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What is elder financial exploitation (EFE)?

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Elder financial exploitation: What you need to know

An 87-year-old Holocaust survivor is defrauded of his life’s savings in a 6-7 year romance scam. A major drug cartel diversifies its income stream by branching out into timeshare scams targeting seniors. A nationwide organized crime group dubbed “The Enterprise” tricks seniors into giving away “thousands to tens of thousands” on false pretenses.

What do all of these headlines have in common? They tell stories of seniors victimized by elder fraud, a form of elder financial exploitation (EFE). As a population sector more likely to suffer from isolation and increased vulnerability, the elderly represent an attractive target for criminals seeking to defraud them or use them to launder illegal funds.

EFE is a growing problem in jurisdictions around the world. To protect their most vulnerable customers, firms should understand what it is and how to spot its warning signs. An accurate understanding of this growing risk can ensure fraud and anti-money laundering frameworks truly defend even the most vulnerable.

What is elder financial exploitation?

Elder financial exploitation (EFE) is the most common form of elder abuse and involves misusing (often illegally) elderly people’s finances, assets, or possessions. The perpetrators of EFE may be close to their victims, friends, and family members, or maybe strangers such as online or offshore scammers. Perpetrators may seek to move the proceeds of EFE using financial products and instruments, meaning that financial institutions are on the first lines for fighting this type of illegal activity.  

EFE incidents have increased significantly over the last decade, with over 72,000 related suspicious activity reports (SAR) filed with the United States Financial Crimes Enforcement Network (FinCEN) in 2021 alone. The financial impact of Elder Financial Exploitation is significant: in 2022, complaints received by the FBI suggest that individual victims lost an average of $35,101 each, amounting to $3.1 billion total — an 87 percent increase from 2021. Since those figures relate only to information derived from official complaints, the real-world financial impact is likely far greater. EFE may be more prevalent in areas experiencing financial adversity or types of crisis which leave the elderly exposed to risk. 

Types of elder financial exploitation

The FBI’s 2022 Elder Fraud report details a variety of EFE methodologies. While some perpetrators may use the threat of violence or intimidation to extract funds from elderly people, others may engage in scams to leverage financial products and instruments in a manner that avoids regulatory scrutiny. The FBI includes the following among top typologies for 2022 (see the full report for more details):

  • Romance scams: Elderly people may be contacted by potential romantic partners outside the United States (or their country of residence). Those partners subsequently request or coerce money from the elderly person for a range of fabricated expenses such as travel or medical bills.  
  • Impersonation fraud: Agents at a scam call center may impersonate trusted authority figures or support personnel to convince older victims to part with their money on false pretenses.
  • Extortion: Victims’ vulnerability may be exploited using fear tactics, such as invented claims that the victim or one of their loved ones is in danger unless they comply.

Other types of EFE to be aware of include:

  • Family-member exploitation: Family members that have power of attorney over elderly people may perpetrate elderly abuse by misusing their elderly relative’s credit cards or other financial products to withdraw or transfer funds. Alternatively, family members may accompany their elderly relatives to banks and other financial services premises in order to withdraw funds in person. 
  • Caregiver theft: Like family members, caregivers of elderly people may perpetrate EFE by misusing credit cards and other financial instruments to steal money. Caregivers may extract funds by making large withdrawals from ATMS or illegally cashing checks on behalf of elderly people.
  • Money muling: Criminals may seek to use elderly people as money mules in order to avoid triggering AML/CFT measures. Elderly people may be drawn into a money mule scheme through coercion, deception, or financial incentive and then be requested or coerced to transfer money between accounts on behalf of criminal third parties. 

EFE red flags

FinCEN has released advisory guidance setting out 34 ‘red flag’ characteristics of elder financial exploitation. Those red flags include:

  • Abrupt changes in a senior’s account information, particularly unusual new contact details — especially if overseas.
  • Incongruous transaction activity from a client who suffers from known cognitive impairment.
  • Senior clients who mention sending funds to a long-distance romantic partner.
  • The sudden appearance of third-party involvement in an older client’s transactions without the correct documentation.
  • Apparent fear from a senior client that they have to pay a caretaker to avoid eviction or enrollment at a care facility.
  • Sudden withdrawals from a senior’s formerly dormant account or frequent insufficient funds notices.

More than 50 percent of Elder Financial Exploitation incidents reported to FinCEN between 2013 and 2017 involved the transfer of funds from an elderly person’s account while checking accounts, credit cards, and money orders were also misused. EFE incidents tended to take place over months (with four months being the average), and only 28 percent of those incidents were reported to state or federal authorities by victims or their family members. 

The figures reveal not only the scale of the EFE problem and the need for greater protection for vulnerable elderly people but the important role that financial institutions play in detecting and preventing abuse.

How to comply with EFE regulations

Under the Bank Secrecy Act (BSA) and FINCEN’s advisory guidance, when banks, financial institutions, and other obligated entities detect suspicious financial activity, including EFE, they must submit a suspicious activity report (SAR) to FINCEN. SARs are used to trigger and inform investigations by law enforcement agencies into incidents of money laundering, fraud, and the financing of terrorism, which may be connected to or predicated by elder financial exploitation. FinCEN’s electronic SAR filing includes a designated category for EFE, with the instruction for filers to set out a description of the type of activity involved. 

Firms may be able to detect EFE using the controls and measures deployed as part of their BSA AML/CFT programs, which include identity verification and transaction monitoring. Those measures should be risk-based, meaning that they should be deployed in proportion to the level of criminal risk that their customers and transactions present. With that in mind, a suitable AML program should feature:

  • Customer due diligence: Firms should seek to accurately establish the identity of their customers so that they can be sure that they are who they say they are and are being truthful about the nature of their business. Effective CDD requires customers to submit certain personally identifiable information (PII), such as names, addresses, and dates of birth. 
  • Transaction monitoring: Firms should monitor their customers’ transactions for suspicious activity that is indicative of EFE, including unusual transaction patterns. Suspicious activity may warrant SAR submission. 
  • Sanctions and PEP screening: Vulnerable elderly people may be used to conduct transactions on behalf of sanctioned individuals or politically exposed persons (PEP) as a way to avoid regulatory scrutiny. 
  • Adverse media monitoring: Adverse media stories may indicate that an individual is at higher risk of money laundering and may use elderly people as a way to avoid AML/CFT scrutiny. Accordingly, firms should monitor adverse media stories involving their customers in screen, print, and online platforms. 

Reported cases of Elder Financial Exploitation represent only 2 percent of the estimated 3.5 million cases that occur in the United States every year. The growing number of EFE SARs reveals a widespread and damaging problem with serious implications for aging populations in the US and around the world and a need for strong, decisive responses from financial institutions and law enforcement agencies alike. 

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Originally published 30 November 2020, updated 09 February 2024

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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