As the ages of baby-boomers in the United States rise, the rate of elder financial fraud is expected to grow as well. It’s the job of CPAs to know the signs of elder financial fraud and do everything within their power to ensure that it does not happen to their clients. Such is the premise of “Elder Financial Abuse Is a Growing Problem: CPAs Can Help Prevent It,” a feature from the spring 2019 Pennsylvania CPA Journal. We discuss the article with authors Howard Silverstone and Irina Balashova of Forensic Resolutions Inc.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

Elder financial abuse is a major issue in this country with the age of the baby boomer population only continuing to rise. It should be expected that the rate of such crimes will continue to grow in upcoming years. Therefore, it's incumbent upon CPAs to know the signs of elder financial fraud so they can do everything within their power to prevent it from taking place. Such is the premise of “Elder Financial Abuse Is a Growing Problem: CPAs Can Help Prevent It,” a feature from the upcoming spring 2019 Pennsylvania and CPA Journal. Today we are with the authors of the feature, Howard Silverstone and Irina Balashova of Forensic Resolutions Inc., to discuss this important topic.

When you think of elder financial abuse, the first thing many people think about is telephone scammers trying to steal financial information, and there is still a lot of that going on. A large percentage of it. But a lot of these perpetrators can be closer and more familiar to the victim than that. So who are some of the more common perpetrators of these crimes?

[Balashova] Well, this is true that when we talk about perpetrators of elder financial abuse we tend to think about people who are far away from the family, some strangers calling in. But, in fact, approximately 58% of the elder financial abuse cases are happening where the perpetrators are family members, elder adults, or spouses. The next big group of the perpetrators is neighbors or close family friends. And then yet another big group of people who commit frauds like that are the home health aides or someone who comes in on a regular basis and helps the elder. We also know that, according to the research, the perpetrator is usually a male and he himself has some issues with ongoing stress, some abuse issues, some problems with finance or they find themselves in a hard and difficult financial situation. We also need not forget about the fact that elder financial abuse goes usually hand-to-hand with other types of abuse, which is physical abuse and sometimes neglect.

[Silverstone] One other thing to add with traditional fraud as we called it or the old fashioned fraud: it was always the bookkeeper of a company or someone in a financial position in a company. What's different about elder financial abuse as Irina said is it really could come from anywhere.

Your piece states that these types of crimes are only expected to intensify in coming years. What are some of the factors that are driving this sort of anticipated uptake? It is it really just the percentages of baby boomers, and things like that.

[Balashova] In order to answer this question in a very good way, we should first take a look at the population statistics of the United States. As they say, we live in a time of change and statisticians say that within 10 to 15 years there will be more, older people – those who are 65 and older – than those who are younger – age 18 and younger, like children. These statisticians right now even tend to divide this older group of people who are 65 and older in between two groups. Young-old – between 65 and 85 – and old-old – 85 and older. And according to the latest statistics we have approximately 80 million people who are 65 and older in our country right now. This number is expected to double within 15 to 20 years. And the reason for that is that baby boomers are going to retire soon, and in addition to that statistic, which is simply a population statistic of bigger numbers of people like that, we want to keep in mind that these populations of people who are about to retire are the wealthiest population.

They accumulated lots of resources, like home equity investments, retirement savings, and all other wealth, which is very lucrative to crooks and con artists. Finally, we don't want to forget about the fact that older populations tend to have some cognitive issues, which makes the fraud very easy.

[Silverstone] The other problem we face is there are a lot of people who maybe don't have insurance in place. So if something happens to them they can go into a facility, but because they have a certain amount of money set aside, they can't afford to have someone come in and live with them or spend extra time with them. And again, that's one of those factors that's going to expose them potentially to financial abuse.

The feature goes over the top 10 financial scams targeting seniors in depth, so we won't go over them all here, but it's very informative. What would you say are two or three of the most common and, I guess it's sort of sad to say, effective sorts of techniques?

[Balashova] We decided to touch base on a couple of them and one of the most prominent out there is the so-called tax impersonating scam. It’s when a person gets a phone call and someone represents himself as an IRS agent claiming that the victim has some kind of back taxes going on or troubles with the tax returns previously filed. Some kind of issue. And in order to fix this issue the victim has to pay a certain amount of money. Actually there is a harassment going on right there on the phone because they require the payment right away and they threaten the victim on various charges like eviction from the house, arrest, enormous fines, and in some cases even deportation from the country. Of course, people are getting scared, especially when they see over the phone. This technique is called caller-ID spoofing.

When they see the Washington, D.C., area code, of course they tend to trust that there is some kind of authoritative person calling in, and there is indeed the problem with the tax returns. So especially when we're talking about older population who may not familiar with the frauds like that, that are going on around here. What is happening is that the victim is requested to transfer some money by various means like credit cards, debit cards, or even gift cards. In some instances, the con artist asks to purchase and dictate over the phone the iTunes gift card numbers, which is strange and people don't even pick that up as a sign of a fraud going on, and not a legitimate thing. But unfortunately many elders fall into this fraud.

