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Fraud by a Fiduciary Can Be Especially Costly

What to do if you suspect a financial or legal professional is misusing a loved one’s money

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From 2012 to 2019, a former Belmont County, Ohio, lawyer and elected official named Mark Alan Thomas served as power of attorney for an older client, a woman with dementia living in a long-term care facility.

During that period, according to a September 2021 federal indictment, Thomas used his status to convince banks, insurance companies and other entities to transfer more than a half-million dollars of the woman’s money to his control. The alleged fraud continued even after he lost his law license in 2015.

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According to the federal Consumer Financial Protection Bureau (CFPB), 7 percent of reported cases of elder financial exploitation (EFE) involve a fiduciary — an attorney, financial professional or trustee tasked with managing an older adult’s accounts. The monetary loss in such cases is more than two and a half times that for EFE generally, a 2019 CFPB analysis found.  

A financial blow

Older Americans collectively lose about $4.8 billion a year to financial abuse reported to state and federal authorities, but with most incidents going unreported, the true toll "likely dwarfs that amount,"according to a study by Comparitech, a cybersecurity research firm.

The cost is only expected to grow as the U.S. population ages, with the number of people age 65 and over projected to increase from 56 million in 2020 to 94.7 million in 2060.

“They call elder exploitation the crime of the 21st century,” says Paul Greenwood, a former deputy district attorney in San Diego County, California, who specialized in elder fraud. “And in many ways, that’s true, just because of the demographics.”

To an older person who has worked hard to amass a lifetime of savings, such a crime can be devastating. The average amount lost by an older adult in a reported instance of EFE is $34,200, the CFPB study found. In cases involving fiduciaries, the average loss is $83,600.

Fiduciaries who engage in these crimes choose their victims carefully, says Greenwood, who was involved in prosecuting more than 750 felony cases of elder and dependent adult abuse, many of which had a financial component.

“They know the client’s lifestyle,” he says. “They know their client’s cognitive impairments. They also know whether or not that client has family members who are close by, or who stay in regular contact.”

Many older adults’ financial skills decline with age, making them even more vulnerable to an unscrupulous financial professional, says Surya Kolluri, a managing director with Bank of America’s retirement and personal wealth unit.

Financial industry oversight

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The vast majority of financial professionals do not steal from their clients and work hard in those clients’ best interests. In fact, they are a significant line of defense against financial exploitation.

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The federal Bank Secrecy Act obligates financial institutions to file a suspicious activity report (SAR) with the Treasury Department’s Financial Crimes Enforcement Network if they detect questionable activity in a customer’s account. The CFPB also advises institutions to report cases to local, state or federal authorities.

The Financial Industry Regulatory Authority (FINRA), an industry group authorized by Congress to protect the interests of investors, also has regulations that can help detect EFE. For example, FINRA rules require member institutions to seek the name of a “trusted contact” for anyone opening a new account. 

That way, if the institution spots suspicious activity involving the account or if a financial adviser has concerns about the account holder’s cognitive skills, “I have permission to go contact” the designated person, Kolluri says.

What family caregivers can do

Experts recommend that family members and friends take these steps to minimize the risk that a vulnerable loved one will be taken advantage of by professionals to whom they’ve entrusted their finances.

Be on the lookout for red flags

Ask questions if a financial adviser is frequently moving a loved one’s money around or recommending major changes in their assets or estate, says Adam P. Scherer, president of Greenbeat Financial, a financial planning firm in West Hartford, Connecticut.

A lack of availability and accessibility — not returning phone calls, for example — is another big warning sign, Scherer says, indicating at the very least negligence on the financial professional’s part.

Alert banks to life changes

Notify a loved one’s bank or credit union of changes in an aging loved one’s lifestyle or money management, such as a new caregiver, conservator or professional fiduciary, or about a move into a long-term care facility, Greenwood advises.

Ask the institution, in writing, “to keep a special eye on my mother’s account or my father’s account, and if you see a change in any kind of pattern of behavior, I want you to immediately flag that and do your duty and report it to Adult Protective Services,” he says.

Stay in touch with service providers

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Whether it’s a hired caregiver, a financial adviser or a professional fiduciary, let them know the family is playing an active role in the client’s life, Greenwood says. Ask questions such as, “What are you going to be doing for my parents?” and “How often are you going to be billing?”  

If it’s practical, pop into their office “unannounced, just to make sure that things are going smoothly,” he recommends. If you don’t live in the area, ask a trusted friend to do so.

Get a second opinion

This option may be costly, but if you feel in your gut like there’s something’s wrong with how a loved one’s fiduciary is handling their finances, “ask your own lawyer or accountant, ‘Hey, do these numbers make sense?’ ” says Patrick M. Simasko, an elder law attorney in Mount Clemens, Michigan.

Report it

If you believe your loved one has been victimized, place a call or write a letter to Adult Protective Services in your area and notify local law enforcement.

The key to stopping EFE is raising awareness, Greenwood says: “What I’ve learned over the years is that we have to keep getting this message out in all forms.”

Editor's note: This article, originally published Nov. 5, 2021, has been updated with more recent data from Comparitech's study of elder financial abuse.

Tamara E. Holmes is a Washington, D.C.–based writer and editor. She has written extensively about money, entrepreneurship and careers for more than two decades. Her work has appeared in such publications as USA TodayWorking Mother and Essence.

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