QUESTION
Our bank formed a group to prevent elder financial exploitation. Most of our clients are seniors and elderly, so we want to be sure our customers are protected from being exploited. They revised a number of screening procedures to catch fraud. They report directly to our Chief Compliance Officer.
In the last year, we have seen a substantial increase in elder financial exploitation. What bothers me is that most of the crooks seem to get away with financially exploiting older people because we sometimes catch the crooks after the fraud happens. This means we are constantly revising the filters, and we are continually having to update our training.
As a member of the group, I have been asked to contact you to help us further develop our policy and procedures involving the prevention of elder financial exploitation. In particular, we are interested in outlining the difference between Elder Theft and Elder Scams because we plan to separate the policy into those two primary parts. We have read your articles on elder financial exploitation and have heard you speak on this subject. We need some assistance in developing better filters.
What is the difference between Elder Theft and Elder Scams?
COMPLIANCE SOLUTIONS
Elder Financial Exploitation - Prevention
ANSWER
I have published extensively on the financial abuse and scams referred to as Elder Financial Exploitation (EFE). My efforts have included numerous articles and published White Papers, lectures, and webinars, being a panelist in organizational conferences, and, of course, working with clients who needed to file a Strategic Activity Report (SAR) or notify the FBI with respect to EFE concerns.
Here are a few of my writings on this subject:
Suspicious Activity and Elder Financial Abuse
Elder Financial Abuse: Disclosure, Schemes, and “Red Flags”
Elder Financial Exploitation: Prevention and Filing SARs
Elder Financial Abuse Epidemic
Elder Financial Abuse: Prevention and Remedies (PDF)
Elder Financial Abuse (PDF)
The Articles section of our website has several articles that directly and indirectly relate to Elder Financial Exploitation. Use them to help build your policy and procedures document.
My firm even provides a free checklist of Behavioral and Financial Red Flags – Elder Financial Abuse! Contact us for a copy!
I will tell you straight out: EFE seems to keep happening relentlessly – and growing rapidly.
My answer here is going to be in the form of a “preamble” to your policy. Consider using these preambles as a base for the further formulation of your policies and procedures relating to Elder Theft and Elder Scams.
For many years, amid rampant fraud and abuse targeting older adults, FinCEN has urged financial institutions to detect, prevent, and report suspicious financial transactions. Every year since 2006, FinCEN has issued an advisory in support of World Elder Abuse Awareness Day[i], commemorated on June 15th. The statistics are not getting better. They are worsening.
For instance, depository institutions filed 46,888 EFE-related BSA reports from March 2023 to May 2023, accounting for nearly 30 percent of the total EFE-related reports filed in the review period. This pace appears to be continuing, as FinCEN received an average of 15,993 EFE BSA reports per month between 15 June 2023 and 15 January 2024.[ii] You do the math!
Before we get too far into my response, let me put down a working definition of EFE:
Elder Financial Exploitation (EFE) is the illegal or improper use of an older adult’s funds, property, or assets. Older adults are typically considered individuals aged 60 or older. EFE consists of two primary subcategories: elder theft and elder scams.
Elder theft consists of schemes involving the theft of an older adult’s assets, funds, or income by a trusted person. Elder scams involve the transfer of money to a stranger or imposter for a promised benefit or good that the older adult did not receive. EFE is one type of elder abuse, which includes physical, emotional, and financial abuse. Elder abuse and EFE definitions vary statutorily by state.[iii]
Elder theft often occurs when persons known and trusted by older adults steal victim funds, while elder scams involve fraudsters with no known relationship to their victims. Indeed, some scammers are located outside the United States.[iv] Sadly, elder theft is likely to be underreported and can go undetected because the perpetrators are typically individuals whom the victim trusts.[v]
FinCEN analysis of Bank Secrecy Act (BSA) information indicates that elder scams mostly rely on less sophisticated scam typologies. However, some scammers make their scams more complex by blending multiple scam types into one victimization and using victims both as a source of funds and to launder illicit gains.[vi]
Scammers are often organized, with fraud rings ranging from small groups of individuals to organizations with hundreds of members. There are violent criminal organizations known to carry out fraud schemes, including EFE-related fraud.