Another one, which was the big one, is the so-called sweepstakes, or Jamaican, scam. This is when the person receives the call and what they hear is that they just won the lottery or they just won a very expensive car. There is something very good going their way. And the only thing that they should do is pay just the minimum amount of money of a processing fee or taxes on the winnings. A little bit of cash, you just wire us like 100 dollars or 200 dollars and immediately after that you will have your hands on this enormous winnings. A con artist also is very creative when they talk with the victim over the phone, they say, "You know what? Let's keep it a secret from your family. We'll make it a huge surprise when you finally get your hands on that money. It will be a huge family surprise."

Of course, authorities get to know about the fraud long after the money is actually gone. It is estimated that at the peak of this scheme, approximately 30,000 calls per day were placed to the United States from a Jamaican area code, which is very close to the ... it's 876, which kind of mimics the American toll-free code. That's why people also fall victim to this scheme.

[Silverstone] One of the other schemes we're going to use in the same kind of mentality on technology against the elder people is the grandparents scam. This is the one that we're told is really one of the most popular where an older person will get a phone call from a young-sounding person saying, "Hi grandma, it's me." And they'll say, "Do you know who this is?" And the grandmother or the grandfather will say, "Oh, is this Jimmy?" "Yeah." And then they'll go into this whole scam about how they got themselves in trouble. "And don't tell mom and dad because they will ground me and I'll be really in trouble, but I need money," or "I need money. It's to get me out of jail." Or something like that. And it seems simplistic to us but, again, they'll ask for iTunes money. That's the most popular thing, which most of us know you don't get out of jail using iTunes money, but to an older person, quite frankly, they don't realize that and sadly they fall foul to it.

It's interesting that when people think of seniors getting scammed, the first thing they think of is mental incapacitation. But your feature talked about people maybe just over 50 being scammed due to lack of familiarity with technology or the like. How much of a problem is that?

[Silverstone] It's a huge problem for the reason that we just gave as the example for the grandparents scam and the iTunes money. So the first question is, "Well, how would the caller even know that person had a grandchild?" In a lot of cases, they don't. They're just taking the chance that they'll find someone like that. Maybe they got their number knowing it's an older person. A lot of times unfortunately it's an older person exposing themselves using Facebook and exposing all of their private information, posting pictures of their grandchildren, showing their grandchildren's name, using the words that the grandchildren call them. "A nice day out with Nana" or "A nice day out with Mama." Or something like that. People will pounce on that. And the other big problem is smartphones. People want smartphones now because if they want to get an Uber or a Lyft, they have to have a smartphone. They want to use online banking. They want to do all kinds of things and they don't realize the predators that are out there if they're in the local library using public access wi-fi or they're waiting for a train or a bus or a plane or something like that. So unfortunately technology is changing a lot quicker or more quickly than people can really get knowledge about it, especially the aging population.

What would you say are some of the more common signs that a senior citizen may be falling victim to financial abuse?

[Silverstone] You have to take a look at the various ways of ... we call that “red flags” and basically those red flags evolve around change. You first probably need to take a look at the older person, your maybe older client’s lifestyle and see what is going on in their lives, how they used to live before and if there is any change going on after. For example, if the person was outgoing and tended to spend time with their friends and all of a sudden became socially isolated or vice versa if they used to live in their own little house and not going out somewhere or having connections. All of a sudden they start spending enormous amounts of time over the phone talking with some new friends. This is a huge red flag. You also generally want to take a look at the behavior of the person. If the person is embarrassed or kind of tends to close down, not wanting to share information. You can pick up those social clues.

From a financial standpoint, you want to take a look at the credit cards and debit card statements and see if there are any unexplained disbursements going on. You just cannot make sense of why these amounts of money going out from their account. You also want to take a look at the unusual spending and the unusual extreme spending. You also want to take a look if a person cannot keep up with the debt, cannot pay their mortgage because all of a sudden they don't have money. Or if there is something going on with the titles, you want to also take a look at the titles, life insurance, mortgage, or a title on the car. And all of that, if you see any change, you want to make sure the change is legit.

In the old days or even now, but in the old days as forensic accountants, we always talked about the red flags of fraud when it came to someone in a company who maybe wasn't making a lot of money but all of a sudden build a big house and had a nice car. Those are some of the things, the outward kind of motions of what people might have been doing. This is a little bit of the reverse of that. The red flags here are all of a sudden someone, as Irina has said before, this should be a wealthy retiring group of the population. Now all of a sudden there were people who for some reason don't have the money to spend. They've had to downsize. They've sold the car. They're not going out as much. That kind of thing. And those are some of the red flags that Irina was talking about, which are a little bit of the reverse mentality of the traditional red flags that we used to look for.

What factors can complicate the detection of financial abuse? In the feature, you talk about the embarrassment felt by the victim, for instance. Can you tell us a little bit about that and other factors that can serve as obstacles?

[Balashova] Well, first of all, we have to acknowledge that as a society we're not doing that good of a job related to elder care fraud. Compared to the more well-known types of fraud, for example child abuse or domestic violence. We are lacking for 10 or 15 years in just simple research of this type of fraud. We just don't pay that much attention. We also need to take a look to understand and realize how extensive the problem is, because we know for sure that only one out of 25 cases of frauds like that is getting reported, is getting to the hands of the authorities. This is an enormous amount of wrongdoing going on. And, as you said, it was an embarrassment. If I'm an older person, I’m supposed to know better and all of a sudden someone managed to defraud me. Of course it's embarrassing to acknowledge that, but also we're talking about such factors as a fear factor.

