Risk Factors for Fraud & Financial Exploitation

By Marguerite DeLiema, PhD, Stanford Center on Longevity

Fraud and financial exploitation are two crimes that target older adults. In 2010, a national study reported that over 5% of Americans ages 60 and older were financially exploited by a family member in the past year (Acierno et al., 2010), and in 2011, approximately 7% of adults ages 65–74, and 6.5% of adults age 75 and older were defrauded by strangers (Anderson, 2013). While these crimes share similar risk factors, elder financial exploitation is committed by people who occupy traditional positions of trust, such as friends and relatives, and fraud is typically perpetrated by strangers.

Researchers have recently identified several important risk factors for elder financial exploitation. For the older adult, these include poor physical health, cognitive impairment, and needing assistance with daily activities such as shopping, preparing meals, and managing money (Peterson et al, 2016). Lack of social support is another major risk factor. In fact, a 2014 study by Schafer and Koltai found that older people who are embedded in dense social networks have lower risk of elder mistreatment. These adults are well connected to those around them, and those around them are well connected with each other, often acting as a sort of watchdog over the actions of the others. This deters potential perpetrators from gaining too much influence over the elder.

In sparse social networks, not only are there fewer individuals to provide financial oversight, but also fewer people to guard against the harmful behaviors of others. Furthermore, in the absence of meaningful social interactions, older adults may be more open to engaging with strangers to fulfill their social and emotional needs. Some of these interactions might include talking on the phone or in-person with financial predators. Indeed, Lichtenberg (2013) found that seniors with unfulfilled social needs were significantly more likely to report fraud victimization.

In a study I conducted in 2015, older fraud victims were less likely to have adult children compared to financial exploitation victims. Perhaps what differentiates seniors who are defrauded by strangers from those exploited by close friends and relatives is the social context surrounding their victimization. Having adult children who participate in money management activities decreases risk of fraud because they prevent strangers from accessing their loved ones’ accounts; yet, the presence of adult children may increase opportunities for financial exploitation. Family members may feel entitled to the elder’s assets, particularly those who live in the same household and are dependent on their aging parents for support.

Social isolation is not only a potential risk factor for financial victimization, it is also a tactic perpetrators use to manipulate their victims and hide acts of exploitation. Fraudsters and financial exploiters use undue influence — the substitution of one person’s will for the will of another (Quinn, 2000) — to limit and control an older person’s social interactions, thereby creating a sense of powerlessness and dependency. This makes elders easier to manipulate, even if they are mentally competent. In one of the elder fraud cases I studied, a caregiver isolated the older person from her family and withheld food to coerce her to sell property and fire a long-term accountant. In another case, the perpetrator replaced the victim’s locks and unplugged her telephone to prevent her from speaking with her son, and in a third case, the perpetrators transferred the elder into a long-term care facility and moved into his home, falsely promising that they would renovate it on his behalf.

While low network density, poor health and cognitive impairment are personal risk factors for financial victimization, new research suggests that negative behaviors exhibited by those who associate with the elder are more strongly related to financial exploitation outcomes (DeLiema & Conrad, 2016). For example, elder abusers are more likely than non-abusers to drink, become intoxicated, and have alcohol abuse problems. Exploiters are also often unemployed and socially isolated (Amstadter et al., 2011; Lowenstein et al., 2009; Manthorpe et al., 2007). In addition, studies have reported a high prevalence of mental illness among abusers (Pillemer et al., 2016).

Given that low network density and the presence of problematic relatives are associated with financial victimization, aging adults should select more than one person to make financial decisions on their behalf should they be unable to manage their assets independently, preventing one person from having unbridled access and control over their financial assets.