QUESTION
Our bank caters to older people, so-called seniors and elders. As a group, these customers are 65 and older. We are located in a state where the senior and elderly population is about 20% of the population, which is the highest percentage in the country.
Not a week goes by when we don’t have alarm bells going off because one of our elderly customers seems to be getting financially exploited. It is harrowing and unnerving. You would not believe the types and number of scams. It is so frustrating I could scream!
I’m just a lowly branch manager. I have taken the BSA/AML employee training. But I am required to pass these situations up to our compliance people, who do a great job of resolving the issues. I believe they file SARs with FinCEN, too. Although compliance does a great job, I want to have my own list of Red Flags.
You’ve written about elder financial abuse and even provided some Red Flags. But I would like to spot behavioral and financial activities. I would be very grateful if I could get a list of such Red Flags.
What are some Red Flags for elder financial abuse?
ANSWER
For many years, I have written about elder financial exploitation. I have spoken at conferences, interviewed, been a podcast guest, and provided many checklists and Red Flag templates. Yet the situation keeps getting worse. Often, I feel like the proverbial Dutch boy with his finger in the dike, but I am only one person.
Here’s an article with downloads and links to some of my writing on this subject.
I’ve been so concerned about Elder Financial Exploitation that my firm developed and added the EFE Tune-up® to our Compliance Tune-up® series. Now, our clients have an additional tool to fight back at the crooks and scammers. Click HERE to request information about the EFE Tune-up®.
What is there in human nature that drives a person to take advantage of an older adult?
Our audits and reviews have encountered horrific elder financial abuse over the years. I recall one older gentleman left bereft of his money and virtually all other earthly assets by his son’s greedy, avaricious actions. Others in his family jumped into the feeding frenzy. His financial advisor came to us through a bank referral for a due diligence review of the excessive cash-out refinancing of his home. This man was of sound mind and body. But he was old, and age often brings many cognitive, emotional, and physical challenges. An older person can be easily preyed upon by corrupt family, friends, professionals, and strangers.
Sad to say, but the clown in Hamlet got it about right when he said
“Age, with his stealing steps,
Hath clawed me in his clutch.”[i]
In 2021, financial institutions filed 72,000 Suspicious Activity Reports (SARs) related to EFE.[ii] This represents an increase of 10,000 SARs over the previous year’s filings. The Consumer Financial Protection Bureau’s (CFPB’s) estimate of the dollar value of suspicious transactions linked to EFE has similarly increased from $2.6 billion in 2019 to $3.4 billion in 2020. This is the largest year-to-year increase since 2013.[iii]
I appreciate that you have asked for Red Flags based on behavior and financial actions. My firm has placed these Red Flags into a dynamic Behavioral and Financial Red Flags Checklist, which includes SAR filing instructions. Later on, I will give you a link to request it. As a courtesy to you, it’s free.
Because you are a branch manager, you are often on the “front lines” of first noticing elder financial exploitation, categorized by the Financial Crimes Enforcement Network (FinCEN) as “EFE.” FinCen has been tracking EFE for many years. Recently, it issued an Advisory on Elder Financial Exploitation (“Advisory”).[iv] I am going to discuss some aspects of this Advisory because of its outlining of behavioral and financial Red Flags. The last time FinCEN came out with typologies and Red Flags goes back to 2011.
But remember, crooks come in many guises, and their scams seem always to be one step ahead of the law.
Broadly speaking, FinCEN defines EFE as an act that involves the illegal or improper use of an older adult’s funds, property, or assets and is often perpetrated either through theft or scams.
EFE schemes generally involve either theft or scams. The perpetrators of elder theft are often known and trusted by older adults, but many scams, which can disproportionally affect older adults, frequently involve fraudsters, usually located outside of the United States, with no known relationship to their victims. Regardless of the relationship, these criminals can place older adults in financially, emotionally, and physically compromising situations. The resulting loss of income and life-long earnings devastates the victims’ financial security, dignity, and quality of life.
Let’s bifurcate the way the crooks go about preying on the elderly. One way is through elder theft. The other is through elder scams.
In the case of elder theft, perpetrators are often family members and non-family caregivers who abuse their relationship and position of trust. In 2019, FinCEN analyzed a statistically significant, random sampling of SAR narratives. It found that a family member was involved in the theft of assets from older adults in 46% of elder theft cases reported between 2013 and 2019. Unfortunately, the trusted persons who commit elder theft can also include familiar associates and acquaintances, such as neighbors, friends, financial services providers, other business associates – or even those in routine proximity to the victims.
According to the Advisory, elder theft often follows a similar methodology: “trusted persons may use deception, intimidation, and coercion against older adults to access, control, and misuse their finances.” The financial abuser frequently exploits victims’ reliance on support and services and “takes advantage of any cognitive and physical disabilities or environmental factors such as social isolation to establish control over the victims’ accounts, assets, or identity.
