Protecting elders from financial abuse

Financial abuse of elderly citizens is one of the most common, yet under-reported, crimes in the United States. While many older adults have the mental acuity to protect their assets, the combination of cognitive decline and financial wealth make some other seniors easy prey for financial crime.

In 2023, there were more than 100,000 victims of elder fraud who lost an average of $34,000 each. The total amount of losses for the year was $3.4 billion, an 11% increase from 2022.¹ Worse, true losses may be difficult to calculate since many incidents go unrecognized or unreported.

The best prevention for you and your older loved ones is being aware of forms of financial abuse and knowing what preventive steps you can take.

With elder financial abuse, fraudsters exploit certain vulnerabilities of the elderly, including lack of familiarity with technology, to collect their personal and financial information to perpetrate fraud. Financial abuse against the elderly covers many types of fraud such as:

• unauthorized use of a senior’s property,
• mismanagement of their income for a personal benefit,
• persuading a senior to sign a fraudulent document,
• deceitful investment offers,
• rip-offs by contractors,
• cybersecurity scams,
• impersonation scams, and
• intentional bad advice from disreputable advisors.

While every case of abuse will be different, there are common red flags for the various types of scams. For example, since many seniors are dependent on others, often the abuser is someone close to him or her. Deceitful family members and caregivers are in a good position to access the victim's assets illegally without being noticed. They may also coerce, deceive, or psychologically manipulate the victim under the guise of being helpful.

A lot of times the person who's committing the fraud is a natural object of the senior person's generosity. It is often difficult to determine that a fraud has taken place.

Cases like these can be challenging to address because investigators must deal with a relationship in which the victim is emotionally attached to the offender. In many instances, the victim chooses not to report the fraud.

Elderly people can also be duped into new romantic or platonic relationships with unscrupulous people who seek to obtain money. In 2023, these types of scams resulted in over $357 million in losses to adults over 60 years of age.¹

Seniors who live alone are particularly exposed, especially those who frequent social media, as they may come to place excessive trust in their new companion, who typically is exclusively virtual. This vulnerability from loneliness, though, also arises often when a senior’s primary contact with the outside world is through their home caregiver.

Internet access has fueled senior financial fraud. Seniors who aren’t savvy with e-mails can fall prey to notifications of overseas lottery wins, unexpected inheritances from abroad, or even “ransom requests” about allegedly kidnapped younger relatives, who often are away on a college semester abroad program.

Trusted family and friends are the first line of defense for detecting elder financial abuse. It is important for senior clients to prepare and include individuals they trust in their financial affairs. Coordinate with your loved ones so you can regularly check their account statements and access information online to review any transactions. A major step to combating senior financial abuse is being aware of the flow of money as many crimes are carried out through wire transfers, withdrawals and electronic payments.

Warning signs or red flags that could point to exploitation could include unusual activity such as:

• abrupt changes in a will,
• the sudden appearance of previously uninvolved “relatives” or “friends”,
• unusual account activity,
• a senior that breaks his or her habits of withdrawals and transfers.

Another step to help prevent elder abuse is for a client to add a Trusted Contact to their account. A Trusted Contact is a person appointed by a client who serves as a point of contact in case a concern arises about the client’s health status, financial activities or wellbeing. Note that, unlike an agent with a power of attorney, a Trusted Contact has no authority to take any action on an account.

Elder financial abuse can impact financial security, fracture families and lead to a potential loss of trust. It is up to friends, relatives, and professionals to stop this scourge. The best prevention may lie in being familiar with the habits of potential victims and taking action when suspicious activity occurs.

Morgan Stanley has been supporting the fight against elder financial abuse, educating both clients and employees. To learn more about how we work to help secure your and your loved ones’ accounts, visit the Security Center. More information about elder financial abuse is also available from the Consumer Financial Protection Bureau.

The source of this article, Protecting Elders from Financial Abuse, was originally published on May, 2024.

1. The Federal Bureau of Investigation, 2023 Elder Fraud Report, May 2024, https://www.ic3.gov/Media/PDF/AnnualReport/2023_IC3ElderFraudReport.pdf