Your Money Matters by Thomas Sottile, Esq.
Stanford, FINRA Unite To Fight
Financial Fraud Against Seniors
The Stanford University Center on Longevity has combined resources with the Financial Industry Regulatory Authority (FINRA) to form the Research Center on the Prevention of Financial Fraud — the inaugural conference of which is being held this month in Washington, D.C.
The stated purpose of this unique and forward-looking partnership is to provide technologically-advanced working tools for law enforcement, government, and research groups in the fight against financial fraud. The idea is to find the answer to why Americans lose millions of dollars each year to these types of schemes.
The reason for the Center on Longevity’s involvement is that seniors are clear targets of fraud and their victimization is widespread. “But the factors that go into making people vulnerable are not well understood,” said psychology Professor Laura Carstensen, the Research Center’s founding director. “Even people who did everything right are finding themselves in situations where [their] savings are being stolen.”
FINRA is the largest independent regulator for all securities firms doing business in the United States. Its task is to protect America’s investors by making sure that the securities industry operates fairly and honestly. All told, FINRA oversees nearly 4,500 brokerage firms, about 163,470 branch offices and approximately 634,385 registered securities representatives.
Criminal fraud generally involves a significant false representation made to a potential victim by an operator who knew that the representation was false when he or she made it, or that it was made recklessly without any knowledge of the truth. Also, the operator would have made the representation with the intent that the potential victim rely upon it.
Unlike other theft offenses such as burglary and robbery, most financial frauds necessitate that the victims in some way become unwitting accomplices in their own deception. They do this in any number of ways including by providing personal identifiers and banking information to the scam artists; and by investing money based upon false promises and dubious guarantees without performing basic due diligence.
The operator tricks his victim into viewing the transaction as legitimate; a misperception planted in the victim’s mind and cultivated by the swindler over the course of many days, or in one conversation aimed at quickly gaining the their confidence. The Research Center indicates on its website (www.fraudresearchcenter.org) that the aspects of financial fraud are fertile ground for psychological study. What makes one person laugh and hang up on the investment cold-caller while another takes the bait?
If you happen to be of the male gender, high risk ventures and property investments are two types of offers which make you listen long. Females are susceptible to internet matrixes, career opportunity rip-offs, and miracle health and diet scams.
Older people tend to fall victim to investment schemes because many have accumulated savings and are trying to make the money work harder and last longer. Also, the fact that some of us have made investment decisions in the past and have dealt with financial companies gives us self-assurance that we could see through any fraudulent offer. But this is not always the case since even bankers and investment brokers have been burned by million-dollar scams. The Bernie Madoff debacle is just one example of that.
In a Research Center article entitled “Consumer Fraud and the Aging Mind,” a cognitive neurologist asserts that as individuals age they tend to think differently. The gist of a conversation is remembered more readily than its exact content; the negative implications of a message are given less credence than its questionable positive content. Older consumers who are warned about the falsity of a particular offer are more likely to believe the proposal when it is made again at a later date rather than to pay attention to the caution. This is because now we have greater familiarity with the offer as compared with the warning. In older Americans, familiarity trumps fact.
Those of us who enter contests, accept free gifts, and attend retirement or financial information seminars where food is provided gratis have a type of personality which makes us statistically vulnerable to being conned, experts say. We are open to sales pitches in general and read every piece of mail we receive including the advertising flyers.
Consumer research shows that as human beings our decision making skill is distorted by our inability to predict how we will feel about certain events which have a future outcome. We ultimately feel less bad about things we dread and less good about things we desire once they occur. This is known as the “psychological immune system”; suppressing extreme reactions as does the biological immune system. Our awareness of this tendency can encourage a balanced outlook and more rational judgment if we are able to acquire the necessary presence of mind.
Fraud artists are cognizant of this emotional dynamic as well. Their goal is to convince us that investing in a Hollywood movie or buying a 10% share in a gas drilling operation is the one sure thing which will bring us happiness — or just the opposite if we reject the offer. But, of course, this is a ploy because feelings in the moment will surrender to harsh reality once the money goes for naught. Con men have admitted that their first step is to get victims in a heightened emotional state where they are so focused on the once-in-a-lifetime offer that logic goes out the window.
Oftentimes financial frauds are not reported by older victims because we refuse to face the truth that we have been duped. It is hard to swallow the fact that the very professional and well-spoken young person whom we trusted with our hard-saved capital was nothing more than a reprobate in a $300 suit. So we rationalize that all investments are risky and that everyone has to take a gamble at least once in their lives. Nothing ventured, nothing gained — chalk it up to experience. None of us wants to admit that we were unable to see through the ruse, even though we are not alone in this regard.
The Research Center has information regarding hundreds of interviews which were conducted with known fraud victims who lost money in financial investment schemes. Only about 40% of these would admit that they had been defrauded. In this situation many seniors blame themselves for being hoodwinked and stay silent about it out of fear or embarrassment. Even worse than this reaction is the sending of good money after bad in the hope that what we suspect is a fraud scheme really is a legitimate endeavor and we are just another thousand dollars away from cashing in.
Unfortunately, the promised reward never materializes no matter how much more money we throw into the scheme. At this stage the victim must seek help from a family member, trusted friend, police agency or professional advisor. There is no shame in doing this. And it may be the only way to get clear of the fraudulent enterprise which is bent of getting our last dollar.
*
Thomas Sottile is an attorney in Media, PA. He retired from the U.S. Postal Inspection Service after 23 years as an investigator and attorney.
