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Prevention is the Key to Stopping Elder Financial Exploitation & Fraud

Terri Luttrell, CAMS-Audit
June 13, 2022
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Elder fraud prevention and education

Learn strategies for recognizing and reporting elder fraud and exploitation. 

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Baby Boomers
A growing target for elder fraud and exploitation

Elder financial exploitation and elder fraud are serious crimes in the United States. With rates of these crimes rising across the country, financial institutions should anticipate such incidents happening in their customer bases.

While each state defines elder financial exploitation differently, it is generally defined as the act of illegally or improperly using or stealing a vulnerable senior's or disabled person's money or property. These crimes can result in 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 as the baby boom population (those born before 1965) ages. According to the National Council on Aging (NCOA), this heartless crime is most likely under-reported due to victims' embarrassment. The NCOA estimates the cost of elder financial abuse to older Americans to be up to $36.5 billion annually.   

A recent American Bankers Association Foundation (ABA) research study found that older Americans hold 65% of the deposited wealth in the United States. According to Federal Reserve data, Americans aged 70 and above have accumulated nearly $35 trillion in assets. In what's now being referred to as the "Age Wave," ten thousand baby boomers will turn 65 every day until 2030, creating a larger pool of potential victims for fraudsters and scammers. Elder financial abuse leaves many seniors in a financial nightmare during the sunset of their lives; some are even left destitute. These crimes take an emotional toll on the victims, with victims often becoming depressed with intense feelings of shame and fear. 

Fraud Tactics
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.

How can your financial instiution prevent elder financial exploitation?
Get the latest information from FinCEN.

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Key Findings
Recent elder fraud research

The good news is that financial institutions are uniquely positioned to deter and report elder financial exploitation. Older customers often enjoy coming to the branch to do business, thus building relationships with bank staff. Many seniors are uncomfortable with online banking and other more modern tools, including drive-through banking, which gives frontline financial institution staff an opportunity to detect a decline in a client's financial situation or change to their personal demeanor.

The ABA study found four key findings on banks’ proactive measures toward preventing elder fraud:

  • More than half of the banks surveyed offer products with terms that are favorable for older customers (60% in 2021 compared to 53% in 2019). Banks with less than $1 billion in assets are most likely to offer such products (67%).
  • Of banks surveyed, 86% provide training to customer service representatives on how to detect and report elder financial exploitation. The percentage of banks providing and often requiring this type of training for frontline employees and other staff has remained high throughout the three surveys the ABA has conducted.
  • Banks are assertive in protecting older customers. Nearly all the banks surveyed (93%) report that they file a suspicious activity report (SAR), flag accounts, close accounts, or report to Adult Protective Services (APS) when banks suspect elder financial exploitation. More banks are reporting to APS, rising from 62% in 2017 to 81% in 2019 and 78% in 2021.
  • The latest survey indicates that COVID-19 has impacted bank community engagement. However, banks continue their outreach to older customers, with 47% of respondents hosting community events.
Red Flags
FinCEN guidance on recognizing elder fraud

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 when reporting suspicious activity. The red flag guidance recommends noting the following:

Erratic or unusual banking transactions:

  • Frequent, large withdrawals, including maximum daily 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 them
  • 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 their financial status or shows a sudden reluctance to discuss financial matters

FinCEN further clarifies that when filing a SAR on elder financial exploitation, check the applicable box in the Suspicious Activity Information section of the SAR form and include 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; instead, all available information should be added to the narrative.

Senior Safe Act
A safe harbor for reporting suspected cases

Many states are mandatory reporters to APS for any elder abuse. To determine the definition and reporting requirements for your state, Eversafe.com has an interactive map showing the laws of 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 your state.

The Senior Safe Act encourages reporting and staff training for covered institutions to increase awareness and deter elder abuse. Reporting must be encouraged to stop the growth of financial elder exploitation from paralleling the growth of our senior population. Remember, protecting vulnerable adults from financial exploitation is everyone's business; these victims are our community members, friends, and family. Implement education and training on this topic at your financial insitution, and create systematic prevention procedures where possible. Our seniors are worth the effort, so keep up the good fight.

About the Author

Terri Luttrell, CAMS-Audit

Compliance and Engagement Director
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.

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