The abuse takes many forms, including the exploitation of legal guardianship and power of attorney arrangements or fraudulent investments such as Ponzi schemes. Thus, older adults are stripped of their income and retirement savings.
It bears repeating, these relationships enable trusted persons to continuously abuse the elderly victims “by liquidating savings and retirement accounts, stealing Social Security benefit checks and other income, transferring property and other assets, or maxing out credit cards in the name of the victims until most of their assets are stolen.”
Elder scams are a conglomeration of criminals defrauding victims into sending payments and disclosing personal identifiable information (PII) under false pretenses or for a promised benefit or good the victims will never receive. These scammers are often located outside the United States and have no known previous relationship with the victims.
In most cases, these scams follow a similar methodology: scammers contact older adults under a fictitious persona via phone call, robocall, text message, email, mail, in-person communication, online dating apps, websites, or social media platforms. To appear legitimate and establish trust with older adults, scammers commonly impersonate government officials, law enforcement agencies, technical and customer support representatives, social media connections, family, friends, and other trusted persons.Perpetrators often create high-pressure situations by appealing to their victims’ emotions and taking advantage of their trust or by instilling fear to solicit payments and PII. Scammers often request victims to make payments through wire transfers at money services businesses (MSBs). Still, they are increasingly requesting payments via prepaid access cards, gift cards, money orders, tracked delivery of cash and high-value personal items through the U.S. Postal Service, automated teller machine (ATM) deposits, cash pick-up at the victims’ houses, and convertible virtual currency (CVC).
Further, elder scams are sometimes facilitated through money mules who transfer or move illicit funds in the direction of the scammers. This is where the term “money mule” comes from in the lexicon of illicit activity. A victim of an elder scam can also serve as a money mule: “the scammer convinces the victim to set up a bank account or limited liability corporation (LLC) in the victim’s name to receive, withdraw, deposit, or transfer multiple third-party payments from other victimized older adults to accounts controlled by the scammer under the illusion of a business opportunity.” In too few cases, victims of EFE acting as money mules are prosecuted for this illegal activity and are liable for repaying the victims. However, the victims often wind up with damaged credit and further victimized through their stolen PII.
There are five primary typologies associated with elder scams. Here is a brief overview of these scams.
Government Imposter scams
Scammers frequently target older adults by impersonating officials from U.S. government agencies that are often well-known or provide services to older adults, such as the Social Security Administration,[v] the Department of Health and Human Services/Centers for Medicare and Medicaid Services, and the Internal Revenue Service, among others.
Romance Scams
These scams include online dating, confidence, or “sweetheart scams.” Romance scams involve fraudsters creating a fictitious profile on an online dating app or website to establish a close or romantic relationship with older adults to exploit their confidence and trust. Scammers who the older adult first meets in person can also perpetrate Romance scams. Before committing the fraud, these scammers use romantic overtones to unduly influence older adults and gain their trust and loyalty.
Emergency/Person-in-Need Scams
Also known as “grandparent scams,” these frauds are perpetrated by scammers contacting older adults and impersonating a grandchild, another relative, an attorney, emergency medical personnel, or a law enforcement official to deceive victims into believing that a loved one is in an emergency (i.e., a car accident, medical emergency, under arrest, or stranded in a foreign country) and needs money sent immediately to resolve the situation.[vi]
Lottery and Sweepstakes Scams
These scams are a type of “advance-fee” hoax in which scammers, typically located in jurisdictions outside of the United States, impersonate lottery or sweepstakes representatives and lawyers, claiming that the victims have won a lottery, prize, or sweepstakes.[vii] Scammers may target older adults regardless of whether the victims have previously played the lottery or entered a sweepstake. The scammers instruct the victims to pay for supposed shipping, taxes, or other fees to claim their prize or lottery winnings. Victims never receive their prize or lottery winnings and are often re-victimized with additional requests for payments throughout the scheme until they run out of money.
Tech and Customer Support Scams
These scammers impersonate well-known companies, portraying themselves as tech and customer support representatives to falsely claim that a virus or other malware has compromised the victims’ computers. Scammers may request remote access to diagnose the alleged problem and will typically attempt to solicit payment for fraudulent software products and tech support services.[viii] They also often exploit the remote access to install malware and steal PII and credit card numbers to defraud the victims further. According to the Advisory, a recent evolution of the refund scheme involves perpetrators claiming to be online retailers and purporting to offer a refund for unauthorized transactions on the victims’ accounts.
Let’s now take a look at the behavioral and financial Red Flags.[ix] As mentioned above, we have placed these Red Flags into a dynamic Behavioral and Financial Red Flags Checklist. It includes SAR filing instructions. You can request the free checklist HERE.
BEHAVIORAL RED FLAGS
Financial institutions should include EFE behavioral Red Flags, and the names of staff who witnessed them, in the SAR narrative to assist future law enforcement investigations. Behavioral Red Flags[x] include:
- An older customer’s account shows sudden and unusual changes in contact information or new connections to emails, phone numbers, or accounts that may originate overseas.
