Ron Cresswell, J.D., CFE
On June 15, 2021, the FBI’s Internet Crime Complaint Center (IC3) released its 2020 Elder Fraud Report. According to the report, victims over 60 reported nearly $1 billion in fraud-related losses in 2020, which represents 28% of all losses reported to IC3. The average loss for seniors was $9,175, and nearly 2,000 senior victims lost more than $100,000. The top three fraud schemes reported by seniors in 2020 were extortion schemes, nonpayment/nondelivery schemes and tech support fraud. The type of scheme that accounted for the greatest amount of loss was confidence fraud/romance schemes.
Among seniors, extortion schemes were the top fraud scheme reported to the IC3 in 2020. According to the report, there were 23,100 senior victims of extortion schemes in 2020. This represents an increase since 2019 (12,242 victims) and 2018 (13,600 victims).
In extortion schemes, the fraudster extracts money or something of value from the victim by threatening physical or financial harm, or the release of sensitive information. In one popular extortion scheme, victims received an email threatening to tell their contacts that they are infected with COVID-19, or threatening to infect the victims with COVID-19, unless they sent virtual currency to the fraudsters. According to the report, this type of email campaign accounted for most of the extortion complaints filed by seniors in 2020.
Although extortion schemes were the most reported among seniors, they were also the least costly of the schemes discussed in this article. Senior victims lost more than $18 million to extortion schemes in 2020.
The second most reported type of fraud among seniors in 2020 were nonpayment/nondelivery schemes. There were 14,534 reported senior victims of this type of scheme in 2020, which was almost double the number of victims as in 2019 (7,731) and 2018 (7,328).
In nonpayment schemes, goods or services are delivered, but payment is never received. In nondelivery schemes, payment is made, but the goods or services are never delivered. According to the report, the increase in senior complaints for nonpayment/nondelivery schemes can probably be attributed to the worldwide pandemic, which forced many seniors to shop online for the first time. Additionally, more seniors used social media to connect with others. Many complainants reported ordering goods from links advertised on social media and then receiving nothing or receiving goods that were not as advertised.
Seniors lost more than $40 million to nonpayment/nondelivery schemes in 2020. This is significantly more than the $18 million lost to extortion schemes, but it is much less than the amounts lost to tech support schemes and confidence fraud/romance schemes (discussed below).
Tech support fraud
Tech support fraud was the third most reported type of fraud among seniors in 2020. The IC3 received 9,429 complaints of tech support fraud from seniors — up from 6,781 in 2019 and 6,731 in 2018. Senior victims accounted for 66% of total complaints for tech support fraud and 84% of total losses.
The goal of tech support fraud is to convince victims to pay for unnecessary services to resolve nonexistent problems. The fraudster impersonates a company’s support or service representative and offers to resolve an issue such as a compromised email or bank account, a virus on a computer or a software license renewal. In 2020, there was an increase in fraudsters posing as representatives of financial institutions, utility companies and virtual currency exchanges. The victims are often asked to wire funds to overseas accounts, purchase prepaid cards or mail cash via overnight services.
Tech support fraud is one of the fastest growing fraud schemes. In 2019, IC3 reported that seniors lost more than $38 million to tech support fraud. In 2020, that number jumped to more than $116 million. Only confidence fraud/romance schemes and business email compromise schemes account for greater losses among seniors.
Confidence fraud/romance schemes
According to the report, there were 6,817 senior victims of confidence fraud/romance schemes in 2020. Despite being only the seventh most reported type of fraud, these schemes were by far the most expensive for seniors. In 2020, they accounted for a $281 million loss to seniors — a slight increase from 2019 ($234 million) and a significant increase from 2018 ($170 million).
In confidence fraud/romance schemes, the fraudster adopts a false online identity to gain the victim’s confidence and affection, often creating the illusion of a romantic relationship. The fraudster then uses that relationship to manipulate the victim and ask for money. The fraudster often claims to need the money for an unexpected personal, medical, business or legal expense. Additionally, IC3 received 403 complaints last year that involved confidence fraud/romance schemes in which the victim was pressured to participate in alleged investment opportunities, often involving virtual currency. These hybrid schemes, standing alone, resulted in losses of $29 million to seniors.
SOURCE: ACFE Insights – A Publication of the Association of Certified Fraud Examiners