple call back to a family member, the perpetrator creates such a sense of emergency that the victim doesn’t have a moment for a second thought. The Federal Trade Commission estimates that, in 2020, $1.2 billion in losses were due to imposter scams. This number increased by $1.1 billion in 2021.
In April 2021, Darlens Renard and four others were convicted in Indiana for carrying out an enormous grandparent scam, defrauding at least 60 older victims of at least $350,000. Another incident included defrauding an elderly individual by telling her that her daughter had been in an accident and was in legal trouble as a result. The scammer claimed that she needed over $10,000 to settle the claim before it escalated. Importantly, the victim was instructed to keep silent. Again, this type of fraud is easy to expose if the story is shared with family members, but there is always a bogus reason provided for why they cannot do so.
Government imposter fraud – The pandemic brought about new assistance programs from various government agencies to support people in need as businesses shut down and jobs were lost. Typically, this type of imposter fraud begins with the perpetrator contacting the potential victim and posing as a government agent. They may claim they are from the Social Security Administration and need additional personal information to process a new program’s benefits. In this scheme the fraudsters often ask for bank account and Social Security information. Alternate forms are those where scammers claim they are a Medicare or Medicaid representative and demand payment on past-due medical bills or that they are from the IRS and request payment for alleged back taxes. These schemes have the common thread of impersonating a government official to obtain personal information or payment.
In March 2022, the U.S. Attorney for the Western District of North Carolina announced the civil forfeiture of cryptocurrency stolen from an older adult who had fallen prey to a government imposter scam. The fraudster claimed to be from the Office of the Inspector General and told the victim his information had been used for drug trafficking and money laundering.
The above are only a few of the most prominent scams. There are numerous other fraud schemes that the elderly should be aware of, including telemarketing fraud, lottery and sweepstakes fraud, and identity theft.
A Call to Action
As advisers to the elderly or their families, sometimes CPAs see the red flags before they do. Here are a few ideas you can share that may offer guidance to your clients.
Call out the problem –We all know that reported cases of fraud are only the tip of the iceberg. It has been estimated that over 80% of all fraud cases targeting the older population are never prosecuted; consequently, the perpetrators are not stopped or punished. This underreporting occurs because victims do not have support, are scared, or lack knowledge concerning ways to report fraud to the authorities. Therefore, primary action to prevent elder fraud is to disseminate relevant information to the public. Numerous resources are available (see a few below) to older adults, caregivers, family members, and professionals. Raising awareness is fundamental to reducing instances of fraud.
Advice for clients, friends, and family – Highlight some of these tips so clients can share them in turn with their loved ones:
- Resist the urge to respond to missed calls or texts from unknown numbers. If it is important they will call back or leave a message.
- Do not click on links in emails or on advertising banners on web pages.
- Do not share any personal information – particularly address, Social Security number, and passwords – with anyone you do not know, especially over the phone or via text or email.
- Be aware of red flags. These are certain signs that should raise suspicion, including words indicating urgency or a distressed voice used by the caller.
As CPAs, we should all be current on the developing trends and cases being reported. The best way to connect and understand what can happen to potential victims is to be aware of how these frauds are taking place. CPAs have the knowledge to help identify the red flags of fraud.
Government resources – Government agencies are aware of the fraud problem, and several have developed fraud-fighting tools, including hotlines and educational materials. Here is a list of some of the resources:
- FBI, Vigilance During the COVID-19 Pandemic. The FBI established a COVID-19 working group that addresses a variety of topics, including tools to combat elder fraud.
- U.S. Department of Health and Human Services, Operation CARE, Office of the Inspector General. This is a set of programs and resources developed to fight elder fraud.
- U.S. DOJ, Elder Justice Initiative. This resource includes statistical data, tips, descriptions of programs and activities, and news related to the prosecution of real-life cases.
- Federal Trade Commission, Protecting America’s Consumers. This includes research, analysis, and tools to help combat elder fraud.
The process of understanding elder fraud in the age of COVID-19, together with helping in its prevention, is a team effort. Between our knowledge as CPAs and the resources available, we have many tools available to help those most at risk. It is a continual process to stay up to date on fraud schemes, find ways to combat them, and ensure the most vulnerable can protect themselves.
Howard M. Silverstone, MBE, CPA, CFF, is director of Forensic Resolutions Inc. in Haddonfield, N.J. He can be reached at email@example.com.