Unfortunately, perpetrators of EFE schemes often do not stop after first exploiting their victims. In both elder theft and elder scams, older adults are frequently re-victimized[vii] 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. Scammers may also sell victims’ Personally Identifiable Information (PII) on the black market to other criminals who continue to target the victims using new and emerging scam typologies.[viii]
ELDER THEFT
Elder theft is so insidious because the family of the victim is often the perpetrator. Another form of elder theft is where a non-family caregiver financially abuses the relationship from t a position of trust. In 2019, FinCEN analyzed SARs based on elder theft narratives.[ix] The analysis found that a family member was involved in the theft of assets from older adults in 46 percent of elder theft cases reported between 2013 and 2019.
Who were these perpetrators? Family members, familiar associates, acquaintances such as neighbors, friends, financial services providers, business associates, or those in routine close proximity to the victims.
Considerable studies have been undertaken by senior citizen organizations, FinCEN, DOJ, and many state governmental authorities to find a pattern to this criminality. It turns out elder theft often follows a similar methodology in which trusted persons may use deception, intimidation, and coercion against older adults in order to access, control, and misuse their finances. Criminals frequently exploit victims’ reliance on support and services and will take advantage of any cognitive and physical disabilities.[x] Environmental factors such as social isolation lead to elder theft.
The criminal’s goal is to establish control over the victims’ accounts, assets, or identity.[xi] Here are just a few of the ways in which financial exploration takes place. The elder may be financially abused by the exploitation of legal guardianships[xii] and power of attorney arrangements[xiii] or the use of fraudulent investments such as Ponzi schemes[xiv] to defraud older adults of their income and retirement savings. These relationships lead to repeated abuse, as the trusted person repeatedly abuses the victims by liquidating their 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.[xv]
ELDER SCAMS
Criminals involved in elder scams defraud victims into sending payments and disclosing PII under false pretenses or for a promised benefit or good the victims will never receive. These scammers are often located outside of the United States and have no known previous relationship with the victims.
Like Elder Theft, a pattern of criminality can be identified. Elder scams often follow a similar methodology in which scammers contact older adults under a fictitious persona via phone call, robocall, text message, email, mail, in-person communication, online dating apps and websites, or social media platforms. In order 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, or family, friends, and other trusted persons.
There are several typical types of elder scams. To name but a few:
· Government Imposter Scams;
· Romance Scams;[xvi]
· Emergency or Person-in-Need Scams;
· Lottery and Sweepstakes Scams;
· Tech and Customer Support Scams.
This set-up is a con that evokes stress in the victim. 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. This is, in effect, an Imposter Scam.[xvii] Scammers often request victims to make payments through wire transfers at money services businesses (MSBs) but are increasingly requesting payments via prepaid access cards, gift cards, money orders, tracked delivery of cash and high-valued personal items through the U.S. Postal Service, ATM deposits, cash pick-up at the victims’ houses, and convertible virtual currency (CVC).[xviii]
Money Mules are a particularly deceitful way to trap victims into an elder scam.[xix] A money mule is a person who, wittingly or unwittingly, transfers or moves illicit funds at the direction of or on behalf of another, in this case, transfers or moves illicit funds at the direction of the scammers. The 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 some circumstances, victims of EFE acting as money mules may be prosecuted for this illegal activity and are liable for repaying the other victims. They may also be subject to damaged credit and further victimized through their stolen PII.[xx]
Jonathan Foxx, Ph.D., MBAChairman & Managing Director
Lenders Compliance Group
[i] World Elder Abuse Awareness Day,
Administration for Community Living, launched by the International Network for
the Prevention of Elder Abuse and the World Health Organization at the United
Nations.
