1st May 2008

Protecting against Identity Fraud

Late last year the NSW Supreme Court ordered that a family home be returned to its 92-year-old owner. The frail elderly man's nephew and sole beneficiary had transferred the title of the property to his own name without his uncle's knowledge or permission. Needless to say, the nephew has since been written out of the old man's will.

You don't have to be old to be ripped off but older people are especially vulnerable to financial exploitation. They often own their own home and have significant savings and investments, while many also suffer from isolation, poor health, a loss of mental capacity and misplaced trust in family and strangers.

Financial abuse ranges from trusted family members bringing forward their inheritance by pressuring elderly relatives for cash or property, to criminal fraud by strangers who abuse their position of trust and authority to obtain property through deception.

Detective-Sergeant Rod Mills of the Victoria Police, who has a long-standing interest in the issues of elder abuse and fraud, says the biggest danger period for many people is when they retire and reinvest their superannuation. Where some organised crime groups used to plan armed robberies, Mills says it's easier for criminals these days to target super. In cases of identity fraud, the crime may not be detected until people want to access their money.

Lillian Jeter, of the Elder Abuse Prevention Association, says abuse always starts with dependency and may involve undue influence, coercion, threats and intimidation from family members, carers or outsiders.

Typically, the abuser seeks an enduring power of attorney, title to the older person's property and a change in the will to ensure they are named as beneficiary. "I call it the three-for-one deal," Jeter says. An enduring power of attorney gives another person the legal right to act on your behalf if you become incapacitated in some way and are unable to make your own decisions.

Other methods include forging the older person's signature, abusing joint signatory authority on a blank form, misusing ATM and credit cards, cashing their cheques without permission, misappropriating pensions, using deception or coercion to get an older person to sign a will, power of attorney, deed or contract, and promising care in exchange for money and property without giving that care.

There are criminal and civil legal avenues for many of these offences but older people are often less willing than others to press charges. "Sometimes the victim doesn't have the capacity or they're too old or the complaint is withdrawn because of fear of intimidation, embarrassment or fear of being put in a nursing home," Mills says.

Statistics are hard to come by but a report on older people and the law released last September by the federal House of Representatives Legal and Constitutional Affairs Committee suggested that 3 to 7 per cent of people over 65 will experience abuse from someone they trust, with financial abuse the fastest growing and most common type of abuse.

By 2040 close to 25 per cent of Australians will be aged 65 or more. Already, there are 210,000 people with dementia or Alzheimer's - one in 16 people over the age of 65 and one in four over 85 - and the number is expected to more than double by 2040.

The deputy chairman of the committee, Liberal MP Peter Slipper, says legislative changes are needed to provide uniformity across Australia, particularly in the area of powers of attorney. "There are disturbing stories where powers of attorney died at the border," Slipper says. For example, if an elderly person from Queanbeyan is put into a nursing home across the border in the ACT, a pre-existing power of attorney made in NSW will no longer be valid.

The report on older people and the law made 48 recommendations, including uniform legislation on powers of attorney, national protocols for banks and financial institutions to report alleged financial abuse, a nationally consistent approach to the assessment of mental capacity, nationally consistent legislation on guardianship arrangements and a national register of enduring powers of attorney.

Despite bi-partisan support, the Federal Government has yet to respond. The NSW Public Trustee, Peter Whitehead, says state and territory public trustees are working towards "harmonisation" of powers-of-attorney legislation but they have not yet started a formal review of the legislation.

There has been some movement on the issue of powers of attorney, though. In 2004, NSW followed Victoria's lead in making it possible to bypass the costly court system to have an enduring power of attorney reviewed, where an elderly person does not have the capacity to manage their own affairs. Complaints can be taken to the Victorian Civil and Administrative Tribunal or to the NSW Guardianship Tribunal.

As people become less mobile, and perhaps less mentally alert, they tend to rely on family or carers to help manage their financial affairs. But only 16 per cent of these arrangements involved a formal enduring power of attorney, a study by the School of Social Work at the University of Queensland has found. Unfortunately, due to loopholes in the law an enduring power of attorney is no guarantee against financial exploitation, as the Clare story below illustrates.

Whitehead says family member involvement in abuse can sometimes be assisted by lawyers not being diligent in looking out for warning signals in transactions where the older person's interests are clearly being compromised. "If you have to do an enduring power of attorney, do it when you can make an informed decision and don't give it to one person but to two or three," Jeter says.

Whitehead says recent court cases make it clear that the court will not treat lightly inaction by lawyers to prevent abuse. In some cases, solicitors have been found liable for losses by third parties, or damages have been awarded against a solicitor for acting on a forged signature on loan documents.

