How CPAs can help prevent elder fraud

Know the most common types of fraud — and be sure your clients know, too.
By Ilana Polyak

Though Baby Boomers are more educated than previous generations of retirees, they are just as likely to face an unfortunate retirement reality: elder fraud, which costs U.S. seniors $35.5 billion a year, according to the National Council on Aging.

"There's going to be an upcoming tsunami of aging Baby Boomers in the next 18 to 20 years, and the problem will get worse," said Mitchell Freedman, CPA/PFS, CEO of MFAC Financial Advisors in Westlake Village, Calif.

There are several reasons older people are especially vulnerable to fraud. For one thing, retirees, especially Baby Boomers, often have accumulated substantial retirement savings, which can prove tempting to fraudsters. Older people can suffer from diminished mental capacity, which can affect their ability to make sound financial judgments. According to the Alzheimer's Association, while just 3% of people who are 65 and older suffer from Alzheimer's, 32% of those who are 85 and older do. Older people also may not have family living nearby who can act as a check on any suspicious offers and overtures.

Elder fraud can have serious consequences. "After a person has lost money, they may not be able to afford necessities like food and keeping the heat on," said John Bunting, CPA/CFF, who volunteers with the First Judicial District Elder Abuse Unit in Jefferson County, Colo.

Compounding the problem is the fact that seniors themselves may be reluctant to come forward and report the fraud, especially if a family member has victimized them. But it's crucial for CPAs to remember that elder fraud is a crime, said Bunting, and try to prevent it.

CPAs who work with seniors offer advice on how to keep older clients from falling prey to fraud:

  • Be able to recognize the many types of fraud. There are several types of elder financial abuse. One is theft, usually carried out by family members, friends, or neighbors. Two-thirds of the time, financial abuse is committed by family members, according to "The New York State Cost of Financial Exploitation Study."
  • Another is Internet and phone scams. For instance, imposters may call older people posing as the IRS and demand payment of back taxes under threat of arrest. Other types of Internet and phone frauds include Medicare, lottery, and grandparent scams. In the latter case, scammers pose as seniors' grandchildren and ask for money.

    "The con artists will go on Facebook and see who [clients'] connections are, and they'll call knowing who their grandkids are," said Bunting. "They're very convincing, very persuasive, and have an urgency."

    Seniors also need to watch out for fraudulent contractors who show up offering their services, Bunting said. "They may not change a single shingle on the roof, but they know darn well that seniors are not getting up on the roof to see if the job was done," he said.

    The National Council on Aging maintains a list of the top 10 elder frauds.

  • Educate your clients. Let your clients know about common types of scams. By raising clients' awareness, you can help them know when something's suspicious, said Freedman. Remember to inform younger clients too, so they can keep tabs on their elderly parents.
  • "As soon as we become aware of a potential scam, we'll tell our clients about it," Freedman said. "At least we can stop a couple of people from being scammed."

  • Get to know the family. Establishing a relationship with clients' adult children early on can help facilitate communication. Encourage clients to give you consent to engage their adult children years before any issues arise.
  • "Your engagement letter can allow you to speak with family members" if you suspect fraud or abuse, Freedman said: "You can be the eyes and ears for that family."

    In addition, if you think a client may have fallen victim to a scam, and you have the client's specific consent to inform a third party of your suspicions, consider contacting Adult Protective Services and local law enforcement who can investigate the situation further. (Notifying a third party without the client's specific consent is a violation of the Confidential Client Information Rule in the AICPA Code of Professional Conduct.)

  • Check for fraud at tax time. Unusual activity on a client's tax returns can be an indicator that something is wrong. "If you have an elderly client who is living off the income of their investments, there's probably a standard pattern of income and spending from year to year," noted Karen Webber, a forensic CPA in Rochester, N.Y. "What if their 1099s and distributions are much larger, all of a sudden, than they have been? That should set off some alarms. But many times, the tax preparers aren't asking these questions."
  • Offer oversight. Studies show that managing money is among the first skills to go when dementia and memory problems set in. CPAs can help elderly clients with daily money management duties, Webber suggested.
  • Technology can facilitate this process. Services such as EverSafe, for example, help to monitor bank and investment accounts, alerting clients and family members to suspicious activity. SilverBills is a bill-paying service geared toward seniors and their families.

As the population ages, the problem of elder financial abuse will grow. By becoming informed and taking proactive steps, however, CPAs can help make sure their clients don't fall victim to it.

Learn more about ways to safeguard clients from financial fraud by listening to this podcast series from the AICPA Forensic and Valuation Services (FVS) and Personal Financial Planning (PFP) sections.  The series features CPA experts Martin Shenkman, James Sullivan, and Randal Wolverton discussing elder fraud and abuse, including the motives behind elder fraud, the reasons it's a threat, and practical steps CPAs can take to address it.

Ilana Polyak is a Massachusetts-based freelance writer. To comment on this article or to suggest an idea for another article, contact Courtney Vien, a JofA senior editor, at

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