The Financial Crimes Enforcement Network (“FinCEN”) recently issued a Financial Trend Analysis (“Analysis”) focusing on patterns and trends identified in Bank Secrecy Act (“BSA”) data linked to Elder Financial Exploitation (“EFE”) involving scams or theft perpetrated against older adults.
The Analysis is a follow up to FinCEN’s June 2022 EFE Advisory (“2022 Advisory”). The Analysis reviews BSA reports filed between June 15, 2022 and June 15, 2023 that either used the key term referenced in the 2022 Advisory (“EFE FIN-2022-A002”) or checked “Elder Financial Exploitation” as a suspicious activity type. In its 2022 Advisory, FinCEN warned financial institutions (“FIs”) about the rising trend of EFE, which FinCEN defines as “the illegal or improper use of an older adult’s funds, property, or assets, and is often perpetrated either through theft or scams.” The 2022 Advisory identified 12 “behavioral” and 12 “financial” red flags to help FIs detect, prevent, and report suspicious activity connected to EFE. Additionally, FinCEN recommended EFE victims file incident reports to the FBI’s Internet Crime Complaint Center (IC3) and the Federal Trade Commission. Consistent with a risk-based approach to BSA compliance, FinCEN encouraged FIs to perform additional due diligence where appropriate.
Reports of EFE are significant, and increasing. In the Analysis, FinCEN identified 155,415 relevant BSA filings over this period, reporting approximately $27 billion in EFE-related suspicious activity. Further, FinCEN continues to receive EFE BSA reports, and has received on average 15,993 reports per month between June 15, 2023 and January 15, 2024.
Key findings from the Analysis include:
As stated above, banks filed the vast majority of EFE-related BSA filings, followed by money services businesses (“MSBs”), credit unions and securities/futures institutions. Within MSBs, virtual asset service providers accounted for 42% of the filings.
For elder theft, filers report an average suspicious activity amount of $98,863 and a median amount of $23,762. For elder scams, filers reported an average suspicious activity amount of $129,483 and a median amount of $33,499.
Although methods of elder theft varied, they generally relied on cash withdrawals, card transactions, online bill pay, and funds transfers made for the abuser’s benefit, while making little effort to obfuscate the transactions. The Analysis provides that in elder scams, money was most commonly transmitted through checks and domestic wires. Further, “[p]erpetrators of both EFE scams and theft utilize methods of siphoning funds that avoid direct contact with depository institutions or MSB personnel[,]” who “would likely identify EFE activity more frequently if victims or perpetrators conducted transactions in person, and presumably not permit the requested transactions.”
FinCEN’s manual review of the filings indicated perpetrators used the following scams: impersonation (8%), romance scams (9%), tech support (10%), account takeover (22%), scam unidentified (23%), and 41 other scam types (28%).
In the Appendix, FinCEN describes the most prominent scams identified in the filings, which should be included in elder abuse compliance trainings by FIs.
Link to Historical Context Historical Context
The FinCEN Analysis and 2022 Advisory do not arise in a vacuum. Rather, they occur on the shoulders of earlier regulatory warnings.
In August of 2016, the CFPB issued an elder financial abuse report, “Report and Recommendations: Fighting Elder Financial Exploitation through Community Networks,” and a related resource guide, “A Resource Guide for Elder Financial Exploitation Prevention and Response Networks,” where it made recommendations to existing networks and key stakeholders on how to develop and improve their communities’ efforts to combat elder financial abuse.
In July 2016, the CFPB issued an update to an earlier advisory, “Reporting of Suspected Elder Financial Exploitation by Financial Institutions” which recommended actions for banks and credit unions to take to prevent, recognize, report, and respond to elder financial exploitation. In February 2019, the Consumer Financial Protection Bureau (“CFPB”) issued a report, “Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends,” drawing on non-public data derived from EFE-related BSA filings from 2013 to 2017. During that period, MSBs accounted for 58% of the EFE-related BSA filings. The losses averaged $34,200 and were greater for elder theft than elder scams.
In March of 2019, the U.S. Department of Justice, the FBI and other federal and state partners announced the largest coordinated sweep of elder fraud cases, resulting in criminal cases against more than 260 defendants who allegedly victimized more than two million Americans, most of them elderly. All told, the offenders allegedly engaged in financial schemes which exceeded more than $750 million in losses.
Link to Reporting Reporting
In addition to filing a Suspicious Activity Report (“SAR”), FinCEN recommends in the Analysis that FIs refer customers who may be victims of EFE to the Department of Justice’s National Elder Fraud Hotline at 833-FRAUD-11 or 833-372-8311 for assistance with reporting suspected fraud to the appropriate government agencies.
EFE is receiving attention from states as well. In 2023, 34 states and Puerto Rico addressed financial exploitation of the elderly and vulnerable adults in their legislative sessions. Most state laws require mandatory reporting of elder financial abuse to adult protective services or law enforcement agencies. The U.S. Department of Justice posts these state laws on its website for reference. Further, some state attorneys general are proactively enforcing these laws against FIs who, in the state’s view, are not adequately protecting and reporting elder financial exploitation.
Link to Key Takeaways Key Takeaways
EFE is a growing problem, and regulators expect FIs to not only report EFE, but also to protect the elderly against scams. To that end, FIs should develop, implement and maintain internal protocols and procedures for protecting elder account holders, including:
- Arranging the sharing of account information with third parties designated as “trusted” by elder account holders;
- Offering age-friendly services to older consumers, including protective opt-in account features such as withdrawal limitations, alerts, transaction restrictions for merchant categories; information on planning for incapacity or disability; and honoring powers of attorney; and
- Ask detailed questions when the elder account holder requests account transactions that are unusual for the account (i.e., wire transfers and large cash withdrawals) and monitor account activity to help prevent and detect scams and theft.
Further, FIs must train their employees to prevent, detect and respond to EFE. The training should include descriptions of indicators of potential EFE and preventative measures and action steps for responding and reporting EFE.