FinCEN warns against elder financial exploitation | #datingscams | #lovescams


On June 15, FinCEN issued an Advisory on Elder Financial Exploitation (“Advisory”) to warn financial institutions about the rising trend of elder financial exploitation (“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 Advisory is detailed.  It highlights new EFE typologies and potential red flags and builds upon a related advisory issued in 2011.  It also offers tips on Suspicious Activity Report (“SAR”) filings and describes other resources available to fight EFE.

Background

According to the Advisory, older adults – defined by FinCEN as anyone 60 years or older – are targets for financial exploitation due to their income and accumulated life-long savings, in addition to the possibility that they may face declining cognitive or physical abilities, isolation from family and friends, lack of familiarity or comfort with technology, and reliance on others.  All of these risks have been exacerbated by the  COVID-19 pandemic.  The Advisory states that although EFE is the most common form of elder abuse, the majority of incidents go unidentified and unreported because victims may choose not to come forward out of fear, embarrassment, or lack of resources. 

The Advisory provides some statistics on the pervasiveness of EFE and notes that financial institutions filed 72,000 SARs related to EFE in 2021 – an increase of 10,000 SARs over filings in 2020. Further, the Consumer Financial Protection Bureau estimates that the dollar value of suspicious transactions linked to EFE has increased from $2.6 billion in 2019 to $3.4 billion in 2020.  Similarly, the Federal Trade Commission reports that older adults account for 35 percent of the victims associated with filed fraud reports when a consumer has provided an age.

Theft and Scams

The Advisory divides EFE schemes into two basic types:  thefts and scams. 

Elder thefts are typically committed by known and trusted persons of older adults, such as family members and non-family caregivers who abuse their relationship and position of trust, or neighbors, friends, financial services providers, other business associates, or those in routine close proximity to the victims. According to the Advisory:

  • Instances of elder theft often follow 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, or environmental factors such as social isolation, to establish control over the victims’ accounts, assets, or identity. This can take many forms, including the exploitation of legal guardianships and power of attorney arrangements, or the use of fraudulent investments such as Ponzi schemes to defraud older adults of their income and retirement savings.
  • These relationships enable trusted persons to repeatedly abuse the 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.

On the other hand, elder scams typically involve fraudsters with no known relationship to their victims and often located outside of the United States who lure victims into sending payments and disclosing personal identifying information (“PII”) under false pretenses or for a promised benefit or good the victims will never receive.  Scammers will 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, scammers commonly impersonate government officials, law enforcement agencies, technical and customer support representatives, social media connections, or family, friends, and other trusted persons. They often will create high-pressure situations and then request victims to make payments through wire transfers at money services businesses, prepaid access cards, gift cards, money orders, tracked delivery of cash through the U.S. Postal Service, ATM deposits, cash pick-up at the victims’ houses, and virtual currency

Even worse, an elder scam victim can serve as a “money mule”: the scammer convinces the victim to set up a bank account or limited liability corporation in the victim’s own 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.”

The Advisory identifies five common typologies of elder scams:  government imposter scams; romance scams; emergency/person-in-need scams; lottery and sweepstakes scams; and tech and customer support scams. 

Red Flags

The Advisory identifies 12 “behavioral” and 12 “financial” red flags to help financial institutions detect, prevent, and report suspicious activity connected to EFE.  An example of a “behavioral” red flag is when an “older customer’s account shows sudden and unusual changes in contact information or new connections to emails, phone numbers, or /accounts that may originate overseas.”  An example of a “financial” red flag is when “dormant accounts with large balances begin to show constant withdrawals.”

The Advisory explains that because “no single red flag is determinative of illicit or suspicious activity, financial institutions should consider the surrounding facts and circumstances, such as a customer’s historical financial activity, whether the transactions are in line with prevailing business practices, and whether the customer exhibits multiple red flags, before determining if a behavior or transaction is suspicious or otherwise indicative of EFE.”  Further, and consistent with a risk-based approach to compliance with the Bank Secrecy Act, FinCEN encourages financial institutions to perform additional due diligence where appropriate.

SARs and Other Outreach to Combat EFE

The Advisory provides that SARs filed on suspected EFE schemes should reference the Advisory and mark the check box for Elder Financial Exploitation in SAR Field 38(d).  The Advisory also offers non-regulatory tips for writing SARs, such as:

  • Provide details about the reporting entity’s response, e.g., whether accounts were closed, whether the person was warned that transactions appear to involve fraud, if the person was not permitted to conduct new transactions, etc.
  • Reference supporting documentation, including any photos or video footage, in the narrative.
  • Cross-report the circumstances leading to the filing of EFE SARs directly to local law enforcement if there is any indication that a) a crime may have been committed and/or b) the older adult may still be at risk for victimization by the suspected abuser.

Beyond filing SARs, FinCEN also recommends that financial institutions refer customers who may be victims of EFE to the Department of Justice’s National Elder Fraud Hotline for assistance with reporting suspected fraud to the appropriate government agencies.  The Advisory observes that financial institutions may be required under state law to report suspected EFE to law enforcement and/or Adult Protective Services.  Finally, financial institutions may share information with each other under Section 314(b) of the Patriot Act, and may turn to FinCEN’s Rapid Response Program, which seeks to help victims and their financial institutions recover funds stolen due to certain cyber-enabled financial crime schemes, including cyber-enabled EFE.



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