Accountants teaming up with Minnesota Department of Commerce to stop fraud in its tracks
St. Paul, MN – Commerce Commissioner Mike Rothman has issued a letter to more than 9,000 licensed CPAs in Minnesota, enlisting tax professionals in the fight against elder fraud and financial abuse.
Under Commissioner Rothman’s leadership, the Minnesota Department of Commerce has stepped up its efforts to protect elderly and vulnerable consumers from fraud and financial scams. Providing Minnesota CPAs the tools and resources to spot fraud in their older clients is one important part of that effort.
“As millions of Minnesotans prepare their taxes, now is the time to spot fraud and abuse that is robbing our parents and grandparents of their financial security,” said Commissioner Rothman.
According to the Commerce Department, seniors are particularly vulnerable to fraud. Older consumers control 70 percent of the nation’s wealth, making it more lucrative than ever to target seniors with unsuitable financial products, phony investments, and other scams.
A 2010 survey conducted by the Investor Protection Trust (IPT) showed that more than seven million older Americans (one out of every five citizens over the age of 65) have already been victimized by a financial swindle. According to the IPT, con artists scam senior citizens out of $2.5 billion every year.
“Licensed tax professionals are on the front lines every day, and have the skills to identify when their clients may be the victims of financial abuse,” said Rothman. “Accountants recognize when the numbers just don’t add up. Working together as a united front we can stop fraud in its tracks this tax season.”
In preparing tax returns during 2012, Commissioner Rothman has asked all licensed CPAs to keep alert for the following signs of financial abuse in their elderly clients:
1) Missing or incomplete documentation. Has your client received full and complete documentation regarding a transaction they engaged in? Is the tax information you have been provided regarding the transaction accurate and professional?
2) Substantial changes in income. When compared to the prior year, has your client experienced an unusual change in interest or dividend income? If your client has experienced a significant decline in income, is it explainable? Where did the money go? If your client experienced a large increase in income, does it seem too good to be true?
3) Promissory Notes and Gifts. Has your client been loaning money pursuant to long term promissory notes at interest rates that are not competitive? Has your client been gifting large sums of money to questionable third parties?
4) Exotic instruments. Has your client engaged in investing in exotic forms of investment that they do not understand and cannot explain?
5) Fees. If your client employs a broker, does the broker enjoy discretion over your client’s investment? If so, does it appear from year end statements that an excessive number of trades are occurring that may be resulting in excessive fees to the broker?
6) Investment Advisor. Does your client employ an investment advisor? Do you believe the investments are not suitable given your client’s age and financial situation?
7) Capital gains or losses. Does it appear that your client is reporting an unusual amount of capital gains or losses compared to their historical experience?
8) Exchanges. Has your client engaged in a 1035 exchange that is not suitable and may have resulted in merely fee generating activity for the promoter of the exchange?
If they spot suspicious activity, Commissioner Rothman asked licensed tax preparers this week to encourage their elderly clients to contact the Minnesota Department of Commerce Consumer Help Line.
“Our staff and professional investigators are standing ready to take action against crooks who take advantage of vulnerable investors,” Rothman said.
The Commerce Department’s Consumer Help Line can be reached by phone at (651) 296-2488 or (800) 657-3602. Questions or consumer complaints can also be directed by email to [email protected] or by mail to Minnesota Department of Commerce, 85 7th Place East, Suite 500, Saint Paul, MN 55101.