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, yet only a small fraction of incidents are reported, just one in 44 cases according to the National Adult Protective Services Association (NAPSA).
In June 2011, a study by the MetLife Mature Market Institute called elder financial abuse, “The Crime of the 21st Century.” Demographics suggest the exploitation of our older population could 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.
So who are these predators taking advantage of our aging population? According to NAPSA, 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.
Financial institutions 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 March 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. The warning signs 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 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 nonsufficient 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 consumer’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 BSA training materials.
If these warning signs are detected, a Suspicious Activity Report (SAR) should be filed (and if necessary, continuing SAR reports). In 2011, the Financial Crimes Enforcement Network (FinCEN) issued an Advisory noting that SARs are a valuable reporting avenue for elder financial exploitation cases. FinCEN provides a designated category of suspicious activity, “elder financial exploitation,” on the electronic SAR form. Although the electronic SAR form includes a checkbox for elder financial exploitation, the narrative remains critical, and FinCEN instructs filers to provide a clear, complete, and concise description of the suspicious activity.
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. The refusal of financial institutions to honor valid powers of attorney 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 powers of attorney, which qualified staff make decisions based only on state law and other appropriate considerations, and that frontline staff recognize 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.
Elder financial exploitation targets one of the most vulnerable demographics in our society. Financial institutions are uniquely positioned to detect, report, and prevent this ever-growing form of abuse. If red flags for this type of exploitation are not already included in training materials, training should be enhanced so personnel can recognize the warning signs of elder financial exploitation. When necessary, SARs should be filed to assist in the identification and prosecution of these predators. Lastly, financial institutions should consider offering services that may help prevent elder financial exploitation.