- An older customer with known physical, emotional, and cognitive impairment has unexplainable or unusual account activity.
- An older customer appears distressed, submissive, fearful, anxious to follow others’ directions regarding their financial accounts, or unable to answer basic questions about account activity.
- 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.
- During a transaction, an older customer appears to be taking direction from someone with whom they are speaking on a cell phone, and the older customer seems nervous, leery, or unwilling to hang up.
- 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.
- A caregiver or other individual shows excessive interest in the older customer’s finances or assets, does not allow them to speak for themselves or is reluctant to leave the older customer’s side during conversations.
- An older customer shows an unusual degree of fear or submissiveness toward a caregiver or expresses 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 older customer, despite repeated attempts to contact them.
- A new caretaker, relative, or friend suddenly begins conducting financial transactions on behalf of an older customer without proper documentation.
- An older customer’s financial management changes suddenly, such as through a change of power of attorney, trust, or estate planning vehicles, to a different family member or a new individual, particularly if such changes appear to be done under undue influence, coercion, or forgery, or the customer has diminished cognitive abilities and is unable to agree to or understand the consequences of the new arrangement.
- An older customer lacks knowledge about their
financial status or shows a sudden reluctance to discuss financial
matters.
FINANCIAL RED FLAGS
Identification of the EFE financial Red Flags and the associated payments are critical to detecting, preventing, and reporting suspicious activity that is potentially indicative of EFE. The DOJ and the CFPB have published notices regarding financial Red Flags; in addition FinCEN provides financial Red Flags,[xi] which include:
- Dormant accounts with large balances begin to show constant withdrawals.
- An older customer purchases large numbers of gift cards or prepaid access cards.
- An older customer suddenly begins discussing and buying CVC.
- An older customer sends multiple checks or wire transfers with descriptors in the memo line such as tech support services, winnings, or taxes.
- Uncharacteristic, sudden, abnormally frequent, or significant withdrawals of cash or transfers of assets from an older customer’s account occur.
- An older customer receives and transfers money interstate or abroad to recipients with no in-person relationship, and the explanation seems suspicious or indicative of a scam or money mule scheme.
- Frequent large withdrawals are made, including daily maximum currency withdrawals from an ATM.
- An older customer’s account shows sudden or frequent nonsufficient fund activity.
- Uncharacteristic nonpayment for services occurs, which may indicate a loss of funds or of access to funds.
- Debit transactions are inconsistent for the older customer.
- Uncharacteristic attempts are made to wire large sums of money.
- Certificates of deposit or accounts are closed without regard to penalties.
A final note: perpetrators of EFE schemes often do not stop after first exploiting their victims. Older adults are often re-victimized and subject to potentially further financial loss, isolation, and emotional or physical abuse long after the initial exploitation due to the significant illicit gains at stake.[xii] Scammers may also sell victims’ personally identifiable information on the black market to other criminals who continue to target the victims using new and emerging scam typologies.
The behavioral and financial Red Flags are available from us in a dynamic checklist, including SAR filing instructions. Click HERE to the free Behavioral and Financial Red Flags Checklist.
For information about our EFE Tune-up®, please get in touch with us HERE.
Chairman & Managing Director
[ii] Consumer Sentinel Network: Data Book 2021, February 2022 Federal Trade Commission
[iii] Suspicious Activity Reports on Elder Financial Exploitation, Consumer Financial Protection Bureau
[iv] Advisory on Elder Financial Exploitation, FIN-2022-A002, June 15, 2022, Financial Crimes Enforcement Network. Most quotes and footnotes in this article are taken from the Advisory.
[v] Growing Wave of Social Security Imposters Overtakes IRS Scam, FTC, April 12, 2019; and Protect Yourself From Social Security Scams, SSA
[vi] Scammers Use Fake Emergencies to Steal Your Money, FTC, May 2021
[vii] Fake Prize, Sweepstakes, and Lottery Scams, FTC, May 2021; and see Senior Scam Alert, DOJ
[viii] What you should know about tech support scams, CFPB, January 12, 2021; How to Spot, Avoid, and Report Tech Support Scams, FTC, February 2019; Older Adults Hardest Hit By Tech Support Scams, FTC, March 7, 2019; Technical and Customer Support Fraud, FTC, March 16, 2022; Transnational Elder Fraud Strike Force, DOJ
[ix] See 2011 Advisory, supra Note 3. Also see, Red Flags of Elder Abuse, DOJ; and Recommendations and Report for Financial Institutions on Preventing and Responding to Elder Financial Exploitation, CFPB, March, 23, 2016
[x] Op. cit. iv, pp 9-10
[xi] Op. cit. iv, p 10
[xii] Addressing the Challenge of Chronic Fraud Victimization, American Association of Retired Persons (AARP), and Heart+Mind Strategies, March 2021
