• Wealth Management

Cracking Down on Senior Financial Abuse

Financial abuse of older citizens is one of the most common crimes in the US. But there are ways to protect your loved ones from scams like these.

Although it's rarely talked about, financial abuse of elderly citizens is one of the most common crimes in the United States—and unfortunately, one of the most under-reported.

In fact, one in five adults aged 65 or older have reported some form of financial abuse1, and nationwide, victims of this type of exploitation suffered an annual loss of $2.9 billion2 collectively. Worse, true losses may be difficult to calculate since many incidents go unrecognized or unreported.

While most older adults have the mental acuity to protect their assets, the combination of cognitive decline and financial wealth make some seniors easy prey for financial crime.

Although some new legislation is in the works to help combat these crimes, the best prevention for you and your older loved ones is an awareness of these kinds of abuse and some potential protective measures.

A Wide Variety of Crimes

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 or persuading a senior to sign a fraudulent document.

Other scams include deceitful investment offers, rip-offs by contractors and intentional bad advice from disreputable financial advisors.

While every case of abuse will be different, there are typical red flags for each type of scam. 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,'' says Thomas Mierswa, Executive Director in Morgan Stanley’s Legal and Compliance Division. “It is often difficult to determine that fraud has taken place.''

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

Confidence Scams

Elderly people can also be duped into new romantic or platonic relationships with unscrupulous people who seek to obtain money. According to Mierswa, people who live alone are particularly exposed, as they may come to place too much trust in their new companion. This vulnerability often arises when a senior’s primary contact with the outside world is through their home caregiver.

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

First Line of Defense

The first line of defense is the client and their trusted family and friends. It is important for senior clients to prepare and include individuals they trust to be aware of their financial affairs. Financial Services firms can assist in detecting potential fraud.

Because many crimes are carried out through wire transfers, withdrawals and electronic payments, cash management personnel can act as front-line watchdogs in exploitation cases. A major step to combating senior financial abuse is following the flow of money. This is where the relationship between account holder and financial advisor becomes key.

Morgan Stanley staff is trained to detect warning signs that could point to exploitation such as abrupt changes in a will, the sudden appearance of previously uninvolved relatives, or unusual account activity. A senior client breaking his or her habits of withdrawals and transfers can also raise suspicion.

“We don’t expect our Financial Advisors to be doctors, but they are trained to monitor what is going on with their clients' behavior and activity,'' says Rocco Procopio, Head of Field Compliance at Morgan Stanley.

At Morgan Stanley, a Financial Advisor can raise a suspicious situation to compliance and ultimately to the legal department. When a case is determined to constitute a deceptive or abusive act, legal and compliance will act to stop the financially exploitative activity and try to protect the client's assets. When appropriate, Adult Protective Services may be alerted and the matter may be reported to law enforcement.

Senior Fraud Legislation

Among new legislation to protect the elderly, the Elder Justice Act was introduced in March 2010 to provide federal resources for comprehensive programs to prevent and fight abuse, neglect and exploitation. The Office for Older Americans was opened in 2010 within the Consumer Financial Protection Bureau. Congress is also debating a new Elder Abuse Victims Act, which seeks to establish an Office of Elder Justice within the Department of Justice.

Elderly financial abuse cuts income, fractures families and produces a huge loss of well-being for the people who need it the most. 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 interest when these change.

If you or a loved one have questions or concerns about senior financial abuse, the Financial Industry Regulatory Authority (FINRA) has a toll-free Securities Helpline for Seniors at 1-844-57-HELPS. Seniors and caretakers can call the helpline Monday through Friday from 9 a.m. to 5 p.m. (ET) to better understand account statements, raise concerns or get information about investor tools. You can also speak with your Morgan Stanley Financial Advisor.

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