Financial abuse is a serious issue that is reportedly on the rise.
It is estimated that millions of older adults experience financial abuse each year, and the financial losses associated with this abuse can be devastating.
According to the Office for National Statistics, approximately 1.5mn older adults in England experienced some form of financial abuse in 2020.
Separate statistics from the World Health Organisation predict that between 2015 and 2050 the proportion of the world’s older adults is estimated to almost double, from about 12 per cent to 22 per cent.
In absolute terms, this is an expected increase from 900mn to 2bn people over the age of 60. Dementia cases are also set to triple by 2050.
This is why global professional body Step, supported by the Alzheimer’s Society, conducted a research survey last year exploring the implications for its members of an ageing population.
Its report, “Loss of Mental Capacity: A Global perspective”, noted that capacity issues and requests for advice on these issues have been increasing and will continue to increase due to the ageing population.
The study found that:
- Financial abuse is increasing. It is most prevalent when there is uncertainty about whether a person lacks capacity or when a representative is exercising their authority.
- Financial abuse is often linked to a client’s decision-making abilities and may occur when a client’s decision-making ability is in decline.
- The majority of respondents said that they had observed instances of financial abuse.
- The most common concerns identified regarding financial abuse of a vulnerable person were inadequacy of monitoring of the person’s representative; lack of public awareness, education or vigilance; and the inadequacy of systems in place by financial and other institutions to prevent fraud.
- Although lasting powers of attorney are an important tool, there are barriers and issues to be addressed through policy and legislation. Many jurisdictions do not have LPA legislation. For those that do, respondents felt that their systems required reform.
As indicated in the report, wealth managers and financial advisers are in a position where they may be able to identify and prevent financial abuse due to the close relationships with their clients and knowledge of their usual financial activity.
It is therefore important for them to know how to recognise when abuse may be happening and how to respond.
Definition
Financial abuse encompasses a wide range of activities that exploit another person's financial resources for personal gain.
Section 42(3) of the Care Act 2014 defines abuse as including financial abuse, and for that purpose financial abuse includes:
- having money or other property stolen;
- being defrauded;
- being put under pressure in relation to money or other property; and
- having money or other property misused.
Some examples of financial abuse include:
- theft;
- fraud including internet scamming;
- misappropriation or misuse of property or money, for example improper use of money or assets when dealing on behalf of a vulnerable person informally, including in connection with wills, property, inheritance or financial transactions;
- misuse of an LPA for property and financial affairs or misuse of a person’s assets or money by an attorney or deputy; and
- predatory marriage.
Financial abuse often occurs when a person lacks capacity to manage their property and affairs or as a result of undue influence.
Capacity
The definition of capacity is complex because capacity is time and decision-specific.
For example, a person may have capacity to make certain decisions, such as where they live or with whom they wish to have contact with, but they may lack the necessary capacity to make a will.
The test set out in the Mental Capacity Act 2005 is that a person lacks capacity in relation to a matter if at the material time he or she is unable to make a decision for himself/herself in relation to the matter because of an impairment of, or a disturbance in, the functioning of the mind or brain.
The test for capacity to execute a valid will is different. There are certain conditions we may associate with a lack of capacity (such as dementia) but that in itself is not determinative.
Undue influence
Undue influence usually involves the exploitation of a relationship between two parties to gain an unfair advantage and is exercised by coercion such that the person in question’s own judgment is overborne.
