What Are the Warning Signs of Elder Financial Abuse and How Can You Help?
June 15 is World Elder Abuse Awareness Day and with good reason. According to the National Adult Protective Services Association, one in 20 older adults have indicated some form of financial mistreatment in the past. However, only one in 44 cases of elder abuse is reported. Annual losses related to elder financial abuse are estimated to be between $2.9 billion to $36 billion. That’s money that should go to housing, food and medical care. Instead, it’s going into the pockets of criminals.
Elder abuse is loosely defined as the illegal or improper use of an older adult’s funds, property or assets. The term “older adult” is defined differently from state to state, starting as young as 60-years-old in some states.
This form of financial exploitation is deemed lucrative because elder adults usually have a steady source of income and are vulnerable, either from isolation and loneliness or a decline in physical and/or mental health.
Who is the main perpetrator of elder abuse? Sadly, statistics show it tends to be those who have a relationship with the victim, either as a personal relative, caregiver or financial advisor. Family members and caregivers are the leading perpetrators when it comes to theft against an elder person.
Suspicious Activity Reports (SARs) in regard to elder financial abuse have increased 42% from October 2013 to August 2018, according to the Financial Crimes Investigation Network (FinCEN). Officials feel an increase in education and awareness has led to this substantial increase.
According to FinCEN, 60,348 SARs have been filed specifically on elder financial exploitation so far in 2018. California has filed a total of 3,909 with 2,798 coming from money services businesses (MSB). Texas and Florida have 3,100 elder financial exploitation SARs filed this year, with an average of 2,500 coming from MSBs. In total, MSBs report more scams and other industries report more financial theft.
Of those scams against older adults, romance scams are the most reported on SARs (26%), followed closely by emergency/person-in-need (25%) and prize/lottery scams (25%). SARs are also filed on scams related to internet purchases, investments, and charity. These scams originate from all over the world, but most are traced back to Nigeria, Jamaica, and Ghana.
Banks and credit unions already play a key role in protecting the U.S. financial system, but how can they help to protect elder customers from fraud that happens every day?
- Know Your Customer/Customer Due Diligence – When an older adult comes in to close an account and wants to transfer all of his money to his niece Kelly, whom he has never before mentioned, that should raise a red flag. Bank and credit union employees have the distinct advantage of knowing their customers face-to-face, especially those over 70 as studies show they rely on tellers as their primary form of banking. Tellers have conversations with them at the counter while loan officers might talk to them about their families while looking at mortgage details. Pay attention to the people they usually mention and the roles they seem they play. If someone mysteriously appears in their life around a financial transaction and it seems fishy, it just might be.
- Filing a SAR – Employees at financial institutions have the ability to file a SAR or suggest a SAR is filed if something seems suspicious with a transaction. FinCEN has even added an “Elder Financial Exploitation” as a checkbox for the type of suspicious activity when filing a SAR. When an older adult comes in to wire $20,000 to her 25-year-old boyfriend in Nigeria, that may be cause for a SAR. It could turn out that her boyfriend was on a trip to Africa at the time and it’s legit, but chances are by filing that SAR, you just saved her savings account.
- Comply with EFTA and Regulation E – Electronic fund transfers (EFTs) are one of the most common ways older consumers are exploited. EFTA and Regulation E require financial institutions to follow rules for accepting notices of unauthorized EFTs, specifically regarding the method of providing notice, who provides notice and the specificity of the notice. It also allows financial institutions to limit consumer liability, for example, when an elderly person writes his/her pin number on his/her debit card to help remember it.
- Plan for the Future – Work with older customers to ensure they have a financial plan in place should they become incapacitated. Have they named a trusted person to act as an agent under a power of attorney? If they have a power of attorney, make sure to honor it or have procedures in place so you and your staff can make prompt decisions on it, if need be.
- Use Technology to Your Advantage – Elder fraud or financial exploitation doesn’t always look the same as other forms of fraud. Because of this, use technology to your advantage (BAM+ Fraud Scenarios, for example) to help better detect these specific forms of fraud.
This current population that is retiring or recently retired is one of the wealthiest in terms of retirement savings, making them a bigger target to be finically exploited. As Mike Rothman of the North American Securities Administrators Association stated, “It’s easier to try to exploit a senior citizen with cognitive or other impairments in financial issues, who are alone, than it is to rob a bank.” By knowing your customers and filing SARs, or alerting the authorities of suspicious activities, you are helping to prevent these crimes from happening.
The Office for Older Americans identified best practices for banks and credit unions to prevent elder financial abuse, available here.
-Jessica Morris, CAMS, Senior Risk Management Consultant