Sometimes older people are too scared to report a fraud because, for example, in the situations when the perpetrator is a home health aid, someone who spends enormous time with the elder and they don't want to report that. In addition to that, we want to mention the confusion. The person may not even realize that they are in a position of a victim in this situation when a spouse or an older child takes advantage of their financial resources. Finally, some people may just not understand the whole concept of financial fraud and being the victim of this fraud. And we're talking about the case of cognitive decline of a person.

[Silverstone] The embarrassment does come from this whole issue of pride, that this generation that's now retired or retiring has a tremendous amount of pride, and does not want to let people know that they let their defenses down or they fell foul to something. You can't really look at all of this in a vacuum but it all goes to the fact that most of us know the IRS does not call your home asking for money. But unfortunately there is an element of the population that doesn't know that, and are embarrassed about it. And we've been talking recently about a case that we've seen which really sums it all up and is really the saddest case that we've seen. A lady who fell foul to one of these schemes and the people kept calling her and asking for more money. "Oh, we realized there's more taxes that have to be paid before we can release this money." So she started borrowing money. She didn't tell anybody, and then obviously she ran out of money and she realized it and she was too embarrassed to tell anybody.

And sadly she committed suicide. And that's the case that we know about. I mean, there's tons of cases that obviously we don't hear about, but this was a high-profile case that we heard about recently and it really made us realize just how serious a problem this is.

It's incredibly sad and something that CPAs should want to prevent as best as possible. So that takes us to our next question. What can CPAs do to counteract these abuses and attempt to ensure that their elderly clients don't fall victim to these schemes?

[Balashova] We want to make sure that we establish the trustworthy relationship type of rapport with our elder clients. We want to make sure that they know that we are right there for them, that we are trustworthy and that we will serve to the best of their interest. So they are not shy to share. If something's not quite right, if something is going on not as they expected or something unexpected came their way. In addition, education is a very good source of combating frauds like that. We want to educate our clients about all those various types of frauds going on, all those various con artists that know that, you as a client, you have money and they want to get their hands on it.

[Silverstone] I can speak from a personal standpoint as a CPA and as a son. My mother passed away recently, but she was almost 94. And for the last few years I gave her a script and I said, "If anybody calls asking you anything about anything, your standard line is, “I'm sorry, my son handles that and he's not home right now. Can you give me your phone number?" And at most times that was met with a click. But also I made sure that I got copies of her credit card statements. I got copies of her bank statements, and she knew that, and she understood that. Because just to make sure that someone wasn't skimming her ATM card, to make sure that someone wasn't conning, say, pretending to be from the FOP asking for money, and could she give them her credit card number.

I also set up a service for a few dollars a month to get the credit reports if anybody checked credit using her Social Security number. Because, as you know, up until recently, everybody's Medicare number was their Social Security number. So it'd be easy for someone to call and say, "Hey, we're calling from Medicare. We just want to check your number." Or something like that. As CPAs, we should be the most knowledgeable from a fiscal responsibility standpoint. We should really be teaching our clients, those who have elderly clients, if you have someone in your family that you trust implicitly that they can get a copy of this stuff, it would really help.

It's so important that CPAs can be up on the signs of elder financial abuse. Being able to know where and how to help is probably even more important. Are there any other particular resources that they should be looking at to know how to do this?

[Balashova] Luckily in these days, virtually any organization and any government organization has some form of a hotline or some kind of reporting line that can be used to report the abuse. Besides FBI and the policy department, any kind of a social organization that deals with elder people, elder clients, they tend to have some kind of a reporting line which can be used, which can be utilized to report abuse. I personally like to give the example of the Department of Justice because it's so easy to remember. It's www.stopfraud.gov. It will send you right away and you can file a claim if you suspect something is going on.

[Silverstone] Also, for example, the AARP. I've spoken at length with them. They have a Fraud Watch Network. Not only do they send out monthly emails – which I believe every CPA should be on that mailing list because they send out an email every month of what the hot scams are – but they also have this Fraud Watch Network. People can call in. Not that we need toll-free numbers anymore because it doesn't really cost anything to make a call, but they have a basically a toll-free hotline that if someone suspects abuse or some kind of scam they can call it in. Our biggest advice to our fellow CPAs is like anything else in our profession: stay educated. There are lots of articles and blogs that are being written about this subject. It's changing all the time and a lot of these organizations, like Irina mentioned the Department of Justice, like I just mentioned, the AARP, they are always regularly updating the current scams.

So let people know when they hear about certain things, whether that's actually a scam that people are aware of or it's something that they should report because it's never been heard of before. Because we always know ... I'm going to quote the head of Mastercard many years ago at a conference who said, "We build 10-foot security walls and the fraudsters build 11-foot ladders." We all know that we can't stop this, but we can try our best to help prevent it by staying educated.