[ii] Financial Trend Analysis, Elder
Financial Exploitation: Threat Pattern & Trend Information, June 2022 to
June 2023, April 2024, Financial Crimes Enforcement Network.
[iii] Memorandum on Financial Institution
and Law Enforcement Efforts to Combat Elder Financial Exploitation,
Consumer Financial Protection Bureau (CFPB) and FinCEN, August 30, 2017; see
also, Elder Abuse and Elder Financial Exploitation Statutes, U.S.
Department of Justice (DOJ).
[iv] Advisory on Elder Financial
Exploitation, FinCEN Advisory, FIN-2022-A002, June 15, 2022
[v] Recovering from Elder Financial
Exploitation, A Framework for Policy and Research, September 2022, Consumer
Financial Protection Bureau
[vi] Phantom Hacker Scams Target Senior
Citizens and Result in Victims Losing their Life Savings, Alert Number
I-091223-PSA, September 29, 2023, Federal Bureau of Investigations Internet
Crime Complaint Center
[vii] For additional information on
re-victimization in EFE schemes, see Addressing the Challenge of Chronic
Fraud Victimization, March 2021, FINRA Investor Education Foundation (FINRA
Foundation), American Association of Retired Persons (AARP), and Heart+Mind
Strategies.
[viii] List Brokerage Firm Pleads Guilty to
Facilitating Elder Fraud Schemes, September 28, 2020, Department of Justice
[ix] Elders Face Increased Financial
Threat from Domestic and Foreign Actors, December 2019, FinCEN Financial
Trend Analysis
[x] Idem
[xi] Associate Deputy Attorney General
Paul R. Perkins Delivers Remarks at the ABA/ABA Financial Crimes Enforcement
Conference, December 9, 2020, Department of Justice
[xii] Court-Appointed Pennsylvania
Guardian and Virginia Co-Conspirators Indicted for Stealing Over $1 Million
from Elderly Wards, June 30, 2021, Department of Justice
[xiii] Franklin, Tennessee Couple Charged
With Defrauding Elderly Widow of $1.7 Million, May 12, 2021, Department of
Justice; and Former Waterloo Medicaid Provider Sentenced to More than Five
Years in Federal Prison for Defrauding Elderly Victim, June 28, 2021,
Department of Justice
[xiv] Arizona Man Sentenced for
Multimillion-Dollar Nationwide Investment Fraud Scheme, March 15, 2021,
Department of Justice
[xv] Annual Report to Congress on
Department of Justice Activities to Combat Elder Fraud and Abuse, October
18, 2021, Department of Justice
[xvi] In Romance Gone Awry: A Tale of AML
and Negligence, April 14, 2022, I outline litigation involving a Romance
Scam. Visit https://mortgage-faqs.blogspot.com/2022/04/romance-gone-awry-tale-of-aml-and.html. See O’Rourke v. PNC Bank, 2022
Del. Super. (Del. Sup. Ct. February 15, 2022)
[xvii] The Federal Trade Commission provides
extensive information about Imposter Scams. Visit its webpage How To Avoid
Imposter Scams, https://consumer.ftc.gov/features/how-avoid-imposter-scams. See my articles, such as Imposter
Robocalls, February 9, 2023, https://mortgage-faqs.blogspot.com/2023/02/imposter-robocalls.html and COVID-19: Imposters and Money
Mules, August 6, 2020, https://mortgage-faqs.blogspot.com/2020/08/covid-19-imposters-and-money-mules.html.
[xviii] FBI Warns of a Grandparent Fraud
Scheme Using Couriers, Alert Number I-072921-PSAJuly 29, 2021, FBI; New
Twist to Grandparent Scam: Mail Cash, December 3, 2018, Federal Trade
Commission
[xix] See my article Op. cit. xvi COVID-19:
Imposters and Money Mules.
[xx] The FBI maintains a website to increase
public awareness of money mules. Visit Money Mules at https://www.fbi.gov/how-we-can-help-you/scams-and-safety/common-scams-and-crimes/money-mules
