Losses to Ponzi schemes, franchise fraud, real-estate swindles and advance-fee cons quadruple in one year, approach $1 billion
Retirees have long been a frequent target of cybercriminals, but the amount of money those digital fraudsters fleeced from older adults skyrocketed in 2022 amid the growth of poorly understood cryptocurrencies and hyped concern about the economy.
While tech support scams continue to be the most common type of fraud, with 17,810 victims, investment frauds raked in the most money by far — roughly $990 million, or more than four times as much as 2021, according to the most recent FBI Elder Fraud Report.
Education and awareness are the most effective defenses against fraud. If you can spot a con, you can avoid it
The soaring sum of money lost came even as data from the bureau’s Internet Crime Complaint Center (IC3) showed that the number of investment-fraud victims aged 60 and over declined by 4.4%, to 88,262 in 2022 from 92,371 a year earlier.
So Many Hustles
“Senior individuals often fall victim to these scams due to a lack of digital literacy,” explains Taylor Kovar, a CFA and founder of Kovar Wealth in Lufkin, Texas. “Scammers take advantage of their unfamiliarity with technology and their often-trusting nature.” Cryptocurrency and other types of newer payment methods also helped scammers to commit elder fraud.
When looking at the full menagerie of scams — including those involving tech support, non-payment, personal data breach and confidence/romance — total losses by victims aged 60 and over soared to $3.1 billion in 2022 from $1.7 billion in 2021.
Unfortunately, that’s not the only statistic that skyrocketed last year. The average loss per victim increased to $35,101 from $18,246, and the number of victims losing more than $100,000 rose to 5,456 from 3,133.
To be clear, people in every age group are susceptible to fraud. However, the $3.1 billion reported by those over 60 years of age is close to or more than double the $1.8 billion reported by those in the 50 to 59 age group or the $1.5 billion reported by those in the 40 to 49 age group.
Education and awareness are the most effective defenses against fraud, Kovar says. If you can spot a con, you can avoid it. To help you recognize frauds, here are common scams.
Investment fraud scams tend to be online and are presented as low-risk opportunities promising guaranteed returns. This includes Ponzi schemes, pyramid schemes, real-estate swindles and advance-fee fraud. Cryptocurrency is commonly involved. Victims are often talked into draining their savings, tapping into the equity in their home or accessing their retirement accounts.
Tech Support Scams
Tech support scams claimed 17,810 victims in 2022, a year-over-year increase of 147%. It was, by far, the most common swindle committed against victims over 60 and resulted in losses totaling more than $587.8 million. In addition, government-impersonation flimflams claimed 3,425 victims — almost twice as many as a year earlier — and resulted in losses of $136.5 million. These two schemes involve call centers, which disproportionately target older adults.
Schemes involving lotteries, sweepstakes or inheritance stung 2,388 victims. Total losses exceeded $69.8 million. In this kind of fraud, con men may contact victims by email, phone call, social media or U.S. mail, but the scam remains the same. Victims are told they won a contest, lottery or sweepstakes (even though they never signed up or submitted any type of information). After calling in to claim the prize, they are informed that they need to pay taxes and fees. This scenario plays out for several months (but can even be years), as the scammers keep making up new types of fees, while promising victims they are just one step away from claiming their prize.
With inheritance scams, it’s the same process, but involves an unknown relative who died and purportedly left the victim a large sum of money.
A closely related crime is the grandparent scam, in which grifters pretend to be a member of the victim’s family who is in trouble and needs money sent to them immediately.
Confidence and romance scams claimed 7,166 victims and resulted in losses exceeding $419 million. This online crime involves a scammer pretending to fall in love or have other types of strong feelings for victims in order to gain their trust — and eventually their money. The scammers will usually claim to either be in the military or live outside of the U.S., and ask for money to be sent overseas. This cover also provides them with a convenient excuse to avoid meeting the victim in person.
A closely related crime is the grandparent scam, in which grifters pretend to be a member of the victim’s family who is in trouble and needs money sent to them immediately. The FBI reports that close to 400 victims lost 3.8 million in 2022 as a result of this scam.
Extortion scams claimed more than $15.5 million from 4,285 victims in 2022. Victims are coerced to turn over funds or else face physical or financial harm or public embarrassment by the release of sensitive information. Sextortion accounted for almost half of the extortion scams. Victims, who were tricked into thinking they were in actual relationships with the scammers, shared intimate photos or information; the material is then used against them.
The second-most-reported elder fraud are non-payment/non-delivery scams, in which victims sell something of value to someone they met on social media but never receive payment or pay up front for something that never arrives. Criminals using this scam stole $51.5 million from 7,985 victims.
The Internet Crime Complaint Center classifies cryptocurrency as a descriptor, not a type of fraud, because IC3 considers it a tool sometimes used to commit fraud. The center said about 10,000 people asserted they had lost a combined $1 billion on a variety of cryptocurrencies, such as Bitcoin, Ethereum, Litecoin and Ripple.
Avoid Becoming a Victim
This isn’t an exhaustive list of elder fraud scams. There are also data breaches, identity theft, credit card fraud — the list goes on. However, there are ways to avoid elder abuse.
“It’s important to know that unsolicited tech support calls or emails are almost always scams,” Kovar says. “No reputable company will ever ask for remote access to your computer or ask for payments via gift cards or wire transfers.”
Regarding the alarming increase in confidence/romance scams, Kovar says, “It’s crucial to remain skeptical of anyone you meet online who quickly professes love and then needs financial assistance.”
“No reputable company will ever ask for remote access to your computer or ask for payments via gift cards or wire transfers.”
He adds that there is no such thing as love at first sight online. “And it certainly doesn’t carry a price tag,” he cautions, “so when in doubt, take the advice of your heart, but take your wallet out of the conversation.”
The Consumer Financial Protection Bureau recommends that retirees choose a trusted contact person who can help them protect their money. This person, who could be an adult relative or close friend, would be listed on your banking account as an emergency contact.
If the bank cannot contact you to confirm that a large withdrawal from your account is not a scam-related transaction, it would be authorized to ask your trusted contact person to talk with you about the withdrawal.
Sometimes, two heads are better than one, and someone who has not been in contact with the scammer can provide a different perspective.