Financial fraud and financial abuse


What is financial fraud or abuse?

It is a concerning reality that financial abuse of the elderly is happening on a large scale across the world. Recent data indicates that those aged 65 and above are often the main target of financial abuse.

Financial abuse comes in many forms. Some typical examples might include:

  • The misuse of a person’s funds or assets.
  • Excessive gifts.
  • Mixing of money.
  • Not acting in a person’s best interests when managing their affairs.
  • Unpaid bills (particularly care home fees).
  • Opening a credit card account or making loan applications for the person.
  • High risk investments.
  • Not keeping appropriate records.
Who can be guilty of financial abuse?

Sadly, it is often family members who commit financial abuse. A once trusted son or daughter might become greedy and decide that he or she should benefit more than their siblings from their parent’s estate, or that they are entitled to receive their inheritance in advance.

 Individuals who were not previously involved in the person’s life may suddenly insert themselves into their life to the exclusion of others. This is often a red flag when it comes to spotting financial abuse and it can have an impact both during the elderly person’s lifetime (when they are vulnerable to having their assets stolen by the abuser) and after their death (for example, if the elderly person was pressured into making a new Will leaving their estate to the abuser after the elderly person’s death).

In addition, those in positions of trust (e.g. an attorney or carer) can also be guilty of financial abuse because they see the elderly person as an easy target.

In short, anyone with a position of influence over the elderly person is capable of financially abusing them, especially where they have the ability to control and/or access the elderly person’s finances.

Who can be liable in a financial fraud or abuse case?
  • Anyone who owes a duty of care to the victim – this can include an attorney, court appointed deputy, carer or trustee. A person who has a duty of care to a vulnerable person under their charge can be liable for breach of fiduciary duty if they have abused their position.
  • Any person who has coerced the victim into doing something which the victim did not want to do – for example writing a Will leaving everything to the coercer. The coercer may be guilty of undue influence.
  • Third parties – in some situations a third party (such as a bank) may be liable for loss to the elderly person (e.g. if they failed to ensure that the elderly person consented to payments taken from their account).
How to spot financial fraud or abuse

When there is financial abuse or fraud this usually means that the victim is going without, because their money is not being used for their benefit. It also means that by the time the victim dies, their estate has often been diminished, leaving little or nothing for the beneficiaries of their Will.

Having some background regarding the deceased’s circumstances before they died can help you to start to piece together the facts which could help you to build a case regarding financial fraud or abuse (or indeed allay your concerns in this regard).

Both court appointed deputies and attorneys appointed under an enduring or lasting power of attorney (‘EPA/LPA’) must act in the best interests of the person who lacks capacity (‘P’).

Examples of action which would not be in P’s best interests include: failure to pay their care fees, medical fees and/or bills, cancelling their direct debits for regular donations to a charity without explanation, opening a credit card account and/or making loan applications in their name, making high risk investments or investing in a business that the deputy or attorney owns or has an interest in.

If the person who received the large payment claims that it was a gift then obtaining evidence of P’s capacity at the time of the alleged gift can help to establish whether fraud or financial abuse may have occurred. If P lacked capacity to make the alleged gift then it will be void.

If the deceased lacked capacity at the time of an alleged gift then the court’s permission would be required for any non-customary gifts (e.g. large gifts and/or gifts other than for birthdays, weddings, Christmas and/or other religious holidays etc). Spotting large payments on bank statements can often help to uncover financial abuse. Enquiries should be made into any large payments and, where the recipient claims that the payments were made as gifts, further enquiries should be made into whether the court’s permission was sought prior to making the gift.

Requesting copies of the Will file, estate accounts and the deceased’s bank statements for the 7 years prior to their death can help you to identify any big changes in the deceased’s spending patterns and/or financial position in the years leading up to their death. It can also help you to identify any unusual bank transfers and unauthorised lifetime gifts.

What can you do once evidence of financial fraud or abuse is uncovered?

If you spot evidence of financial abuse, it is advisable for you to instruct a solicitor to investigate and, if appropriate, to recover the misappropriated assets. Such cases can be complex and time-sensitive, and they can require swift action to be taken in order to prevent the further dissipation of assets by the abuser.

Initial investigations

It is important to undertake initial investigations to try to establish whether the abuser has any assets against which to enforce any order you might obtain against them.

If you have the abuser’s address then you can start by obtaining OCE’s for the address to establish whether the abuser owns the property. The OCE will also show whether the property is in joint names and whether a mortgage or any other legal charges are registered against the title.

Your solicitor may suggest instructing a private investigator or tracing agent to obtain information about the abuser through legitimate means. The cost of instructing a private investigator is likely to be minimal (at least in the first instance) so it is a step worth taking and the investigator is likely to be able to obtain information that you will struggle to obtain through simple online searches.

Application to the court

Freezing injunction

If there is sufficient evidence to suggest that the abuser may attempt to dispose of their assets to put them out of your reach (e.g. you discover that the abuser’s property is being marketed for sale) then you may need to urgently apply for a freezing injunction.

A freezing injunction is a remedy which prevents assets being removed from the jurisdiction and prevents anyone dealing with them.

A freezing injunction can only be granted where there are assets to which the injunction can attach and where there is a serious risk that the defendant will deal with or remove their assets before the claimant can obtain judgment and enforce it. The freezing injunction can attach to the abuser’s bank accounts to prevent the abuser spending excessive sums of money while the order is in place. It can also attach to any properties registered in the abuser’s name to prevent them from selling, transferring or otherwise dealing with the property pending the outcome of the proceedings.

Disclosure order

It may be necessary to apply for a disclosure order against a third party, for example a bank, in order to obtain disclosure of the abuser’s historic bank statements in order to identify suspicious transactions and establish whether these can be matched with suspicious transfers on the deceased’s bank statements. The bank statements could also help lead you to evidence of additional financial abuse (e.g. the purchase of property using the deceased’s money).

Account and Inquiry

You may seek an account of the abuser’s dealings with the elderly person’s affairs with consequential inquiries and directions. This remedy will be appropriate if the abuser acted as the deceased’s attorney during their lifetime and/or in any other fiduciary capacity.

You may also seek an order that the abuser pay the sum found due to the estate upon the taking of the account and inquiries.

Declaration

If there is sufficient evidence you may be able to apply to the court for a declaration that the deceased (and thus their estate) is the sole beneficial owner of a property held in the abuser’s name. This would enable you to bring the asset back into the deceased’s estate for the benefit of the charity and any other beneficiaries under the Will.

You can also obtain an order transferring the legal title in the property into the names of the PR’s so that they can sell the property for the benefit of the charity and other beneficiaries under the Will (as appropriate).

Damages for breach of fiduciary duty

In addition (or as an alternative) to the above, you may seek damages (in a sum to be assessed) for breach of the abuser’s fiduciary duty.

We are always happy to talk on an initial no obligation and informal basis so please email or call one of the team.

Our Charities Team

Natasha McKeever
I am a Partner and head of the Disputed Wills and Trusts Team. Read More
T: 020 7288 4707
Alexa Payet
I am a Partner in the Disputed Wills and Trusts team. Read More
T: 020 7288 4714
Emma Bryson
I am a Senior Solicitor working in the Disputed Wills and Trusts team. Read More
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