Elder Financial Exploitation (EFE) is a global problem and is on the rise. One of several forms of elder abuse, this type includes theft, fraud, and exploiting the financial resources of older adults. The bad actors in these situations can be scammers, relatives, even a spouse. Older adults are targeted both because of their accumulated wealth and, in some cases, because of their declining physical and mental capabilities. Organizations around the world, including the World Health Organization, national health services, and financial regulators are focused on this issue.
The US Department of Justice estimates that older adults in the US lost more than $3 billion to financial fraud in 2019. The number of suspicious activity reports (SARs) relating to EFE has increased from 62,000 in 2020, to 72,000 in 2021. Despite these numbers, many incidents go unreported.
Recently, the Financial Crimes Enforcement Network (FinCEN) issued updated guidance on this challenge. This guidance is worth your attention. Financial service providers are often positioned to recognize and report possible abuse. In the many jurisdictions, medical professionals, care facilities, and financial service providers have a reporting obligation if they suspect or detect EFE.
Theft and Scams
Generally, EFE takes one of two forms – theft or scams. Thefts, where victim’s assets are stolen, are usually perpetrated by a person trusted by the victim. Scams involve funds transferred to an imposter or stranger for promised goods or benefits which are never received. In each case, the exploitation can be a single event or a series of incidents.
Theft offenders are frequently care givers or family members. In 2019 FinCEN analyzed a sampling of SAR narratives and found that a family member was involved in 46% of elder thefts reported between 2013 and 2019. Thefts can take these and other forms:
- Liquidating savings and retirement accounts
- Stealing Social Security benefit checks and other income, transferring property and other assets
- Maxing out credit cards in the name of the victims
- Exploitation of legal guardianships
- Exploitation of power of attorney arrangements, or
- Use of fraudulent investments such as Ponzi schemes.
Scammers are generally unknown to the victims and located outside the US. Scammers often contact their targets through email or telephone calls, attempting to exploit physical and cognitive disabilities. Their goal is to take control of the target’s identity, assets, or accounts. The scams can take many forms, including phony lotteries or sweepstakes, emergencies or persons-in-need, tech customer support, romance, or government imposter.
Red flags are useful indicators of possible EFE. Using them in front-line training can help financial service providers detect, report, and interdict EFE. No single red flag is a guarantee that EFE is occurring.
The guidance recognizes two categories of red flags: behavioral and financial. Unusual behavior and unusual transactions can each be telltale signs of EFE. When making a report of EFE to law enforcement of through a SAR, the guidance states that the identified red flags should be called out in the narrative. The guidance includes 12 red flags in each group. Here are a few to note:
- A new caretaker, relative, or friend suddenly begins conducting financial transactions on behalf of an older customer without proper documentation
- An older customer mentions how an online friend or romantic partner is asking them to receive and forward money to one or more individuals on their behalf or open a bank account for a “business opportunity.”
- An older customer is agitated or frenzied about the need to send money immediately in the face of a purported emergency of a loved one, but the money would be sent to the account of a seemingly unconnected third-party business or individual.
- Uncharacteristic nonpayment for services, which may indicate a loss of funds or of access to funds.
- An older customer sends multiple checks or wire transfers with descriptors in the memo line such as “tech support services,” “winnings,” or “taxes.”
- An older customer purchases large numbers of gift cards or prepaid access cards.
Elder Financial Exploitation will continue to be a challenging issue as the population ages. Keeping employees and customers informed of the red flags can help reduce the incidence of this form of abuse.
For more on EFE listen to our This Week in AML podcast.