By one estimate, seniors lose up to $30 billion a year to elder financial abuse—the misappropriation of their money by con artists or thieves who could be total strangers or even trusted friends and family members.
The crimes often go unreported because the victims are often ashamed to speak up or are unable to do so—and also because regulators haven't spotted the fraud.
That's starting to change, however. U.S. banks reported more than 24,454 cases of suspected elder financial abuse to the U.S. Treasury last year, which is more than double the amount in 2013, according to recent data from the department's Financial Crimes Enforcement Bureau.
One reason for the surge in elder fraud reports is simply that there is more of it. "The baby boom generation is getting older and they have a tremendous amount of assets, which makes them susceptible to being defrauded," says Michael Pieciak, president of the North American Securities Administrators Association (NASAA), a group of state regulators.
But the jump in reported cases may also stem from a broader push by the federal government, states, and the financial industry to fight elder financial exploitation. Those steps include putting new regulations in place that encourage people who are in a position to detect elder financial abuse—including brokers, bankers and financial advisers—to act on and report on what they see.
Combating Elder Fraud
Finra, the self-regulatory agency that oversees brokers, now requires them to ask customers, regardless of age, to provide the name of a trusted contact, such as a family member or friend.
The broker could reach out to that person if there's reason to think that the client is being exploited financially—say, because they're suddenly withdrawing large sums of money—or suffers from cognitive impairment, says Jim Wrona, associate general counsel at Finra.
The regulation also allows brokers to place a hold on withdrawals from the account of a client when they have a reason to think there's financial exploitation. The initial hold lasts 15 business days, but it can be extended an additional 10 business days.
"We see this rule as working as a speed bump to keep money from leaving the account before there's an appropriate investigation," says Wrona, "because once it leaves, it's probably never coming back."
On the federal level, the Senior Safe Act was signed into law in June 2018. It enables the employee of any financial institution, including banks and insurers, to report concerns about elder financial abuse without fear of being held liable for disclosing private information. To qualify for this liability protection, financial institutions must provide training to staff about recognizing finance exploit and abuse.
"That training is an essential step that other rules don't currently require," says Cristina Martin Firvida, vice president for financial security and consumer affairs at AARP.
On the state level, NASAA adopted a model rule in 2016 that mandates that brokers and financial advisers report suspected abuse of the elderly or other vulnerable adults, such as those with disabilities, to state authorities. The rule allows them to stop withdrawals from their accounts.
It also protects brokers and advisers from liability if they stop account disbursements. To date, 16 states, including Maryland and Texas, have enacted versions of the model rule, and six more states have legislation in the works, Pieciak says.
Still, you can't rely on government legislation alone to protect your family's finances. In the end, the most effective way to prevent elder abuse is to set up your own safeguards. Here are three key steps to consider.
Start the Money Talks
"The biggest risk factors in elder financial abuse are isolation and cognitive impairment," says Austin Frye, a financial planner in Aventura, Fla. "So it's important to reach out to your parent, stay in touch, and ask questions."
You should know whether your parent is keeping up with bill paying and whether he or she is in contact with strangers or new friends who may prove to be a risk.
Of course, your mom or dad may not be eager to share financial details, and you don't want to be too intrusive or suggest that your loved one is no longer competent. So ease into the conversation, perhaps by sharing your own money worries and asking for advice. Or perhaps enlist one of your parent's friends in the discussion.
If your parent is willing to accept help with one or two tasks—perhaps with bill paying—start with that. Keep it low-key by wrapping it in a social activity, such as going out for meal or visiting friends afterward. As you keep the connection going, you can gradually step up your support if your parent requires it.
Set Up Checks and Balances
Make sure your parents have essential legal documents in place that will enable you or other family members to help if they need it. This includes a will, a healthcare proxy, a HIPAA release form, and durable power of attorney, which will let you pay the bills and manage finances if they can no longer do so.
Your parents will want to give careful thought before selecting which family member or friend should be given the financial responsibility.
"Many people come at it by default, perhaps choosing the oldest child," says Michael Amoruso, an elder-law attorney in Rye Brook, N.Y. "But it's better to consider which person is most likely to put their parents' interests ahead of their own interests."
As a further precaution, consider having more than one person on the power of attorney, who can act together or separately.
"If everyone is consulting each other and everyone is getting statements, that's a better safeguard," Amoruso says.
Streamline Your Parent's Finances
"Many older people end up with a lot of different accounts because they have been chasing the latest high-interest rate offer," says Shirley Whitenack, an elder-law attorney in Florham Park, N.J. To make your parent's finances more manageable, consolidate accounts where possible.
But be careful about moving or closing accounts.
"You don't want to break into a CD and incur penalties," Whitenack says. "With 401(k) and IRAs, you have to do the rollovers the right way or you may be hit with taxes and penalties."
It's also important to maintain any beneficiary designations according to your parent's wishes, or you might face legal challenges.
Simplifying money management will make it easier for you and other family members to monitor your parent's accounts and spot any unusual withdrawals or transactions. That way, you can put a stop to any trouble quickly.
