Limit elder financial abuse through transaction monitoring and staff training

A version of this article first appeared in the January BAI Executive Report: Fortifying your fraud defenses. Find more insight there from industry experts who help banking leaders keep step with fraud-fighting developments, including empowering staff, smoothing customer experiences and incorporating fraud vigilance as a strategic differentiator.

Financial institutions must remain diligent in spotting potential elder financial exploitation — the illegal or improper use of an older adult’s funds, property or assets — as the problem remains rampant and widespread.

And because the issue challenges how banks and credit unions sensitively interact with customers and meet reporting requirements around abuse, it’s valuable for banking leaders to keep teams updated on the latest developments.

Between June 15, 2022 and June 15, 2023, there were 155,415 suspicious activity report filings across the country that referenced elder financial exploitation or a similar term as a suspicious activity type, according to an analysis by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The activity, totaling $27 billion, may have included both actual and attempted transactions.

FinCEN and five other federal financial regulatory agencies in December issued an interagency statement to provide institutions with examples of risk management and other practices that can be effective in identifying, preventing and responding to elder financial exploitation.

The most common way that elderly people are exploited is by people who are known to them and people who technically might have legal access to their money or to their financial data. This often includes relatives or professional caretakers, says Natalie Morse-Noland, BAI product manager, content and regulatory compliance.

“Especially when it comes to relatives, those caretakers might not even consider what they’re doing to be abuse or exploitation,” Morse-Noland says. “They might just think, ‘Mom doesn’t need this money anyway and I’ve got to get this car repaired, so I’ll just take some of this money and get that taken care of,’ or something like that.”

If a relative does not have power of attorney, they might persuade or coerce the elderly person into getting them some money, manipulating them with comments like, “Don’t you love me? I need this money and you should give it to me,” she says.

“That is the most common way that elderly people are financially exploited and unfortunately it’s also one of the hardest to spot because sometimes these people have the legal right to access the finances,” Morse-Noland says. “They’re just using it in a way that is not in the best interest of the accountholder.”

Also on the rise: catfishing scams where someone pretends to be a romantic interest on an online dating site, she says. They develop a relationship with the person, building trust, and then they lie and say something like, “Hey, my brother is in jail and I need bail money, or ‘I’m going to get kicked out if I don’t pay rent.”

Fraudsters also pretend that they’re from a government agency and tell the elderly person that they’re either in trouble for tax evasion, they’re being audited, or they have unpaid fines. The bad actors exploit that fear, telling the victim they need to send the money right now or they’re going to be sent to court, Morse-Noland says. Basically, fraudsters rely on any scenario that puts a lot of stress on the person and forces them to act immediately without thinking it through or investigating.

As part of the Bank Secrecy Act, banks should have policies in place to detect any kind of suspicious transactions and include those on suspicious activity reports, Morse-Noland says. And as one example, institutions should use software that flags large transactions that are not typical for the account.

“For example, an elderly customer who is 85 years old and she takes $200 out every week for expenses and suddenly there is a withdrawal of $2,000. That is a red flag and a bank’s system should be set up to flag that this is unusual activity for this account,” she adds.

When such a flag occurs, a human employee can review the transaction, reach out to the customer to verify that they authorized that transaction. They can explain that they were buying their granddaughter a new car for her graduation gift, which explains the anomaly. Or they might say, “I found out I won a sweepstakes, but I need to pay the taxes on the sweepstakes before I can get my prize money.” Now the bank employee knows it’s a scam.

Delicate interactions

“Embarrassment and shame is a huge tool that scammers use to make sure that they can get away with it,” Morse-Noland says. “If a bank employee reaches out to a customer who they suspect is being exploited and that person tells them, ‘It’s none of your business,’ or ‘I’d rather not talk about it’ or seems cagey in some way, the employee shouldn’t push too hard — that’s not going to get them anywhere.”

But the employee should still report their suspicions on a suspicious activity report, she says. They can write that when they tried to verify the transaction, the customer was unwilling to give more information and seemed nervous – and that is part of what makes the transaction suspicious.

“If an employee can build an actual relationship with that customer, then they might be more willing to actually tell you what is going on because they trust you and they may be willing to tell you what’s actually going on,” Morse-Noland says. “Give your elderly customers space where they can come forward and feel like they won’t be judged, or they know they can always come to you with questions.”

