Elder Theft and Elder Scams

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 

EFE TUNE-UP®

Elder Financial Exploitation - Prevention 

POLICIES AND PROCEDURES 

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 

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 15^th. 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., MBA
Chairman & Managing Director
Lenders Compliance Group

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[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

Money Mules: ID Theft and AML Compliance

QUESTION 

Our company is under investigation by the banking department and law enforcement for allowing "money mules" to use our financial services. They managed to use our mortgage and depository services. The crooks targeted people in nursing homes and hospice care facilities. 

The banking department is now determining if we properly implemented an Identity Theft Protection Program and Anti-Money Laundering Program. They're looking back at the procedures as well as the level of testing and training. Our CEO has told us that she expects an administrative action against us. 

We haven't updated our Identity Theft Protection Program and Red Flags Rule in years. We're reviewing it now. Well, better late than never! 

But we do the Anti-Money Laundering Program testing and training as required. The banking department is closely scrutinizing both written policies. Yesterday, we received a notice from FinCEN that they are investigating our SAR filings. 

The news fallout has been devastating. We have been in business for decades and have never had a hit to our reputation, let alone something as shocking as being an unwitting accessory to an identity theft and money-laundering scheme. There's not enough money in the world to reestablish trust! 

How do "money mules" operate? 

How do "money mules" exploit the stealing of identities? 

How do "money mules" undermine anti-money laundering procedures? 

ANSWER 

Your situation reminds me of a recent arrest in California involving money mules. The victims' money is often initially handled by "money mules," individuals who permit their addresses or bank accounts to be used or agree to receive or negotiate cashier's checks. In brief, a money mule moves money obtained illegally on behalf of another individual. Funds are transferred in person, digitally, or through mail or courier. 

I have discussed money mules previously. Here is one about how the COVID pandemic was used by criminals to bilk the public: COVID-19: Imposters and Money Mules. 

Money mules can be – but are not always! – aware they are involved in laundering money obtained illegally. The purpose of this illegal activity is to obscure the source of funds. They are a key element in the money laundering and identity theft process. 

Scheme 

With some variance and nuances here and there, the following are the steps to money mule schemes: 

Step 1: Criminal looking to launder money employs a money mule to layer illicit funds. 

Step 2: Criminal transfers the funds to the money mule in person or electronically. 

Step 3: Money mule either places[i] the money into the financial system or receives money that has already been integrated[ii] into the financial system. 

Step 4: Money mule uses a series of transfers and transactions to layer[iii] the money. 

Step 5: Money mule returns the layered funds to the criminal. 

In the case I have in mind,[iv] the FBI arrested money mules involved in scams that bilked grandparents. This is brutal, wicked, and heartless, of course, but crooks will do what crooks will do! A con is a con. A mark is a mark. As Hamlet observed, "one may smile, and smile, and be a villain!"[v] 

Two money mules were arrested and indicted for their scheme to launder at least $2 million in proceeds obtained from victims of grandparent scams who were defrauded with false claims that their relatives were in distress and urgently needed funds. 

The indictment detailed how perpetrators of grandparent scams convince victims to send money – purportedly to help relatives, frequently their grandchildren, who are typically described as being in legal trouble – "to bank accounts, business entities, and physical addresses specified by the scammers, using interstate wires and cashier's checks…for the supposed purpose of assisting the relatives in distress." 

One of the money mules is said to be a manager of money mules, and the other, thus recruited, recruited his own money mules. Federal prosecutors further assert that the manager created business entities and opened bank accounts using information stolen from identity theft victims. 

Once the money was in the accounts associated with the money mules or identity theft victims, the two money mules allegedly engaged in transactions designed to conceal the true nature of the funds, which, in this case, had been obtained via wire fraud. 

The indictment specifically alleges that the scheme laundered funds obtained from victims of grandparent scams who live in California and Pennsylvania. The bank fraud scheme alleged in the indictment involves fraudulently obtained funds held in suspense in an account set up in the name of an identity theft victim. 

The two money mules and a co-conspirator allegedly worked in concert to contact the bank and impersonate the identity theft victim to secure the issuance of a check for nearly $83,000 that was remaining in the account. 

As I noted above, money mules can be unwittingly involved in a money mule scam. That seems hard to believe. Investigators find that the trail usually ends with the money mule, who might not have realized that they are laundering money for crime gangs. Unfortunately, the process often depends on the unwitting money mule for its effectuation. The enforcement authorities have found at least three primary types of money mules: (1) unwitting, (2) witting, and (3) complicit. Here's a synopsis of each type. 