Cases of elder abuse involving super are yet to figure prominently on court lists, but it is only a matter of time. With super balances on the increase, and new rules allowing super to be withdrawn as a lump sum from age 60, super is beginning to attract some unwelcome attention.

"I charged a guy a couple of years ago, a genius of identity fraud, who had the annual super statements of 13 people [aged] in their 50s in his possession. If he had taken their identities, it would have been worth $2.5 million," Mills says.

The chief executive of the Association of Superannuation Funds of Australia, Pauline Vamos, admits super is the next big target for fraudsters. Vamos believes new anti-money laundering processes will go a long way towards tightening up the payment procedures for super, by verifying who is getting the money. The association is also working with large accountancy firms to teach super trustees how to identify fraudulent documents.

But that won't help in cases where an older person is coerced or deceived into withdrawing their super and the money then finds its way into someone else's pocket. In such cases, Vamos confirms that super funds have been known to make ex gratia payments to members by way of compensation, but the practice is not publicised.

Reverse mortgages are another area of concern, especially where product providers don't follow their own industry code of conduct by ensuring that borrowers receive independent legal advice (see Brown case study below).

Jeter says that in 23 years of working in the area, she has never had an elderly victim call for help. "It's always a third party because [the victim] is scared and embarrassed," she says. "The law says people can make their own choices in life. But when there is undue influence or coercion from relatives and others these are hidden behind closed doors." Jeter says part of the problem in tackling elder abuse is that there are no reporting mechanisms or adult protective service caseworkers in any state or territory.

Because financial abuse can be so difficult to prosecute, the Government report on older people and the law recommended alternative methods of dealing with the issue that stop short of criminal proceedings. It suggested education programs and mediation, perhaps using the Federal Government's new Family Relationship Centres. Mills would like to see a multi-discipline team such as the Elder Abuse Forensic Centre in Los Angeles, which he observed last year while spending time with the Los Angeles Police Department.

An Australian equivalent might include representatives of health departments, consumer affairs, police, lawyers, banks and the Australian Securities and Investments Commission. Cases of suspected elder abuse could be referred to the team, who would then decide who should be involved.

Western Australia already has a system by which banks can report suspected financial abuse to the public advocate if the older person does not have capacity, or to Advocare, a non-government organisation, if the person does have capacity. There have been suggestions that a similar model could work in all states and territories. For more information, see Elder Abuse Prevention Association, http://www.eapa.asn.au


Jim and Anne Clare* received a call for help from Anne's 94-year-old mother late last year. Betty was worried that her younger daughter and caregiver had helped herself to money from her bank account. The Clares drove Betty to her bank where her fears were confirmed, and worse. Over 10 years, her daughter Felicity had taken more than $250,000 in cash and financial benefits.

Fifteen years ago Betty sold her house and paid to build a granny flat adjoining Felicity's home. Years later, Betty granted an enduring power of attorney to Felicity, who also became co-signatory to her bank account.

After trawling through Betty's bank statements, the Clares discovered that Felicity had made regular unexplained withdrawals of between $500 and $3000 plus a lump sum of almost $20,000 from the proceeds of Betty's super. Felicity had also claimed carer's payment and rental assistance through Centrelink, despite charging Betty rent for her flat and insisting Betty pay for home help from her pension.

"We had to remove [Betty] because of the intimidation and bullying," Jim says. Betty is now settled in a hostel and seeing her old friends. The hostel waived the bond because of Betty's financial hardship.(*All names have been changed.)


Dementia, complex financial products and a desire to help trusted relatives can be a financially lethal mix. Sydney accountant Robert Brown recounts the experience of an elderly client in the early stages of dementia. A trusted relative asked for a loan of nearly $200,000 and convinced her to sign up to a reverse mortgage on her home unit.

Brown's client signed over the money to her relative leaving her with a debt that was accumulating compound interest at a fast rate on her major asset. "When I discovered this, I approached the lender asking them what steps they had taken to verify that this woman was capable of understanding what she was doing," he says.

"I pointed out that the lender's website undertakes that they will ensure that all their customers obtain independent legal advice before a reverse mortgage loan is made and that on this occasion the borrower appeared not to have done so. The lender claimed the woman had been interviewed over the phone and that staff had concluded the borrower was fully aware of what she was doing."

Brown's client had signed the lengthy mortgage agreement in which she stated that she had obtained independent legal advice, even though she had not. Brown argues that reverse mortgages should not be permitted until the borrower gets independent legal advice and the legal adviser certifies this process has occurred.

Consideration should also be given to requiring lenders to assess a borrower's state of mind (with professional help if needed), he says.

Source: Barbara Drury the Sydney Morning Herald 2008

Best regards
Iain Pepper


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Iain Pepper
Head of Lending

Iain Pepper is a Vice-President and the Head of Lending for the La Trobe Group.Read full profile here.

La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 145 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

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