Financial fraud targets older people. How to recognize it

In an increasingly digital world, the specter of financial fraud looms large, particularly among older people. My experience with an 81-year-old client provides a striking illustration of this.

While helping “Emma” (not her real name) with email issues, I witnessed first-hand how vulnerable she was to scams. Despite my repeated warnings over the years, she had happily shared personal information with unknown senders, believing she was being conscientious or supporting noble causes.

This behavior quickly led her to a fraudulent scheme, in which she nearly lost $4,500 to a scammer posing as an IT service provider. This incident wasn’t the first Emma had experienced, but it was the most brazen.

Emma’s story is not unique. This reflects a growing trend of elder fraud, which is both sophisticated and damaging.

Elderly fraud is a growing problem in the United States, with fraudsters becoming more and more cunning. They prey on older people, often exploiting their loneliness, social isolation and sometimes declining cognitive abilities.

It turns out that these people are the most vulnerable. A recent University of Michigan study suggests that older adults who report feeling lonely or isolated are more likely to be victims of fraud than those who report feeling satisfied with their lives and social circles. Meanwhile, the National Library of Medicine published research linking cognitive decline to a greater predisposition to scams.

However, these criminals do not only target the very elderly; people under 80 are also at risk. In 2022 alone, more than 88,000 adults over the age of 60 were victims of financial scams, according to the FBI’s latest elder fraud report.

According to the Women’s Institute for a Secure Retirement, women are more likely to be victims of elder fraud because they outnumber men over 65 and older women are more likely that older men live alone and live in poverty.

Americans 60 and older lost $3.1 billion to cyber fraud in 2022, according to FBI data, with an average loss of $35,101 per victim. More than 5,000 seniors lost more than $100,000 each.

Fraudulent schemes aimed at seniors range from email phishing to identity theft scams, each designed to deceive and manipulate their targets into handing over sensitive personal and financial information. As fraud tactics become more sophisticated, avoiding them can be difficult for those who don’t recognize the warning signs, which often include:

• Suspicious emails. Fraudulent email addresses often have misspellings or odd characters and prompt the recipient to click on links. These links may lead to phishing sites that imitate a legitimate website and trick the user into entering sensitive information or could initiate the download of malware, adware, or scary software onto the user’s computer.

• Vague electronic signatures. Fraudsters’ electronic signatures are usually simple, sometimes just a first and last name. Legitimate companies provide detailed, verifiable contact information, including the company name, address, website URL, and phone numbers.

• Emergency and threats. Phishing attempts typically convey a false sense of urgency or threaten dire consequences to compel action.

• Personal information requests. Fraudsters want personal information to hack into a person’s financial accounts. No legitimate business will ask for credit card numbers, login credentials, or social security numbers over the phone or email.

• Behavior out of character. Some scammers pose as family members or friends who urgently need funds – a feat made easier with the advent of artificial intelligence.

For older people, especially those who are isolated or suffering from cognitive decline, usual caution may not be enough. It’s crucial to establish a support network of trusted people who can step in when financial decisions become confusing. Consider the following proactive measures:

• Early planning. Start organizing a support network around age 70, especially for those who lack extensive family networks or have a history of cognitive decline. For example, another client of mine preemptively engaged a professional home care management team to address her lack of local family support.

• Safety audits by adult children. Adult children can help by checking spam filters, setting up password managers, and automating bill payments.

• Legal preparations. Establishing essential legal documents and creating trusts can guard against the inevitable challenges posed by cognitive decline. For example, a durable power of attorney for finances appoints a trusted individual to manage the financial affairs of a person whose capacity is diminished, while a successor trustee can manage and distribute trust assets on their behalf in accordance with the trust agreement. These legal tools are essential to maintaining financial autonomy and security, even when direct management becomes impractical or even impossible.

A study by TransUnion reveals that the volume of suspected digital fraud attempts increased by 80% globally between 2019 and 2022, mainly due to the increased reliance on digital transactions during the Covid-19 pandemic. As our financial activities become increasingly linked to digital platforms, the opportunities for fraudsters will likely grow exponentially.

Although financial institutions are increasingly able to detect and prevent fraud, awareness and vigilance remain essential in the ongoing fight against elder fraud. By recognizing the signs of fraud, establishing legal and personal protections, and fostering a supportive community, we can help preserve the financial well-being and independence of our elderly loved ones.

— By Cathy Curtis, Certified Financial Planner and Founder and CEO of Curtis Financial Planning. She is a member of CNBC’s Council of Financial Advisors.