Types 

(1) Unwitting Individuals are unaware they are involved in criminal activity and engage in it thinking it's legal. They are often deceived into doing the activity for someone they believe to be an employer, acquaintance, perhaps a romance scammer, or somebody in a position of some trust. 

(2) Witting Individuals who should be aware they are involved in suspicious activity but engage in it anyway. While they aren't fully aware of the extent to which they are involved in criminal activity, they typically ignore clear indicators that what they do is illegal or suspicious. 

(3) Complicit Individuals know they are involved in criminal activity yet still engage in it willfully. This type of money mule ranges from inexperienced individuals unaware of their involvement to experienced and adept fraudsters who run entire money mule rings. 

Identity Theft Prevention Program 

Beyond the legal ramifications of acting as a money mule,[vi] the people who serve as money mules may open themselves up to identity theft. All of their personally identifiable information ("PII") can be stolen by criminals, leading to the theft of their financial assets. Victims often wind up with drained accounts, damaged credit, and deprivation of medical treatment due to loss of cash liquidity. 

Stealing an individual's identity is a fraud committed or attempted using the identifying information of another person without authority.[vii] The "identifying information" of a victim is particularly onerous because such information means "any name or number that may be used, alone or in conjunction with any other information, to identify a specific person."[viii] 

The Red Flags Rule (" Rule") goes back to 2007 under a section in the Fair and Accurate Credit Transaction Act (FACTA), which amended the Fair Credit Reporting Act (FCRA).[ix] The Rule was promulgated in 2010.[x] 

If you haven't reviewed your written Identity Theft Protection Program – which is statutorily required – it is a bit late now, given that the regulators are currently involved in an investigation. In compliance, it is not the case to throw up your hands and, as you do, declare it is "better late than never." Indeed, that phrase harks all the way back to Geoffrey Chaucer in the 14^th century, who said, "For better than never is late; never to succeed would be too long a period."[xi] 

In compliance, virtually everything has a tail, a trace, a remnant, a vestige, some lingering scintilla of activity, a dash of evidence that cannot escape discovery at some point and in some way. Thus, "better late than never" is not functionally good enough in compliance. 

Pay attention to the second half of Chaucer's statement, "never to succeed would be too long a period." There are no viable exceptions to maintaining regulatory vigilance, and if there is a systemic or some other failure, admitting the mistake and fixing it permanently. Regulators are sometimes sympathetic to companies that recognize and willingly fix mistakes. But be assured that most of the time, they will find out about the errors you prefer not to tell them about. To succeed in compliance, you must proactively review, monitor, test, train, and implement regulatory requirements. 

There are notorious correlations between money mules and identity theft. I have been discussing "traditional" money mules, but there are "synthetic identities" used by money mules. Synthetic identities are created using a discrete combination of PII to fabricate a person or entity. Given the availability of stolen data on the dark web, these identities are easy to create on a large scale. 

If you haven't reviewed your Identity Theft Prevention Program in some time, you are quite remiss, and, from a regulatory compliance perspective, you are not only opening yourself to regulator scrutiny but may also be recklessly endangering your customers. 

Anti-Money Laundering Program 

You asked, How do "money mules" undermine anti-money laundering procedures? In our Anti-Money Laundering test audits, we have noted weaknesses in screening for money mules. The results of our findings are provided in our Executive Summary, and we offer our work papers so that you can see how deep we have gone to evaluate your AML program. We provide recommendations to fix the weaknesses. 

Our reviews have uncovered many money mule schemes. However, catching the scams is a never-ending task because the crooks are remarkably inventive in finding ways to undercut even the best AML programs. 

There are telltale elements that might indicate a money mule has landed on your AML radar. We are always adding to our audit list as crooks invent new schemes and scams. You should do the same! These scams come up repeatedly in our AML test audits to the point that we consider them triggers to conducting an investigation to determine if a Suspicious Activity Report (SAR) should be filed with FinCEN[xii]. 

Our organization maintains a list of warning signs that a money mule may be making their way onto a client's AML radar. Our list contains elements provided by CISA[xiii], and we build on these elements continually. In our estimation, AML compliance must include, among other things, periodic testing, employee training, due diligence, transaction monitoring, Identity Theft Protection Program mandates, KYC and KYB[xiv] requirements, CIP[xv], OFAC[xvi], identity theft[xvii] "frozen credit" alerts, and historical SAR filings. 

