Financial Fraud in Later Life: A Growing Epidemic
By S. Duke Han, Ph.D., ABPP-CN
March 07, 2017
Older adults hold about a third of the nation’s wealth, yet lose billions every year to scams and fraud. Believed to be the most common form of elder mistreatment, the problem of scams and fraud in old age is so destructive that the FBI actively maintains a website devoted to the topic. Many older adults have painstakingly acquired financial savings over a lifetime of hard work, and in later life the opportunities and resources are limited to recuperate financial losses. Because of this, scams and fraud can have a particularly devastating impact in later life.
Why does this happen? I am a board-certified clinical neuropsychologist, and I regularly see older patients who have been referred for cognitive difficulties. A few years ago, I started seeing patient after patient referred for cognitive testing because it was discovered by a family member or loved one that thousands of dollars were being given away to strangers or minor acquaintances on a regular basis, and this was a clear departure from previous behavior. The family members reasonably believed this must be a sign of early dementia. However, in case after case we discovered the patient was cognitively intact. Was there something wrong with our cognitive measures? Were there other reasons for falling prey to scams or fraud in old age besides cognitive ability? At the time, few answers could be found in research. It was clear this topic was poorly understood.
Not just cognitive ability. To address some of these questions, myself and others at the Rush Alzheimer’s Disease Center worked on studies that might shed some light on this complex issue. In one study of over 600 non-demented participants, we saw that about a quarter to a third of the sample showed a significant difference between decision making and cognitive abilities. Some had better decision making relative to their cognitive abilities, and some showed the opposite pattern. In a separate study of those with mild cognitive impairment (MCI), we found that cognitive ability only explained a relatively small portion of the variance in decision making. Both of these studies supported the notion that poor decision making may not be simply due to poor cognition.
Multiple complex and interacting reasons. There are likely multiple reasons why an older adult may fall prey to scams or fraud. Impaired or declining cognitive abilities may be an issue. Psychosocial reasons such as social isolation or loneliness could be a factor. Depression and anxiety may complicate matters. A reduced ability to assess trustworthiness may also play a role. All of these reasons could compound and interact to put someone at greater risk for scams or fraud. We listed some of the characteristics we saw time and again among scam and fraud victims in the hopes that these might inspire a greater understanding of the factors involved.
Financial literacy helps. One question I frequently get asked is if anything could be done to help protect against scams and fraud in old age. It seems that increasing financial literacy may help. In fact, our work has found that financial literacy is associated with stronger connectivity of important brain regions over and above the effects of age, education, gender, and cognitive ability (Figure 1). This is encouraging news since we can always become more financially literate at any age.
Future directions. Our laboratory at the University of Southern California is hoping to continue the important work of examining scams and fraud in old age in a study we are calling FINCHES (Finance, Cognition, and Health in Elders Study). We hope to do our part to improve understanding of this important issue to help adults live long, productive, and independent lives free of the burden of scams and fraud in later life.