Friday, September 22, 2017

How to avoid and detect Elder Fraud: A guide for older people, carers and relatives

Elder abuse is a problem in western cultures world-wide. There are many forms of abuse ranging from neglect to physical abuse, and within that range is financial fraud. Elder fraud can take many forms and we’ll focus on the type of fraud that primarily uses the internet in this article.

Seniors are disproportionately targeted as victims for fraud. The AARP (formerly the American Association of Retired People) found that while only 35 percent of the American population is over 50 years old, fraud victims over 50 accounted for 57 percent of all fraud. 

It’s difficult to obtain numbers on how large a problem elder fraud is world-wide. Different organizations calculate numbers in different ways and also define fraud differently. All we can be sure of is that billions of dollars are lost each year to criminals preying on elder citizens.

Fraud and the internet: a backgrounder

Fraudsters play a numbers game. They know that most of their attempts to con people won’t work, but they also know that some will. To succeed, the con-man has to make as many tries as possible. Going door-to-door attempting to scam people has low odds because it takes a long time and it’s only possible to hit so many doors in a day. Also, once a scam succeeds, the con-man has to high-tail it out of town before getting caught. Then, find another town and start all over.

The internet removed all those problems for fraudsters. They can now sit in the comfort of their own home, possibly countries away, and through the use of spam email attempt to con thousands of people per day, every day.

Elder fraud is a specific type of fraud aimed at seniors. The most common way that seniors are targeted over the internet is through email. General phishing techniques are used against a large number of email addresses with content aimed at seniors. Content aimed at seniors usually falls into these categories:
  1. Medication
  2. Financial support with regards to home equity or retirement savings
  3. Friendship or camaraderie
From responses to that general attack, more targeted spear phishing can take place in an attempt to defraud specific individuals.

Why are elders targeted?

The problems that plague humanity are fairly steady throughout life. We all want to be safe, warm, fed, loved, and financially secure. Very few people have all of those things all the time, and in our elder years the absence of some of those things can converge into a pattern.

It’s easier to phish people if you know what their problems are. A general phishing attack may use low mortgage rates, as an example. At any given time there are millions of people looking for mortgages but there are billions who are not and don’t care about the mortgage email. Seniors, on the other hand, tend to have a smaller pool of things that are of greater concern. As a population, things like medication costs, proper health care coverage, financial security as retirement funds run out, and providing for loved ones left behind tend to get more attention. It’s therefore easier to craft phishing emails about a small number of subjects that a large percentage of a population is likely to be interested in.

Other reasons may include the fact that many seniors are isolated and therefore have nobody they can trust to run ideas by. Email did not become widely affordable to households until the 1990s in Canada and wasn’t a daily communications mechanism until after that. Anyone over about 30 today has memories of a world without internet and our seniors would have spent most of their lives without it. That can lead to confusion over how reliable email is, and how much trust to assign it.

It’s also not uncommon to experience some level of diminished mental capacity as we age. That can tax our decision-making abilities to the limit and lead to bad decisions.

Common types of elder fraud

A surprisingly sad statistic is that a good chunk of elder fraud is committed by family members or caregivers. The North American Securities Administrators Association reports that 23% of elder fraud causes in 2015 were committed by family members, trustees, or people with powers of attorney.
Generally, those types of fraud are not committed over the internet since the parties are already known to each other. However, that doesn’t mean other types of fraud don’t exist – this body shop owner has been charged with defrauding elderly clients for car restoration jobs. Some of the more common internet scams take the following forms:

Monetary scams

Monetary scams aimed at elders are attractive to criminals for two diametrically opposed reasons. On one hand, many seniors are living on fixed and inadequate incomes and could use more money to live on. On the other hand, many seniors have sizable nest eggs and large amounts of equity in their houses so they can get their hands on a lot of money. The most insidious scams play both angles.

Fraudulent investment or insurance schemes seek to bilk money out of people with the promise of some greater reward down the road. While it can be grisly to consider at the time, it is always important to think of how much time is left for an investment to mature. By and large, elder people would be looking at short-term investments and there are very few legitimate lucrative short-term investments. The insurance scam plays the other angle – there is no concept of pulling any money out of the insurance policy. Rather, heart strings are played upon to invest money for those left behind.

In some cases, the insurance agent actually is a legitimately licensed insurance agent, but is still trying to commit fraud against the elderly. David Pickett, as US-based insurance agent, has been arrested 3 times for fraud.

A sub-class of this type of fraud involves offers to lend money that seem too good to be true. These types of scams are usually complicated to figure out because it’s hard to believe someone can fraudulently give someone else money. A complex example of this is the reverse mortgage system that exists in some countries. In a reverse mortgage situation, elder homeowners with significant equity in their property can opt to take a chunk of money for the estimated value of their house at the time they pass on or willingly move. At that time, the lender takes possession of the house and the debt is paid. The danger lies in that the principal plus the interest over time can end up being more than the house is worth.

In some countries, such as Canada, only 55 percent of the value of the property can be reversed mortgaged. That is to hedge against the possibility of the loan exceeding the value of the property when the debt is repaid. Some mortgage bloggers state that the value of the loan is not allowed to exceed the value of the property, but neither the government of Canada site, nor the single authorized reverse mortgage lender in the country (HomEquity Bank) confirm that. It’s harder to find concrete information on reverse mortgages in other countries. In the U.S., for example, the borrower’s estate generally does not have to pay any excess of the balance over the property value, but legislation enforcing that isn’t readily available. Reverse mortgages are not inherently fraudulent, but if the industry is not tightly controlled in your country, be sure to obtain sound third-party financial and legal advice beforehand.

Lottery scams are targeted at people of all ages and elder people are no exception. The basic framework of a lottery or sweepstakes scam is to tell the victim they’ve won a large prize of some kind, but some smaller amount of money has to be paid in order to claim the prize. The money to be paid is usually attributed to non-existent things like “international transfer fees” or something equally silly. It is safe to say that if you’ve never entered a lottery, you can’t win it, so claims like this out of the blue are a red flag. Legitimate lotteries are tightly regulated to ensure there is no fraud. It is extremely unlikely that a real lottery organization would contact the winner by email to begin with.  (Click to Continue

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How to avoid and detect Elder Fraud: A guide for older people, carers and relatives

1 comment:

Finny said...

There just can't be enough information out on elder abuse. Thank you for supplying it NASGA.