An example of due diligence is conducting your own investigation. Money mules can contaminate PII. During an investigation, a client of ours discovered that a money mule group used fake websites and social media profiles to trick victims into providing their personal information. It then used that PII to open bank accounts, apply for mortgage loans, and set up cryptocurrency wallets. This criminal group then laundered the stolen funds through a network of money mules, who received and transferred the funds on behalf of the criminals.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director 

Lenders Compliance Group

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[i] Placement is where illegitimate funds are introduced to the legitimate financial system.

[ii] Integration is where layered funds (which now appear legitimate) are returned to the criminal.

[iii] Layering is where the criminal intentionally moves funds to disguise where the money actually originated.

[iv] Two Indicted in Scheme that Allegedly Laundered over $2 Million Generated by ‘Grandparent Scams’ Targeting Elderly Victims, Press Release, Department of Justice, U.S. Attorney's Office, Central District of California, December 12, 2023

[v] Hamlet, Act 1, Scene 5, Shakespeare

[vi] For instance, among other things, the charge of conspiracy to commit money laundering carries a statutory maximum penalty of 20 years in federal prison, and the charge of conspiracy to commit bank fraud carries a sentence of up to 30 years.

[vii] 16 CFR 603.2(a)

[viii] 16 CFR 603.2(b)

[ix] The Red Flags Rule was issued in 2007 under § 114 of the Fair and Accurate Credit Transaction Act of 2003 (FACT Act), Pub. L. 108-159, amending the Fair Credit Reporting Act (FCRA), 15 USC 1681m(e). The Red Flags Rule is published at 16 CFR 681.1. See also 72 FR, Nov. 9, 2007.

[x] The Rule was amended in 2010 by the Red Flag Program Clarification Act of 2010, 15 U.S.C. 1681m(e)(4), Pub. L. 111-319, 124 Stat. 3457 (December 18, 2010).

[xi] Actually, the phrase is a direct translation from the Latin “potiusque sero quam nunquam” (viz., and better late than never) in Livy’s fourth book Ab Urbe Condita (History of Rome), 27 BC. The full quote in Livy is “Their insolence and recklessness must be opposed, and better late than never.” (My translation.)

[xii] Financial Crimes Enforcement Network (FinCEN), for nonbanks, see Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators, Financial Crimes Enforcement Network, 77 FR 8148-8160 (February 14, 2012), as revised from time to time.

[xiii] CISA provides several publications involving money mules and other schemes. One example is Understanding and Protecting Yourself Against Money Mule Schemes, Matthew DeSantis, Chad Dougherty, Mindi McDowell, US-CERT, Cybersecurity & Infrastructure Security Agency

[xiv] Respectively, Know Your Customer (KYC) and Know Your Business (KYB)

[xv] Customer Information Program (CIP)

[xvi] Office of Foreign Assets Control (OFAC)

[xvii] FCRA Identity Theft Rules, Op. cit. ix

Credit Card Relief Scams

QUESTION 

We allow our loan applicants to pay for certain services by credit card. One service that we do not offer is credit relief. But our loan officers send applicants with poor credit to a credit relief company. The credit relief company repairs their credit, which makes it possible for us to get them a mortgage on improved terms. Most of the time, their credit problems involve credit card debt. 

Recently, an attorney for one of our loan applicants contacted us about the applicant being scammed by the credit relief company. He's threatening to contact law enforcement, the state banking department, the FTC, and the CFPB. For what it's worth, I had told the CEO not to use credit relief companies, but he ignored me. 

I know you have written about all kinds of scams over the years. I want to show the CEO your feedback. Maybe he will change his mind about using a credit relief company. 

What are some dangers of using a credit relief company? 

ANSWER 

Yes, indeed, I have written extensively about credit relief companies. They pose a threat to the banks and nonbanks in many ways. Your scenario, unfortunately, happens all the time. The Federal Trade Commission (FTC) is very aggressive in going after these companies. 

If your CEO calls me, I will tell him to knock it off! He's playing with fire. Whatever his reasons (which I assume are based on profit incentives), the risk is much too high to justify such a tactic to originate mortgage loans. 

There is a constant stream of administrative and litigious actions against credit card relief scams. I'll pick just one bad actor out of the barrel of thousands of bad actors that have been caught in the FTC's net. But other federal and state agencies are continually monitoring and prosecuting these scammers. If your company is referring clients to them, you could come in for rather unpleasant special treatment by these agencies. 

Let's take a brief look at the FTC's action against a credit card debt relief scheme operated by Sean Austin, John Steven Huffman, and John Preston Thompson and their affiliated companies that allegedly took millions from people by falsely promising to eliminate or substantially reduce their credit card debt. 

