“Growing Epidemic” and “Rampant, Largely Invisible, Expensive and Lethal Problem”
“Elder financial abuse has become more acute.” This somber assessment by Thomas Curry, Chief Officer of the OCC (Office of the Comptroller of the Currency) which he shared in a speech in Washington, D.C. last month follows on the heels of several notable events related to elder financial abuse earlier this year. The True Link Report on Elder Financial Abuse 2015 published in January indicated their “research reveals that seniors lose $36.48 billion each year to financial abuse” and that “approximately 36.9% of seniors are affected by financial abuse in any five-year period”. The U.S. Senate Special Committee on Aging held a hearing in early February to focus on elder financial exploitation which Chairman Senator Collins characterized as a “growing epidemic” and the Executive Director of NAPSA (National Adult Protective Services Association) testified is “a rampant, largely invisible, expensive and lethal problem”. And in late February, the New York State Department of Financial Services issued Guidance for Financial Institutions on Preventing Elder Financial Exploitationwhich referenced red flags indicators that had been published in a FinCEN advisory.
The Comptroller of the Currency made a second emphatic statement in his March speech on this escalating crime. Mr. Curry stressed that “banks can play a critical role in identifying financial fraud and protecting their older customers against these losses.” With the heightened expectation and responsibility for financial institutions to detect and report elder financial abuse, I thought it would be helpful to share the following list of red flag indicators which was compiled by BITS, the Technology Policy Division of the Financial Services Roundtable.
Three Red Flag Categories:
- Changes in Spending and Transaction Patterns
- Changes to Accounts and/or Documentation
- Changes in Appearance or Demeanor
1. Changes in Checking and/or Credit/Debit Spending and Transaction Patterns
- A set of “out-of-sync” check numbers.
- A sudden flurry of “bounced” checks and overdraft fees.
- Transaction review shows multiple small dollar checks posting to the senior’s account in the same month. This could be indicative of telemarketing or charity scams.
- Large withdrawals from a previously inactive checking or credit account or a new joint account.
- Account use shortly after the addition of a new authorized signer.
- Abrupt increases in credit or debit card activity.
- Sudden appearance of credit card balances or ATM/debit card purchases or withdrawals with no prior history of such previous use.
- Withdrawals or purchases using ATM or debit cards that are repetitive over a short period of time.
- Withdrawals or purchases using ATM or debit cards that are inconsistent with prior usage patterns or times (e.g., late night or very early morning withdrawals by elderly customers, withdrawals at ATMs in distant parts of town by customers who don’t drive or are house bound).
- Withdrawals or purchases using ATM or debit cards that are used shortly after the addition of a new authorized signer.
- Unexplained disappearance of funds or valuable possessions, such as safety deposit box items.
- Vulnerable adult appears confused about the account balance or transactions on his or her account.
- A caregiver appears to be getting paid too much or too often.
- Significant increases in monthly expenses paid which may indicate that expenses for persons other than the customers are being paid.
- Sudden changes in accounts or practices, such as unexplained withdrawals of large sums of money, particularly with a vulnerable adult who is escorted by another (e.g., caregiver, family member, “friend”) who appears to be directing the changing activity patterns.
2. Changes to Accounts and/or Documentation
- Recent changes or additions of authorized signers on a vulnerable adult’s financial institution signature card.
- Statements are sent to an address other than the vulnerable adult’s home.
- Vulnerable adult has no knowledge of a newly- issued ATM, debit or credit card.
- Abrupt changes to, or confusion regarding changes in, financial documents such as Power of Attorney, account beneficiaries, wills and trusts, property titles, deeds and other ownership documents.
- Sudden unexplained transfers of assets, particularly real property.
- Sudden appearance of previously uninvolved relatives claiming their rights to a vulnerable adult’s affairs and possessions.
- Discovery of a vulnerable adult’s signature being forged for financial transactions or for the titles of his or her possessions.
- Refinance of the vulnerable adult’s property, particularly with significant cash out or with the addition of new owners on the deed and, most particularly, without the new owners shown as co-borrowers on the loan.
3. Changes in Appearance or Demeanor
- Vulnerable adult has a companion who seems to be “calling the shots”.
- Change in the vulnerable adult’s physical or mental appearance. For example, the customer may appear uncharacteristically disheveled, confused or forgetful. These signs could indicate self neglect or early dementia and leave the vulnerable adult open for financial exploitation.
- Vulnerable adult acknowledges providing personal and account information to a solicitor via the phone or email.
- Excitement about winning a sweepstakes or lottery.
- Allegations from a vulnerable adult or relative regarding missing funds or physical or mental abuse.
I would highly recommend that all financial institutions review the BITS Financial Services Roundtable publication Protecting the Elderly and Vulnerable from Financial Fraud and Exploitation. It is an extremely informative guide which covers various types of scams; developing an internal training program; working with state and federal agencies; and consumer education. FinCEN’s Advisory to Financial Institutions on Filing Suspicious Activity Reports Regarding Elder Financial Exploitation is another excellent resource and contains a helpful list of potential red flag indicators.