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FinCEN’s Financial Trend Analysis

Insights on Elder Financial Exploitation from BSA Filings

June 13, 2024 by Nasdaq Verafin

In April 2024, the Financial Crimes Enforcement Network (FinCEN) released a Financial Trend Analysis (FTA) providing insights on threat patterns and trend information on Elder Financial Exploitation (EFE) incidents, as well as methods favoured by criminals to evade detection. The findings were based on Bank Secrecy Act (BSA) data filed with FinCEN between 15 June 2022 and 15 June 2023.

EFE continues to be a major threat to America’s elderly. FinCEN received 155,415 EFE-related BSA reports associated with more than $27 billion in reported suspicious activity, which includes both actual and attempted transactions.

Banks Led EFE-Related BSA Filings

During the review period, a total of 4,472 financial institutions filed EFE-related BSA reports, including depository institutions, securities/futures institutions, credit unions, money services businesses (MSBs), insurance companies, credit card companies, lenders, and casinos. Of these filings, banks accounted for a staggering 72% of all EFE-related BSA reports.

The bank filings mainly consisted of transactions directly from their customers, but also including instances where potential EFE-related activity was identified when acting as a correspondent bank. In total, 10 depository institutions filed over 1,000 EFE-related BSA reports each during the review period.

MSB EFE-Related BSA Filings

During the review period, the FTA found that MSBs filed 15% of total EFE-related BSA reports with Virtual Asset Service Providers (VASPs) accounting for nearly 42% of those reports. VASPs include exchanges and convertible virtual currency (CVC) kiosks, with exchanges accounting for most of the BSA reports.

Exchanges or other service providers filed 5,705 BSA reports, while CVC kiosk operators filed 4,307 BSA reports, accounting for 57% and 43% respectively of VASP-related reports during the review period. The cost of running cryptocurrency scams is not low – CVC kiosks can have high transactions fees, ranging from 7-20%. Yet, criminals are willing to accept these costs for the benefits that pseudo-anonymity can bring.

Criminal Tactics to Conduct EFE Scams

Criminals are aware that financial institutions are the first line of defence against EFE. Perpetrators of EFE employ methods of defrauding their victims that avoid direct contact with depository institutions or MSB personnel. Due to the extensive training these personnel receive in identifying EFE, fraudsters avoid in-person interactions where possible to avoid detection.

To avoid these in-person interactions, perpetrators rely on transaction methods that bypass the need for face-to-face interaction. During the review period, digital payment methods, peer-to-peer transfer systems, and ATMs accounted for a significant portion of the funds transfers in EFE-related BSA reports filed. The immediacy of funds these payment types offer makes them an appealing method for defrauding elderly victims, while limiting contact with trained personnel.

The Importance of Filing Timely SARs

Financial institutions should consider behavior-based transaction monitoring solutions that alert investigators to out-of-pattern or potentially suspicious customer activity, such indicators of EFE. Technology solutions can help financial institutions report potentially suspicious behavior, creating and filing timely SARs to quickly provide actionable intelligence to law enforcement and help protect vulnerable seniors.

As the scale of elder financial exploitation grows, understanding evolving and emerging EFE-related scams is essential – detecting and disrupting EFE-related scams can help protect elderly consumers from further abuse and financial loss.

Nasdaq Verafin provides cloud-based Financial Crime Management Technology solutions for Fraud Detection, AML/CFT Compliance, High-Risk Customer Management, Sanctions Screening and Management, and Information Sharing. More than 2,500 financial institutions globally, representing more than $8T in collective assets, use Nasdaq Verafin to prevent fraud and strengthen AML/CFT efforts. Leveraging our unique consortium data approach in targeted analytics with artificial intelligence and machine learning, Nasdaq Verafin significantly reduces false positive alerts and delivers context-rich insights to fight financial crime more efficiently and effectively. To learn how Nasdaq Verafin can help your institution fight fraud and money laundering, call 1-877-368-9986.