Prevention is the Key to Stopping Elder Financial Exploitation & Fraud

Terri Luttrell, CAMS-Audit
December 10, 2019
Read Time: min

The under-reported and growing crime

Elder financial exploitation and elder fraud are rising at an alarming rate as they continue to be serious crimes in the United States. With no signs of dissipating, it is just a matter of time before an incident happens in your customer base, if it has not happened already.

While each state defines elder financial exploitation a bit differently, in general it is when someone illegally or improperly uses or steals a vulnerable senior's or disabled person’s money or property. These crimes can result is significant loss of financial resources for the victims and often greatly impact their quality of life.

An increase in financial crime and fraud against the elderly is expected to continue to climb as the baby boom population (those born before 1964) age. According to the National Council on Aging (NCOA) this heartless crime is most likely under-reported due to the victims’ fear, shame and embarrassment. NCOA estimates the cost of elder financial abuse to older Americans up to $36.5 billion annually.

A recent American Bankers Association Foundation research study (the ABA study) found that older Americans hold 70% of the deposited wealth in the United States. What’s now being referred to as the “Age Wave”, 10,000 baby boomers are turning 65 every day until 2030, creating an even larger pool of potential victims for fraudsters and scammers. This leaves many seniors in a financial nightmare during the sunset of their lives; some even left destitute. These crimes take an emotional toll on the victims as well, with victims often becoming depressed with intense feelings of shame and fear.

Common types of elder financial exploitation

The more common types of financial exploitation or fraud are:

  • Misappropriation of income or assets – Perpetrator obtains access to social security checks, pension payments, checking or savings account, credit card, or ATM card, or withholds portions of checks cashed for a senior citizen;
  • Obtaining money or property by undue influence, misrepresentation, or fraud – Perpetrator coerces the victim into signing over investments, real estate, or other assets using manipulation, intimidation, or threats;
  • Improper or fraudulent use of power of attorney or fiduciary authority – Perpetrator improperly or fraudulently uses the power of attorney or other fiduciary authority to alter a will, to borrow money using the victim’s name, or to dispose of assets or income.

What the ABA study determined is that financial institutions of all sizes continue to focus on elder fraud prevention. Financial institutions are in a unique position to deter and/or report elder financial exploitation. Older Americans enjoy coming to the branch to do business, thus allowing the relationship to build with bank staff. Many seniors are uncomfortable with on-line banking and other innovative banking tools, including drive-through banking, so any decline in a client’s financial situation or personal demeanor can be detected by the financial institution front line staff.

Do you need help clearing the smoke around banking or avoiding CRBs or MRBs?
We can help

Key findings from the ABA study

The ABA study found four key findings:

  • Elder financial exploitation prevention training is now largely standard, being offered for frontline staff at all banks surveyed and required for customer-facing staff at 9 in 10 banks of all sizes.
  • Banks are increasingly reporting elder financial exploitation to Adult Protective Services (APS). Eighty-one percent of banks surveyed listed reporting to APS as one of their key actions in dealing with suspected elder fraud, up from 62% in 2017.
  • With the constant barrage of fraudulent activities and a growing number of at-risk customers, banks are finding that protecting their older customers requires dedicated staff beyond frontline customer service. Sixty-two percent of banks surveyed now have a designated employee in charge of elder financial abuse and fraud prevention.
  • Banks are increasingly embracing their roles as leaders in customer education and outreach to help protect seniors from fraud. Fifty-six percent of all survey respondents host community outreach and education events for older customers.

FinCEN issues red flags for spotting elder financial exploitation

In addition to training efforts to make an enterprise-wide effort to detect and report elder financial exploitation, financial institutions should remember to use FinCEN guidance and red flags for reporting suspicious activity and for reporting to APS. The red flag guidance includes the following:

Erratic or unusual banking transactions:

  • Frequent, large withdrawals, including daily maximum withdrawals from ATM
  • Sudden NSF Activity
  • Uncharacteristic nonpayment for services, which may indicate a loss of funds or access to funds
  • Debit transactions that are inconsistent for the elder
  • Uncharacteristic attempts to wire large sums of money
  • Closing of CDs or accounts without regard to penalties

A caregiver or other individual:

  • Shows excessive interest in the elder’s finances or assets
  • Does not allow the elder to speak for himself
  • Reluctant to leave the elder’s side during conversations

The elder shows:

  • An unusual degree of fear or submissiveness toward a caregiver
  • A fear of eviction or nursing home placement if money is not given to a caretaker
  • The financial institution is unable to speak directly with the elder, despite repeated attempts to contact him or her
  • A new caretaker, relative, or friend suddenly begins conducting financial transactions on behalf of the elder without proper documentation
  • The customer moves away from existing relationships and toward new associations with other “friends” or strangers
  • The elderly individual’s financial management changes suddenly, such as through a change of power of attorney to a different family member or a new individual
  • The elderly customer lacks knowledge about his or her financial status or shows a sudden reluctance to discuss financial matters

The Senior Safe Act provides a safe harbor for reporting suspected EFE cases

FinCEN further clarifies that when filing a SAR on elder financial exploitation to check the applicable box in the Suspicious Activity Information section of the SAR form as well as including the term “elder financial exploitation” in the narrative. In addition, victims of elder financial exploitation should not be added to the SAR as a subject, rather all available information should be added in the narrative.

Many states are mandatory reporters to APS for any type of elder abuse. To determine the definition and reporting requirements for your state, Eversafe.com has an interactive map showing the laws for the United States. Many have wondered if calling APS about a client will put your institution at risk of legal action or worse due to privacy laws. However, The Senior Safe Act of 2018 was signed into law in May 2018 (section 303 of the Economic Growth, Regulatory Relief, and Consumer Protection Act) and provides immunity for covered institutions, including banks and credit unions, from lawsuits or prosecution for reporting elder abuse. Your safe harbor does exist, so be sure to follow all reporting requirements for FinCEN and for your state.

In addition to the safe harbor provisions, the Senior Safe Act encourages reporting and staff training for covered institutions to increase awareness and to deter elder abuse in any form. Protecting vulnerable adults from financial exploitation is everyone’s business; these victims are our community members, friends, and our family. The ABA study shows that financial institutions are increasing their reporting and awareness, and this must continue in order to stop the growth of financial elder exploitation from paralleling the growth of our senior population. Education leads to awareness and training leads to systematic prevention procedures, both of which our community financial institutions need to combat this rising threat. Our seniors our worth the effort, so keep up the good fight.

About the Author

Terri Luttrell, CAMS-Audit

Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size. She has successfully worked with institutions in developing BSA/OFAC programs, optimizing various automated solutions, and streamlining processes while ensuring all regulatory requirements are met. As the Compliance and Engagement Director at Abrigo, Terri provides insights that contribute and support long-term banking strategies based on analysis of market and industry trends, competitor developments, and financial and regulatory technology changes. She is an audit-certified anti-money laundering specialist and a board member of the Central Texas chapter of the Association of Certified Anti-Money Laundering Specialists (ACAMS). Terri earned her bachelor’s degree in business administration, specializing in business and finance, from the University of North Texas.

Full Bio

About Abrigo

Abrigo is a leading technology provider of compliance, credit risk, and lending solutions that community financial institutions use to manage risk and drive growth. Our software automates key processes — from anti-money laundering to fraud detection to lending solutions — empowering our customers by addressing their Enterprise Risk Management needs.

Make Big Things Happen.

 

Looking for Banker’s Toolbox? You are in the Right Place!

Banker’s Toolbox is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to Banker’s Toolbox Community Online.

Make yourself at home!