In the Complaint, Federal Trade Commission v Acro Services LLC, et al,[i] the FTC alleged that, since 2019, Austin, Huffman, and Thompson operated a network of companies incorporated in Tennessee, Nevada, New Mexico, and Wyoming that worked together as a common enterprise to support their deceptive credit card debt relief scheme.[ii] Their companies allegedly operated under multiple names, such as ACRO Services, American Consumer Rights Organization, Consumer Protection Resources, Reliance Solutions, Thacker & Associates, and Tri Star Consumer Group. 

The deceptive and unlawful tactics allegedly included:[iii] 

Deceptive Telemarketing

The operators violated the Telemarketing Sales Rule[iv] by using telemarketers to call consumers and pitch their deceptive scheme. The telemarketers often falsely claimed to be affiliated with a particular credit card association, bank, or credit reporting agency and promised they could greatly reduce or eliminate consumers' credit card debt in approximately 12-18 months. 

Making Phony Debt Relief Promises

In marketing their services, the scheme's operators claimed to use several bogus methods to reduce or eliminate consumers' credit card debt. For example, they falsely claimed that consumers may qualify for a federal debt relief program or that a consumer doesn't owe the debt because it hasn't been "validated." 

Charging Deceptive Upfront Fees

Consumers who agreed to sign up for the debt relief program were charged an upfront enrollment fee of thousands of dollars depending on a consumer's available credit. They were falsely told it is part of the debt that will be eliminated as part of the program. Consumers were also charged monthly fees ranging from $20-$35 for "credit monitoring" services. 

To compound the misery, consumers who signed up for the defendants' services were allegedly told to stop making payments to their credit card companies and communicating with those companies. Consumers, however, were never informed that as a result of such actions, they could be sued for failing to pay their credit card debt, may accrue even more debt, and could damage their credit scores, which could also harm their ability to get credit in the future, the FTC alleged. Nice guys! 

They wound up being temporarily shut down, and their assets were frozen.[v] QED 

Consumers often do not know how to spot a debt relief scam. Two signs of this fraud are (1) the consumer gets an unsolicited call from a scammer helping to eliminate their debt, and (2) the scammer asks for upfront fees. Another trick of this nasty scam is where the scammer tells the consumer to cut off communication with creditors. When a debt settlement company says the consumer must cut off all contact with the creditors and doesn’t disclose potential consequences such as collection actions or damage to the consumer’s credit, that’s a red flag of a debt settlement scam. 

Other ornery stratagems include where the scammer refuses to send the consumer information about the debt relief company unless the consumer first provides financial information (such as credit card account numbers and balances, and offering guarantees about lowering or erasing the debit. 

I do not want to paint all debt relief companies with too broad a brush. Legitimate debt relief companies can help consumers to avoid bankruptcy and get their credit back on track. Most debt relief companies are debt settlement companies whose ultimate goal is supposedly to help the consumer settle their debt, sometimes for less than what they owe. But their services are never free, and often costly, with some companies charging significant fees for their help. 

Debt settlement companies may tell the consumer to stop paying debts during the negotiation process with creditors to enable them to expedite the settlement process; however, they do not tell the consumer to cease contact with the creditors. The idea of negotiating is to convince the creditors that the consumer cannot repay the borrowed amount. Through the negotiation, leading to a debt management plan, the goal is for the creditor to settle for less rather than getting nothing by pushing the debtor into bankruptcy. 

If your CEO wants to continue to use a credit relief company, he should insist that the company comply with applicable FTC guidelines. According to the FTC, upfront, a debt settlement company must disclose the fees, conditions, and terms of service; how long it will take to achieve results; the amount the consumer must save in a dedicated savings account before the company makes an offer to each creditor on the consumer’s behalf; money in a dedicated account is the consumer’s to withdraw at any time without penalty; and the account administrator is not affiliated with the debt settlement provider and doesn’t get referral fees 

Based on your question, your company is currently at legal and regulatory risk. I have only grazed the surface. Careful planning and appropriate due diligence must be done. Until that undertaking is conducted, resulting in legally sound guidelines, your loan officers should stop referring applicants to any credit relief company. 

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director 

Lenders Compliance Group

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[i] Federal Trade Commission v Acro Services LLC, et al, US District Court, Middle District of Tennessee, 3:22-cv-00895, November 7, 2022

[ii] See FTC Halts Debt Relief Scheme that Bilked Millions from Consumers While Leaving Many Deeper in Debt, Release, November 30, 2022, Federal Trade Commission,

[iii] Idem

[iv] The Federal Trade Commission (FTC) enforces the Telemarketing Sales Rule.

