Guarding the Golden Years Part 1: Signs of Elder Financial Exploitation

Could you identify the red flags if your elderly customers were being scammed? Losses to elder financial exploitation have been estimated at $77.7 billion and the problem is growing. As fraudsters increasingly target elderly customers using sophisticated tactics, from investment schemes to technology-enabled scams such as virtual kidnapping, financial institutions have a vital role in prevention. 

FinCEN and other agencies are asking for vigilance in a recent Interagency Statement, aiming to “raise awareness and provide strategies to supervised institutions for combating elder financial exploitation.“ In the first of a two-part blog series, we discuss recognizing red flags of elder financial exploitation and raising employee and customer awareness of this cruel crime. 

Red Flags: The Warning Signs of Exploitation

Fraud is on the rise, but financial exploitation of the elderly is particularly rampant. Criminals often target seniors due to loneliness, isolation, unfamiliarity with scams or technology — and the liquidity of their savings. Recognizing the warning signs of this illicit activity can be the difference between a customer losing a fortune and safeguarding their financial future. 

According to the Statement, financial institutions should consider versing their employees in the red flags for elder financial exploitation to encourage timely action. Specifically, “customer-facing employees may be trained to identify transactional and behavioral red flags when conducting transactions for older adults, including via powers of attorney or other agents.” 

In a 2022 advisory, FinCEN identified these red flags to help institutions detect, prevent, and report suspicious activity that indicates potential elder financial exploitation. The financial red flags in this advisory encourage vigilance for uncharacteristic transfers and payments that may be indicative of a potential scam. Examples include: 

• Withdrawals on dormant accounts with large balances.
• Uncharacteristic transfers of assets.
• Transfers with no in-person relationship.
• Uncharacteristically large wire attempts.

Outside patterns of transactions, employee interactions with elderly customers can reveal other signs of potential exploitation. Behavioral red flags, such as a new “best friend” or caregiver who quickly becomes involved in a senior’s finances, confused speech and meek body language can be warning signs. Having a defined escalation process, as well as a tactful talk track to discuss potentially suspicious transactions with elderly individuals and verify their legitimacy is also crucial. 

Keeping Elderly Customers Informed about Fraud

As fraud evolves, discussing current threats with your elderly customers and ensuring they are aware of how scams inevitably evolve is essential. The Statement also recommends encouraging seniors to designate a trusted person on their account, whereby “an account holder might identify one or more family members, attorneys, accountants, or other trusted individuals and authorize the supervised institution to contact them if the supervised institution cannot reach the account holder or suspects that the account holder may be at risk of financial exploitation.” 

Strength in Vigilance

Elder financial exploitation is an insidious crime. The effect on victims can be devastating, both financially and emotionally — and failing to protect your customers will expose you to reputational, operational, and regulatory risk. Enabling vigilance across your customer and employee relationships can help to mitigate this threat as well as potential reputational risk to your institution.  

As elder financial exploitation grows, financial institutions should also consider effective customer transaction monitoring to detect and disrupt fraudulent activity. In part two of our series, we will discuss insights on effective detection, information sharing, how to file high-quality SARs with FinCEN, and reporting to other law enforcement.  

Download our Understanding Fraud Schemes & Scams eBook for more information about how to navigate the evolving fraud landscape.