Your IndustryOct 11 2021

Former PFS chief warns financial fraud in families is overlooked

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Former PFS chief warns financial fraud in families is overlooked
Financial Vulnerability Taskforce chairman Keith Richards

Financial fraud and abuse between family members is “overlooked” and requires “more research”, according to an industry report published today (October 11).

The Financial Vulnerability Taskforce, an independent body chaired by the former Personal Finance Society chief executive, Keith Richards, has criticised the “lack of national research” into theft and fraud within families, which the report said has left many without financial security.

The taskforce, designed to action the PFS’s newly launched vulnerability charter which now houses some 1,000 signatories, has called for more industry-wide discussions on all aspects of financial abuse within families - be that theft, fraud, coercive control, extortion, grooming or scamming.

Specifically, the taskforce has asked the industry to “unite” under a common definition of intergenerational financial abuse in order to prevent it and, in cases where it can’t be prevented from the outset, reduce the harm it can cause.

The report cited case studies such as an elderly citizen with dementia living in a care home paying their children more money than they want to, as well as younger citizens with physical disabilities that leave them vulnerable to siblings or parents taking control of their assets.

It said hundreds of thousands of pounds are lost to this type of fraud. 

It cited Norfolk County Council, which has established a Financial Abuse and Safeguarding Officer and which between August 2019 and August 2020 had recovered £154,000 in one off payments and £19,000 in monthly payments. During this period it had received 160 referrals for action.

   A consequence of the industry harbouring no common definition of family fraud, the report warned, has been the significant care fee debts which can ensue, “many of which are then paid for by local authorities”.

It added: “There appear to be few criminal prosecutions or civil cases brought by authorities to try and reclaim money from relatives.

"We may need to draw parallels with the investigation and conviction process for benefit claimants who defraud the system and consider at what point does spending a relative’s money become a criminal offence?”

The report outlined a number of aims to reach a common definition of family fraud. These included more alignment between agencies appointed to investigate suspected financial abuses, as well as the production of an all-party parliamentary report seeking official recognition of the need for further research.

The vulnerability taskforce's latest report is already endorsed by the all-party parliamentary group for insurance and financial services.

Craig Tracey, MP for North Warwickshire and chairman of the APPG, said: “We need to better understand the scale and nature of financial abuse in families.

“Only then can we move forward together to ensure it is both prevented and responded to effectively.

"The potential scale of this threat to our loved ones and the consequences across society are simply too great to be ignored any longer, so I commend this report to colleagues across the house who I know share my desire to build back better from this pandemic.”

Finding a motive

Other recommendations in the report included a best practice guide for how to address family fraud, and a plan to spread awareness both within the industry and throughout the general public on the topic of financial abuse between relatives.

The report cited advertisements around scams and Trading Standards as helpful play books to follow.

Fellow industry bodies in support of the report include the Safeguarding Adult National Network, whose chairman Keith Brown said the “majority of stories” he has come across involved family-related fraud.

“People contact me in a very distressed state to talk about how a close relative has taken money without permission or knowledge from another family member.

"This is not just one or two examples, but increasingly is becoming the majority of stories I come across. 

“What is clear is that very few crimes from within families are ever reported to the authorities. [...] We appear to have overlooked the scale and impact of fraud and theft within families.”

Brown pinpointed the problem to a lack of industry understanding around the motivations for family fraud.

“When we consider theft and fraud within families what we don’t yet have an understanding of is the motivation,” he explained.

“How much is an attempt to avoid paying care home fees, or to avoid inheritance tax? Or is it simply relatives believing the money is theirs by right, as they will inherit it anyway, so they are simply ‘accessing it’ early. 

“We simply do not know and thus this report is a compilation of the little that is known, coupled with a call for more research to better understand the scale and impact of this issue.”

The ‘last taboo’

Advisers too have come out in support of the report’s findings and its examples of financial family abuse.

Tracey Evans, a chartered financial planner at Progeny, said the report “raises some really important issues about both financial abuse within families and the wider definition of vulnerability”.

She continued: “A big part of the problem is that money is often the last taboo within families and people therefore avoid openly discussing financial issues, especially in relation to what they want to happen when they have reduced capacity.  

“This makes it much easier for people to fall victim to theft and fraud within their family, as without express wishes being defined, some family members can see this as a right to use these funds however they see fit. I have certainly witnessed this in my career.”

In terms of vulnerability, Evans said the report recognised “the important distinction of vulnerable circumstances, which are often triggered by life transitions such as bereavement, divorce and even the menopause for women and ties into the FCA’s updated guidance on supporting vulnerable customers”.

She concluded: “Not enough is currently being done to protect the financially vulnerable in our society. It’s possible for vulnerable people to fall prey to a wide spectrum of financial abuse and I welcome the focus that the FVT aims to bring to this issue.”

ruby.hinchliffe@ft.com