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 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., MBA
Chairman & 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
[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
[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.
