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Elder Fraud: CPAs Can Be the First Line of Defense
Many seniors are ill-prepared for retirement or the loss of a spouse, so some may feel a pressure to expand their resource base. This makes them ripe for scams. CPAs can be an early line of defense against elder fraud. This blog contains some ideas of what to look for among elderly clients and what actions to take if fraud is suspected.
By William E. Ebersole, CPA, JD
Several years ago, while functioning as a term supervisor for the FBI, I was contacted by two different CPA firms in Pennsylvania around April 15. Immediately, I thought they had identified a potential tax fraud scheme. Each firm represented a different elderly woman who had considerable assets. Both CPA firms, while preparing their client’s annual tax returns, noticed a considerable reduction in dividends, capital gains, and interest that was not explainable by market downturns or familial gifts. The CPAs eventually found that their respective client had been duped out of thousands of dollars by foreign fraudsters operating via telephone and emails. The CPAs obtained client consent to notify law enforcement, and investigations were initiated. Unfortunately, by the time the cases arrived on my desk, the money was long gone.
Sadly, this type of fraud committed against elderly citizens is an almost everyday occurrence. Many seniors are ill-prepared for retirement or the loss of a spouse, and some feel a pressure to expand their resource base that makes them ripe for false-promise scams. Many do not have a trusted family member or friend to provide cautionary advice. And once they have been tricked, many victims are too embarrassed to admit their mistake and attempt to hide the issue from family and friends. This only provides the fraudster valuable time to continue the scheme, initiate additional scams, or sell the victim’s name and contact information to another fraudster.
CPAs can be the first line of defense against elder fraud. Below are some ideas of what CPAs can look for among their elderly clients and what actions can be taken if fraud is suspected.
Be sensitive to clients who have a sudden, unexplained reduction in assets. Elderly clients may not give you the details right away due to embarrassment or a firmly held belief that they are not really a victim. Be advised that fraud does not occur in a vacuum, so be alert for additional scams that may have been committed against your client and that could still be going on.
CPAs should take note if clients reference contact (via telephone or email) with foreigners in situations that are inconsistent with their normal lifestyle. Clients anticipating a “big pay day” on the horizon warrants extra attention in ensure that their assets are protected.
Elderly clients who have just lost a spouse or intimate partner are especially vulnerable to scam artists who promise financial security and a relationship. I once worked with a victim who wired more than $100,000 to a foreign national based upon a marriage proposal over the internet. When I asked the victim if their future spouse existed, the victim produced a stock photograph from a picture frame company that had been received in the mail. A quick check of the back of the picture revealed the specifications of the picture frame, cleaning instructions, and where to order more frames.
When CPAs suspect foul play, get your client’s consent then immediately report the fraud to law enforcement. The FBI’s recovery asset team, working in coordination with financial institutions via the Domestic Financial Fraud Kill Chain (DFFKC) has the ability to stop international wire transfers within the first 72 hours if the transfer is at least $50,000 and a swift recall notice has been initiated.1 Contact with your client’s bank will also be necessary.
Although reimbursement for losses is provided in only limited circumstances, CPAs can contact the Pennsylvania Commission on Crime and Delinquency.2 The Pennsylvania Office of the Attorney General is also an excellent resource to combat elder fraud.
Clients may have an insurance policy, renter’s insurance, or identity theft policy that can be accessed to restore credit and seek restitution. Membership in certain social or fraternal organizations may also have some type of identity theft insurance benefit provided with the membership.
Criminal prosecution is unlikely to get your client’s money back, but it may be required for financial relief under insurance provisions or victim compensation funds. On rare occasions, some fraudsters do come into legitimate funds via inheritance, civil judgement, or lottery winnings. Having a certified judgment in place offers a chance at some limited recovery.
Today’s CPAs are ideally positioned to protect the elderly clients from the financial predators who are able to reach victims in the privacy of their own home from across the world.
1 Internet Crime Complaint Center - 2018 Report, Federal Bureau of Investigation (2018). Accessed on Feb. 27, 2021, via: 2018_IC3Report.pdf (usgovcloudapi.net); "Hit by Wire Transfer Fraud? Use the Kill Chain Process," Title Industry Assurance Company (2021).
2 Helping Crime Victims, Pennsylvania Commission on Crime and Delinquency (2021).
William E. Ebersole, CPA, JD, is security compliance/emergency manager for Disney Cruise Line in Celebration, Fla. He can be reached at spykids1229@brighthouse.com.
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