Older Americans: Unsuspecting accomplices to money laundering, fraud and other financial crime

Every day, millions of dollars are swindled from U.S. citizens though advance-fee mass-marketing fraud, and the numbers only continue to rise. Fraudsters entrap victims through a variety of ploys, deceiving them into giving up trust and money. Unfortunately, older, more vulnerable Americans are the demographic frequently targeted.  Although efforts have been made to educate the public about these crimes, the fraud rate remains alarming.

 Advance-Fee Mass-Marketing Fraud: An Overview

The Department of Justice defines mass-marketing fraud as any scheme that uses one or more mass-communication techniques or technologies “to present fraudulent solicitations to numbers of prospective victims, to conduct fraudulent transactions with victims, or to transmit the proceeds of the fraud to financial institutions or to others connected with the scheme.”

Mass-marketing fraud encompasses many schemes, including:

  • advance-fee fraud, such as romance schemes, emergency schemes, charity fraud, and lottery, prize, or sweepstakes fraud;
  • bank and financial account fraud involving phishing and vishing; and
  • investment opportunity fraud in the form of Ponzi schemes.

Advance-fee fraud typically involves a personal connection between the fraudster and the victim. In all advance-fee schemes, the victim makes a payment in advance of obtaining a promised benefit.

Advance-fee fraud begins when a scammer contacts a victim by telephone, email, flyer, or U.S. Mail. The scammer presents a scenario that plays on victims’ emotions and promises some sort of benefit in return for a nominal cost.

The victim may be required to pay “taxes and fees” for a large lottery winning, a bond to keep a family member from being thrown in jail, or funds to cover another situation that requires immediate action – none of which are real.

The compelling story and nominal amount requested induce the victim to send money to a person or account identified by the fraudster. After the first payment, subsequent conversations with the fraudster present additional events or situations that convince the victim to pay more money. The events and payments are repeated, but the victim never receives the promised benefit.

Without interventions by family, community, financial institutions, or law enforcement, the cycle continues until victims are unable or unwilling to pay. Frequently, this happens when victims exhaust their pool of funds from their bank, investment accounts, or mortgages.

Victims are led to believe that a “sponsor” or “charity” has been engaged to assist them in making the payment and they begin receiving checks, cash, money transfers, or bank wires from unknown individuals.

Although the fraudster assures victims that the funds are aboveboard, in reality the fraudster has recruited others who believe they will benefit by providing funds to the victim.

Connecting a network of victims through a “sponsor” or “charity” story allows fraudsters to mix and convert funds, eventually pooling the money with someone who is willing to transfer the funds to a country outside of the United States and into the fraudsters’ pockets.

The Attraction of an Older Victim

Advance-fee fraud targets victims in every socioeconomic group and at every education level, age, and location around the world.

While advance-fee schemes may target all people, older individuals are the most frequent victims of this type of scheme, resulting in great detriment to their quality of life and their mental health. Older citizens have been shown to be particularly attractive targets for fraudsters for several reasons.

Older Americans frequently pay their living expenses from savings accounts and investments. Because they have worked to obtain assets throughout their lives, their money may not be encumbered by a mortgage, vehicle payments, or other expenses typical for younger adults.

Before a serious decline of a person’s mental health is observed, their funds may be accessed for any plausible need without oversight or questioning by financial institutions or advisors.

Additionally, an older person may have monthly income generated through Social Security benefits, pension payments, or life insurance benefits that allow for additional contributions to the pool of available funds on a set schedule.

The money available to an older individual is finite.

For some, this drawing down of a finite pool of funds is uncomfortable and can create a desire to obtain a monetary benefit for a more comfortable lifestyle, more care options, or a larger estate to pass on to family members.

Older individuals may be unable to find employment in their later years to replenish their funds due to poor physical or mental health. These conditions can motivate them to take on risky investments or gamble on large “winnings.”

Older victims often report seclusion or isolation of some degree. Family members no longer visit, children or grandchildren live across the country, loved ones and friends have passed away, or the person is confined to his or her home.

Older victims also report finding fulfillment in the companionship of, discussions with, and attention from fraudsters. For some, the personal connection with the fraudster outweighs arguments for ceasing participation in a fraud scheme, even after it is uncovered.

Many older Americans experience a decline in mental health as they age.

