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Elder Financial Exploitation: How to Protect Your Most Vulnerable Consumers

Dec 18, 2018

Elder financial exploitation is the illegal or improper use of an older person’s funds, property or assets. Studies suggest that financial exploitation is the most common form of elder abuse, and yet only a small fraction of incidents are reported, just one in 44 cases according to the National Adult Protective Services Association (NAPSA). This is largely because 90% of abusers are family members or trusted advisors who may be facing substance abuse, gambling, or financial problems, or feel a sense of entitlement to the older person’s assets.  


Demographics suggest the exploitation of our older population will get worse before it gets better. The U.S. population age 65 and over is expected to reach nearly 75 million, or one fifth of the total population, by 2030. Furthermore, according to the National Center on Elder Abuse, close to half of all people over 85, the fastest growing segment of our overall population, have Alzheimer’s disease or another kind of dementia. A June 2018 white paper by the U.S. Securities and Exchange Commission, Office of the Investor Advocate, noted that dementia is a documented risk for elder financial exploitation.


What can financial institutions do to protect what are likely some of their most longstanding and loyal consumers? One way is to ensure they file Suspicious Activity Reports (SARs) when elder financial exploitation is suspected. According to FinCEN’s SAR Stats database, the number of filings of suspected elder finan­cial exploitation has increased rapidly in recent years, rising to nearly 60,000 reports in 2017.  


However, financial institutions can do more than file SARs. They are uniquely positioned to detect, report, and prevent elder financial exploitation. According to the CFPB, over 84% of consumers 65 and over visit tellers, and more than half report that tellers are their most common method of banking. 


In 2016, the CFPB released a report to assist financial institutions with their efforts to prevent elder financial abuse and intervene when it occurs. Appendix A of the report included a list of warning signs that may indicate elder financial exploitation. They fall into two categories. The first involves red flags identified during face-to-face interactions with older consumers, caregivers, and other third parties. The second involves warning signs discovered during routine monitoring of account activity. 


Face-to-Face Interaction Red Flags

  • A previously uninvolved relative, caregiver or friend begins conducting financial transactions on behalf of an older consumer—or claims access or privileges to the consumer’s private information—without proper documentation
  • An older consumer associates with new “friends” or strangers
  • A caregiver or other third party shows excessive interest in the older consumer’s finances or accounts, does not allow the consumer to speak for him or herself, or is reluctant to leave the older consumer’s side during interactions with the financial institution
  • An older consumer exhibits an unusual degree of fear, anxiety, submissiveness or deference to a caregiver or other third party
  • An older person expresses excitement over a financial opportunity, prize, or windfall
  • An older consumer lacks knowledge about his or her personal financial status or accounts, or is reluctant to discuss financial matters
  • An older consumer appears to neglect or experience a decline in appearance, grooming, or hygiene


    Account Activity Monitoring Red Flags

  • Large increases in account activity, such as daily maximum currency withdrawals from an ATM
  • Large gaps in check numbers, or “out of sync” check numbers
  • Uncharacteristic non-sufficient funds activity or overdrafts
  • Uncharacteristic debit transactions (including unusual ATM use)
  • Uncharacteristic lapses in payments for services
  • Disregard for penalties when closing accounts or certificates of deposit
  • Abrupt changes to financial documents, such as a new power of attorney, a change to a joint account or a change in account beneficiary
  • Excessive numbers of payments or payments of large sums to a caregiver or third party
  • New account use soon after adding an authorized user
  • Statements mailed to an address separate from account holder’s residence
  • New activity on an inactive account or joint account
  • Signatures that do not match or appear suspicious
  • Uncharacteristic requests to wire money


    To ensure personnel are prepared to detect elder abuse, the above items should be included in financial institutions’ BSA training materials. 


    Financial institutions can also offer services that may help prevent elder financial exploitation. Specifically, the CFPB report recommends that financial institutions:


  • Provide information about planning for incapacity. Advance planning for the possibility of diminished capacity and illness, for example, by naming a trusted person to serve as an agent under a power of attorney or other fiduciary increases the odds that the person managing finances will act in the best interests of the account holder.


  • Honor powers of attorney. If financial institutions refuse to honor a valid power of attorney, they can create hardships for account holders who need designated surrogates to act on their behalf. Financial institutions should establish procedures to ensure that they make prompt decisions on whether to accept the power of attorney, which should be based on qualified staff making decisions based only on state law and other appropriate considerations and frontline staff recognizing red flags for power of attorney abuse.


  • Offer protective opt-in account features. Examples of opt-in features that could reduce the risk of elder financial exploitation include cash withdrawal limits, alerts for specified account activity and read-only access to accounts for authorized third parties. A third-party monitoring feature can enable a designated family member or friend to monitor an account for irregularities without having access to funds or transactions.


  • Offer convenience accounts as an alternative to traditional joint accounts. Traditional joint accounts, often used to enable a helper to pay bills, pose several risks. To avoid risks such as the joint owner withdrawing money for his or her own use, exposing account funds to creditors of the joint owner, and subverting an intended estate plan, financial institutions should provide information to consumers about these risks.When implemented properly, convenience accounts can mitigate these risks. The CFPB recommends routinely offering such convenience accounts as an alternative.


Elder financial exploitation targets one of the most vulnerable demographics in our society. When necessary, SARs should be filed to assist in the identification and prosecution of these predators; however, financial institutions can do a lot more. They are uniquely positioned to detect, report, and prevent this ever-growing form of abuse. If not already included in training, materials should be enhanced so personnel can recognize both the face-to-face and account monitoring warning signs of elder financial exploitation. Lastly, financial institutions should consider offering services that may help prevent elder financial exploitation.


For additional information or to report elder financial abuse, financial institutions should contact their respective state’s department of aging (in addition to filing a SAR). In many states, these organizations will provide free training to financial institutions on request.   



Craig E. Johnson, CRCM, CMQCS
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