Stanford, FINRA Unite To Fight
Financial Fraud Against Seniors
The Stanford University Center on Longevity has combined resources with the Financial Industry Regulatory Authority (FINRA) to form the Research Center on the Prevention of Financial Fraud — the inaugural conference of which is being held this month in Washington, D.C.
The stated purpose of this unique and forward-looking partnership is to provide technologically-advanced working tools for law enforcement, government, and research groups in the fight against financial fraud. The idea is to find the answer to why Americans lose millions of dollars each year to these types of schemes.
The reason for the Center on Longevity’s involvement is that seniors are clear targets of fraud and their victimization is widespread. “But the factors that go into making people vulnerable are not well understood,” said psychology Professor Laura Carstensen, the Research Center’s founding director. “Even people who did everything right are finding themselves in situations where [their] savings are being stolen.”
FINRA is the largest independent regulator for all securities firms doing business in the United States. Its task is to protect America’s investors by making sure that the securities industry operates fairly and honestly. All told, FINRA oversees nearly 4,500 brokerage firms, about 163,470 branch offices and approximately 634,385 registered securities representatives.
Criminal fraud generally involves a significant false representation made to a potential victim by an operator who knew that the representation was false when he or she made it, or that it was made recklessly without any knowledge of the truth. Also, the operator would have made the representation with the intent that the potential victim rely upon it.
Unlike other theft offenses such as burglary and robbery, most financial frauds necessitate that the victims in some way become unwitting accomplices in their own deception. They do this in any number of ways including by providing personal identifiers and banking information to the scam artists; and by investing money based upon false promises and dubious guarantees without performing basic due diligence.
The operator tricks his victim into viewing the transaction as legitimate; a misperception planted in the victim’s mind and cultivated by the swindler over the course of many days, or in one conversation aimed at quickly gaining the their confidence. The Research Center indicates on its website (www.fraudresearchcenter.org) that the aspects of financial fraud are fertile ground for psychological study. What makes one person laugh and hang up on the investment cold-caller while another takes the bait?
If you happen to be of the male gender, high risk ventures and property investments are two types of offers which make you listen long. Females are susceptible to internet matrixes, career opportunity rip-offs, and miracle health and diet scams.
Older people tend to fall victim to investment schemes because many have accumulated savings and are trying to make the money work harder and last longer. Also, the fact that some of us have made investment decisions in the past and have dealt with financial companies gives us self-assurance that we could see through any fraudulent offer. But this is not always the case since even bankers and investment brokers have been burned by million-dollar scams. The Bernie Madoff debacle is just one example of that.
In a Research Center article entitled “Consumer Fraud and the Aging Mind,” a cognitive neurologist asserts that as individuals age they tend to think differently. The gist of a conversation is remembered more readily than its exact content; the negative implications of a message are given less credence than its questionable positive content. Older consumers who are warned about the falsity of a particular offer are more likely to believe the proposal when it is made again at a later date rather than to pay attention to the caution. This is because now we have greater familiarity with the offer as compared with the warning. In older Americans, familiarity trumps fact.
Those of us who enter contests, accept free gifts, and attend retirement or financial information seminars where food is provided gratis have a type of personality which makes us statistically vulnerable to being conned, experts say. We are open to sales pitches in general and read every piece of mail we receive including the advertising flyers.
Consumer research shows that as human beings our decision making skill is distorted by our inability to predict how we will feel about certain events which have a future outcome. We ultimately feel less bad about things we dread and less good about things we desire once they occur. This is known as the “psychological immune system”; suppressing extreme reactions as does the biological immune system. Our awareness of this tendency can encourage a balanced outlook and more rational judgment if we are able to acquire the necessary presence of mind.
Fraud artists are cognizant of this emotional dynamic as well. Their goal is to convince us that investing in a Hollywood movie or buying a 10% share in a gas drilling operation is the one sure thing which will bring us happiness — or just the opposite if we reject the offer. But, of course, this is a ploy because feelings in the moment will surrender to harsh reality once the money goes for naught. Con men have admitted that their first step is to get victims in a heightened emotional state where they are so focused on the once-in-a-lifetime offer that logic goes out the window.
Oftentimes financial frauds are not reported by older victims because we refuse to face the truth that we have been duped. It is hard to swallow the fact that the very professional and well-spoken young person whom we trusted with our hard-saved capital was nothing more than a reprobate in a $300 suit. So we rationalize that all investments are risky and that everyone has to take a gamble at least once in their lives. Nothing ventured, nothing gained — chalk it up to experience. None of us wants to admit that we were unable to see through the ruse, even though we are not alone in this regard.
The Research Center has information regarding hundreds of interviews which were conducted with known fraud victims who lost money in financial investment schemes. Only about 40% of these would admit that they had been defrauded. In this situation many seniors blame themselves for being hoodwinked and stay silent about it out of fear or embarrassment. Even worse than this reaction is the sending of good money after bad in the hope that what we suspect is a fraud scheme really is a legitimate endeavor and we are just another thousand dollars away from cashing in.
Unfortunately, the promised reward never materializes no matter how much more money we throw into the scheme. At this stage the victim must seek help from a family member, trusted friend, police agency or professional advisor. There is no shame in doing this. And it may be the only way to get clear of the fraudulent enterprise which is bent of getting our last dollar.
*
Thomas Sottile is an attorney in Media, PA. He retired from the U.S. Postal Inspection Service after 23 years as an investigator and attorney.