Their decline is useful to fraudsters, as people with memory problems may be more willing to go along with a fraudster’s story and are unable to recall prior conversations or events. Fraudsters tell victims that they failed to complete a promised task or send funds, even if the victims have in fact already complied.

Finally, older individuals often have a great deal of time on their hands. Depending on their mobility and mental state, they may have rigid schedules that include a reliance on others for transportation or assistance. Scammers quickly learn victims’ habits and how and when to reach them.

They know when they will have a captive audience to build up a relationship and uninterrupted time to wear down any hesitation.

Degrees of Involvement

All of these factors make older Americans favorite targets for fraudsters in advance-fee schemes.

Typically, the victims act as “sources of funds,” “unwitting money launderers,” and “mules” throughout the fraud scheme. Their usefulness depends on their characteristics and their roles may vary through the life cycle of the scheme.

Victims who are the “source of funds” are useful to scammers in the early phases of a scheme, as they still have money to make payments.

Scammers provide instructions on how and where to send money, including details on how to evade detection and anti-money laundering safeguards. Frequently, scammers use new technology that older victims do not understand.

The fraudster provides the victim plausible excuses for withdrawing funds, in the event a victim is questioned by a financial institution or advisor. The funds provided allow the “unwitting money launderers” to play their roles in the scheme.

The role of “unwitting money launderer” is filled by older victims who are unwilling or unable to obtain funds without help.

Scammers sometimes arrange for them to obtain funds from others by explaining that a “sponsor” or “charity” is coming to the victim’s financial rescue. Funds received by “unwitting money launderers” are sent by people playing the “source of funds” role.

The guise of “sponsor” or “charity” assistance explains the personal checks, money orders, or cash sent to the “unwitting money launderer” by an unknown person. Victims are told to convert and transfer the funds to purportedly satisfy taxes, fees, or other costs linked to the promised benefit.

Fraudsters provide detailed instructions to the victim, allowing the fraudster to structure funds to evade detection and circumvent anti-money laundering safeguards. Converting victims into “unwitting money launderers” is an effective way to place layers of people between the source of the funds and the fraudster.

Individuals placed in the role of “unwitting money launderers” are given a plausible story about the funds received and reassurance that their actions are legal.

“Mules,” however, are victims who benefit by knowingly working with fraudsters without an excuse or explanation to legitimize received and transferred funds. For example, a mule may be told to retain a portion of the money from each check or money order.

For victims who have no available funds, the chance to gain income while working towards a scammer’s promised benefit can be an attractive option and may easily outweigh any concern that converting the money may be unlawful.

An Epidemic with No Simple Solution

Advance-fee mass-marketing fraudsters have targeted older Americans for years.

Law enforcement groups and prosecutors have used traditional methods to confront the victimization of older individuals, including the creation of task forces, working groups, and legislation that supports the investigation and prosecution of fraud.

Financial institutions have improved their detection of victimized customers and have enhanced screening related to fraud activity. Further, government and community groups who oversee elder care are seeking additional training specific to these schemes.

Improved laws, targeted investigations, and trained personnel are important to confronting the epidemic of elderly victimization; however, traditional solutions have not eradicated the problem.

We cannot “arrest” our way out of this epidemic. In order to effectively confront this problem, emphasis must be placed on community outreach and education, personalized support, and community dialogue.

The person behind a telephone call, email, or mailed solicitation may appear credible, whether or not the information provided is legitimate.

Therefore, community outreach and education is essential to preventing victimization from fraud. A personal, trained representative adds credibility. Community outreach directed at those most vulnerable to fraud delivers information from a credible source and allows “red flags” that raise skepticism.

Community groups, government agencies, and private-sector partners can provide easy-to-understand information and encourage conversations about fraud that benefit all potential victims, but especially older citizens.

Community support of older Americans should focus on preventing victimization from fraud.

Including older individuals in community groups, senior centers, and other events will help foster meaningful connections with their communities, create a support network in the absence of close family, and provide trusted confidants when fraudsters try to target victims.

Engaging the community in this effort may foster more conversations about how to recognize fraud and how to tackle this often devastating crime.

There is no simple solution to prevent the targeting of older Americans by fraudsters in advance-fee schemes.

But greater community involvement, recognition of this growing problem, and education for citizens about how to deal with it are our best chances of protecting the vulnerable. Let us work together to stop fraudsters from victimizing older citizens in advance-fee mass-marketing fraud.