[v] Temporary Restraining Order, Federal Trade Commission v Acro Services, et al, US District Court, Middle District of Tennessee, 3:22-cv-00895, November 21, 2022

Suspicious Activity and Elder Financial Abuse

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.

Elder Financial Abuse: Disclosure, Schemes, and “Red Flags”

QUESTION 

Elder abuse is a big issue because we serve a demographic in Florida consisting of senior citizens and the elderly. Each year, we have incidences of elder abuse. We train our employees on how to identify and report elder financial abuse. But it seems that there’s no end to it. 

We are now updating our policies relating to elder abuse. We have three questions, and we hope you will provide some guidance. We have plenty of advice from our regulator. However, we would like information based on your firm’s experience. Here are our questions. 

· What are we permitted to disclose about an incident of elder financial abuse?

· What are some of the schemes you have encountered to commit elder abuse?

· What are some indicators of elder financial exploitation you often come across?

 ANSWER 

As you likely know, tellers, financial services representatives, and others who regularly interact with customers are in the best position to identify and report this type of problem. Consider them your front line! 

Abuse and exploitation of the elderly are statutorily defined at the state level. Federal guidelines have been issued not only by the federal prudential regulators but also the CFPB, FinCEN, FHA, VA, USDA, and the GSEs. Several states have certain requirements, such as mandatory reporting of suspected issues. You should consult your local bank or credit union association if you do not know your state’s laws. Be sure you are receiving ongoing guidance from compliance professionals. 

I have written extensively on elder financial exploitation. Here’s an article with downloads and links to some of my writing on this subject. 

I will take your questions one by one. 

What are we permitted to disclose about an incident of elder financial abuse? 

Various federal and state authorities either require or encourage reporting this type of information to the appropriate agency. However, many financial institutions were concerned that they might violate their privacy policy and the provisions of the Gramm-Leach-Bliley Act (GLBA) if they reported their suspicions, especially if their state law was mute on the subject. So in 2013, the federal banking agencies and the National Credit Union Administration (NCUA) issued guidance to clarify that reporting suspected financial abuse of older adults to appropriate local, state, or federal agencies does not, in general, violate the privacy provisions of the GLBA or its implementing regulations. 

In point of fact, specific privacy provisions of the GLBA and its implementing regulations permit the sharing of this type of information under appropriate circumstances without complying with notice and opt-out requirements. The guidance set forth exceptions to the GLBA’s notice and the opt-out requirement that, to the extent applicable, would permit the sharing of nonpublic personal information about consumers with local, state, or federal agencies for the purpose of reporting suspected financial abuse of older adults without the consumer’s authorization and without violating the GLBA. 

Those exceptions are: 

·    A financial institution may disclose nonpublic personal information to comply with federal, state, or local laws, rules, and other applicable legal requirements, such as state laws that require reporting by financial institutions of suspected abuse; 

·    A financial institution may disclose nonpublic personal information to respond to a properly authorized civil, criminal, or regulatory investigation, or subpoena or summons by federal, state, or local authorities, or to respond to judicial process or government regulatory authorities having jurisdiction for examination, compliance, or other purposes as authorized; and 

·    A financial institution may disclose nonpublic personal information to protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability. For instance, this exception generally would allow a financial institution to disclose to appropriate authorities nonpublic personal information to report incidents that result in taking an older adult’s funds without actual consent or in reporting incidents of obtaining an older adult’s consent to sign over assets through misrepresentation of the intent of the transaction. 

To the extent specifically permitted or required under other provisions of law, a financial institution may also disclose nonpublic personal information to law enforcement and regulatory agencies or for an investigation on a matter related to public safety. 

What are some of the schemes you have encountered to commit elder abuse?

I could probably fill several spreadsheets with the number of schemes. We’ve come across many in our audits. It seems that the schemers continue to pop up with new ways to commit elder financial abuse. Here are a few schemes that we’ve found over the years.

Misappropriation of income or assets

Perpetrator obtains access to an elder’s social security checks, pension payments, checking or savings accounts, credit or automated teller machine (ATM) card, or withholding portions of checks cashed for an elder.

Charging excessive rent or fees for service

Perpetrator charges an elder an excessive rent or unreasonable fees for basic care services, such as transportation, food, or medicine.

Obtaining money or property by undue influence, misrepresentation, or fraud

Perpetrator coerces an elder into signing over investments, real estate, or other assets through manipulation, intimidation, or threats.

Improper or fraudulent use of the power of attorney or fiduciary authority

Perpetrator improperly or fraudulently uses the power of attorney or fiduciary authority to alter an elder’s will, borrow money using an elder’s name, or dispose of an elder’s assets or income.