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Your Money: How to make seniors smarter about financial scams

NEW YORK (Reuters) - If you are seriously ill and homebound, or starting to be prone to forgetfulness, do you have someone you trust with your ATM code to run out and get you some cash?

FILE PHOTO: Elderly people sit on a park bench after sun set in Encinitas, California, U.S., July 5, 2017. REUTERS/Mike Blake/File Photo

Are you really sure?

Elder financial abuse runs the gamut from stranger danger to scheming family members to unscrupulous financial advisers. Seniors in the United States are scammed out of some $37 billion a year, according to a new report by AIG Life and Retirement.

The consequences to older individuals can be dire. One woman currently being sheltered by the Weinberg Center for Elder Justice, a nonprofit in New York that helps abused seniors, lost her house in a “sweetheart scam” in which a stranger preyed upon her loneliness by developing a romantic relationship via online chats. The predator then asked for money.

“It took a long time for her to acknowledge what had happened. She was so ashamed,” said Joy Solomon, the director and managing attorney of the Weinberg Center.

The first step to protecting seniors is education, experts say. The next move? Put a system of checks and balances in place to make sure that the people you trust to care for you are actually on your side.

In a recent case, AIG’s call center took an order from an 86-year-old client for a large withdrawal. After all the steps to authenticate the transaction, the caller was caught on tape saying something like: “See how easy it is to impersonate my mom?”

An astute AIG representative raised a red flag to the firm’s special Elder and Vulnerable Client Care unit, said Michele Kryger, who heads the group.

Banks, financial advisers and trustworthy family members can help seniors be more secure - without giving up their independence.

Here are some steps to help prevent common forms of elder abuse:

* Practice good online hygiene

It is not just seniors who fall prey to phishing scams, but some common ones target them in particular.

Even so, the AIG survey found that 92% of seniors were aware they should not respond to strangers asking for personal information, and 89% knew not to click on links from unknown senders.

Getting seniors to develop “digital literacy” is not always easy because it means talking to them about taboo topics like control over money and mental fitness.

Good online hygiene includes not giving out personal information online, not clicking on links and being skeptical of requests for money.

* Name a power of attorney and trusted contact

Where many people fall short is putting a plan in action, like drawing up official power of attorney forms and naming a “trusted contact” with financial representatives.

Some 66% of seniors do not have (or do not even know if they have) these set up, according to AIG. Trusts and other estate plans can also help.

“The most important thing is having a reliable, trusted other, so that person has access and can see what’s happening in your accounts,” Solomon said.

Ellen Morris, an partner with Elder Law Associates, based in Boca Raton, Florida, said the power of attorney designation helps protect a person because, at least in Florida, you can sue that person if they do not act responsibly.

* Choose traceable methods to give funds

How you give out money matters in scams. Cash, money orders and prepaid debit cards are virtually untraceable. Signing over deeds and other assets is hard to reverse.

Elder financial abuse is hard to prosecute, said Deb Geister, fraud subject matter expert for NICE Actimize, a financial compliance company. This is because “stranger scammers” are usually based offshore, victims often decline to prosecute family, and it is hard to pin a charge on professionals who charge excessive fees or commissions, she said.

If you are at all concerned about the person you are giving money to, use a check or automatic bank transfers (ACHs). You can also limit funds in accounts open to caregivers and set up alerts to warn of credit card charges and bank withdrawals.

Those methods are easier to trace. Geister had luck pulling funds back when she uncovered fraud using electronic transfers. She had an elderly relative who called for help after sending $30,000 to a catfisher who struck up a romantic relationship online. They filed a dispute with the bank, and were able to resolve it with the institution.

“It’s a good idea to get law enforcement involved, but not necessary,” Geister said. “The bank will work out how to recover the funds behind the scenes. The earlier you contact, the better.”

(Corrects to reflect the full name of New York nonprofit to the Weinberg Center for Elder Justice instead of just the Weinberg Center, paragraph 4)

Writing by Beth Pinsker; Editing by Matthew Lewis; Follow us @ReutersMoney orhere. Editing by Lauren Young