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How financial institutions can help end elder financial exploitation

Four key indicators for fraud detection professionals investigating elder financial exploitation

June 18, 2018 by Verafin

Elderly hands with money

Elder financial exploitation (EFE) may be the crime of the 21st century.

The available numbers paint a scary picture: one 2015 report indicated seniors are defrauded of nearly $36.5 Billion annually, over 12 times the amount previously reported.

In August 2017, the North American Securities Administrators Association (NASAA) completed a survey of state securities regulators regarding elder financial exploitation:

  • 97% of the regulators felt most cases of senior financial fraud go undetected,
  • 29% have seen an increase in incidents, and
  • Nearly none of the respondents have seen a decrease in incidents.

A lifetime of savings together with numerous age-related vulnerabilities make the elderly a serious target for financial abuse.

FIs play an essential role

With in-depth access to a customer’s financial activity, financial institutions (FIs) play a pivotal role in protecting their elderly customers from people attempting to defraud them.

The August 2017 Memorandum on Financial Institution and Law Enforcement Efforts to Combat Elder Financial Exploitation, jointly released by the Consumer Financial Protection Bureau (CFPB), The Department of the Treasury, and FinCEN, makes this responsibility clear:

“Financial institutions can play a key role in detecting, responding to, and preventing EFE. Financial institutions are often well-positioned to detect when older account holders have been targeted or victimized.”

Four key indicators for fraud detection professionals

There are numerous indicators of EFE, many of which are covered in the Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults jointly released by numerous agencies, including the CFCB, Federal Reserve, National Credit Union Administration (NCUA), and Office of the Comptroller of the Currency (OCC) in 2013.

Specific to a customer’s banking activity, below are four key indicators that fraud detection professionals can watch for:

  1. Account balance: Is the account decreasing? Considering past activity does the speed of change make sense?
  2. Account access: Have new individuals been granted access to the customer’s account? It is common for people to either force an elderly person to grant them access to their account or deceive the elderly person into trusting them with access.
  3. Uncommon transaction types: Are they banking via methods that are unusual given their past activity? If they are suddenly wiring money out of their account or transferring funds using online banking, despite never, or rarely, using these transfer methods in the past, the activity should be investigated. Outgoing wires and large ATM withdrawals are particularly suspicious.
  4. Odd spending behavior: Based on their past activity, has their spending changed? For example, past activity includes small in-branch cash withdrawals and a monthly rent payment and, suddenly, you are seeing numerous large ATM withdrawals occurring at late at night.

Ending the cycle of Elder Financial Exploitation

FIs have a responsibility to protect the vulnerable and are in a unique position to positively impact the financial safety of the country’s elderly population.

The ability to recognize unusual behavior and take quick action through efficient investigation can help the elderly maintain a life of dignity and ensure EFE is no longer considered the crime of the 21st century.

 

Verafin’s industry-leading, cross-institutional Fraud Detection and Anti-Money Laundering (FRAMLx) collaboration software is utilized by 1700 financial institutions across North America. With powerful cloud-based technology, FRAMLx facilitates 314(b) information sharing, and offers innovative artificial intelligence and machine learning capabilities to proactively prevent cross-channel fraud, uncover a wide range of suspicious activity, and enhance BSA/AML procedures through end-to-end, risk-based CDD/EDD functionality.