Employees at financial institutions can be a “first line of defense” against elder financial exploitation, theft and scams, says Jill Briggs, head of the courseware development team at Simple Learning Systems based in Auburn, Calif. Financial employees are able to see when a transaction looks out of the ordinary, such as a request for a large cash withdrawal, money order or wire transfer, Briggs says. They may also see when a potential victim’s assets or personal property are being transferred or deeded away.

If an employee at a financial institution sees the signs of possible theft or exploitation happening and doesn’t report it, they can be faced with jail time, fines, or both as a result, she says In California, for example, failing to report comes with a fine of $1,000 and jail time of up to six months in a county jail.

“Because financial employees have a legal duty to report and could face penalties for not reporting, it’s critical for financial institutions to ensure their mandated reporters receive training,” Briggs says.

“Mandated reporter training can help financial employees understand the different types of financial abuse, the signs of abuse, and how to make a report if they suspect abuse.”

Financial institutions should have clear policies about how to handle these situations, which could include speaking to the customer and getting more information, bringing in a supervisor, alerting the fraud department, gathering more information, or filing a report before completing the transaction, she says.

Institutions should also have clear policies on how to educate customers about the risks for both in-person transactions and digital transactions, and how to notify customers about potential exploitation, even if the potential theft is at the hands of family members or caregivers.

“Bankers can help protect elderly people from losing the financial assets they’ve worked a lifetime to amass,” Briggs says. “When you come into contact with an elderly client or have access to their assets, you are in a unique position to spot signs of financial exploitation and protect the assets of your client before they become a victim.”

The front line’s role

Staff at financial institutions should be trained to recognize and act on verbal, behavioral and transactional red flags of financial exploitation, says Jilenne Gunther, national director of AARP’s BankSafe Initiative, an online training platform to help financial professionals identify and stop suspected exploitation.

BankSafe emphasizes the importance of frontline employees — such as bank tellers and member service representatives — to spot and stop suspicious activity before money leaves the account.

“Although we advise that employees always reference and comply with their individual institution’s reporting policies, research shows that interventions such as delaying suspicious transactions, refusing the transaction or putting a hold on the account transactions are valuable approaches for bankers to prevent exploitation in the moment,” Gunther says.

Underlying all these methods, BankSafe teaches the importance of separating the victim from the potential perpetrator and asking probing questions of the customer to slow down the transaction and further determine if the transaction is suspicious, she says. When trusted others are involved, there may be feelings of shame, embarrassment, fear of retaliation or simply not knowing that a crime has even occurred or how to report it.

“We know that in one out of every two times a frontline employee intervenes, they stop the exploitation,” Gunther says. “The power of frontline staff to protect older adults cannot be overstated. Staff should focus on empathy, understanding that victims may feel ashamed or fearful. Employees should treat consumers with dignity, offering reassurance and support rather than judgment.”

Educate your consumers

Financial institutions can help consumers by providing educational materials on recognizing and preventing exploitation, offering workshops and seminars on financial safety and framing discussions positively rather than scaring older adults, she says. AARP’s Fraud Watch Network, the consumer-focused arm of the association’s exploitation prevention programs, provides many of these materials on its website.

There are promising practices and areas for technological enhancement to curb exploitation, Gunther says. Financial institutions can leverage technology to prevent exploitation originating on digital channels through:

• Monitoring analytics: Detect out-of-pattern transactions, unusual account activity, or geographic discrepancies. For example, it can flag an illegitimately opened account, a warning for potential identity theft.
• Predictive analytics: Profile customer behaviors to flag deviations, such as irregular Social Security deposits, or predict vulnerabilities like cognitive decline. Models suggest that a sudden change in payment behaviors along with subprime credit scores can predict dementia more than two years before a physician discovers it.
• Proactive measures: Implement account freezes, transaction delays or tools to identify suspicious messages based on scammer templates.
• Immersive training: Better incorporate technology into the training and education space through immersive training experiences, in which the employee is put in the shoes of the potential victim through virtual reality. This also allows the frontline employees to empathize with the victim and better consider the circumstances which led to the attempted exploitation.

“Education alone won’t solve the problem, so it’s crucial that the financial industry and trusted others be a second pair of eyes — trained to notice the red flags of exploitation and step in on their loved one’s behalf,” Gunther says. “We encourage financial organizations to involve networks of support, such as appointed trusted contacts, when they are concerned about suspicious activity. This added layer of protection can be effective in stopping exploitation but also building trust with older consumers.”

Katie Kuehner-Hebert is a contributor to BAI.