News & Press: Fraud

Aging population, opportunistic relatives leading to surge in financial crimes against elderly

Thursday, March 24, 2016  
Posted by: Brian Monroe
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An aging population, desperate relatives still downtrodden by the economic downturn and fraudsters more readily realizing the vulnerability of older folks is leading to a surge in financial crimes against the elderly.

Now is the perfect storm for crimes against the elderly, putting more pressure on bank compliance teams to be more vigilant about certain transactions involving those in their golden years and also means that local, state and federal investigators must give more care to these cases and not dismiss them if the victim in question appeared to give their consent.

In tandem with the elderly population expanding comes a greater awareness by fraudsters and hacking groups that they can potentially get more money from older people and do so with less stolen information, in some cases only needing a phone number, address and a bank account statement. Investigators have noted that in some data breaches, the hackers parsed out the information by age to better manipulate older victims, through such things and penny stock pump-and-dump scams.

According to the Census Bureau's "middle series" projections, the elderly population will more than double between now and the year 2050, to 80 million. By that year, as many as 1 in 5 Americans could be elderly.

Most of this growth should occur between 2010 and 2030, when the "baby boom" generation enters their elderly years. During that period, the number of elderly will grow by an average of 2.8 percent annually, according to Census Bureau projections.

In Johnson County, Kansas, for instance, financial crimes against the elderly – such as a callous relative attempting to take over their accounts, liquidate investments or cash retirement checks – have exploded in recent years to encompass nearly 80 percent of all the financial crime cases that Tom Gottschalk works on. He is an investigator with the Johnson County District Attorney.

In many cases, the individuals victimizing older adults are “not career criminals,” said Gottschalk, who also has created training programs on how banks and others can better spot elder abuse.

“These are people who lost jobs, mid-level jobs, with mortgages, college tuition for kids and car payments, and their income fell off the table” during the economic recession that took hold in the late 2000s and for some, have yet to improve, he said.

“These people are desperate because their expenses far exceeded their income” and they are looking for some way to get out of the situation and not lose their homes or cars,” he said. “But unfortunately, that opportunity came in the form of an elderly relative with a lot of money.”

Most of the victims are over more than 70 or 80 years old and the major crimes against them include embezzlement, fraud, identity theft and welfare and insurance scams, Gottschalk said.


Senior Scam sign with sky background

For bank frontline personnel and compliance officers, there are some key questions they can ask to better uncover if an elderly person is being abused by a relative or fraudster. These inquiries would also be valid for other entities considered financial institutions, include brokerage firms and others that conduct financial transactions.

For tellers, customer service staffs:

  • Is customer accompanied by anyone else during deposits, withdrawals, and during access to their financial accounts.  Does the customer take the lead, or are they deferential to the companion?
  • Does customer withdrawals of funds change hands from customer to companion?
  • Is companion familiar to teller or customer service staff?  If not, is there an idea of their relationship to customer?
  • What is physical appearance of customer in terms of physical condition and dress?  Compared to historical contact with customer, are they dressed appropriately, or has their level of dress declined?  Are there any visible injuries to customer?
  • As for customer demeanor, are they normal compared to past appearances, or are they more withdrawn?
  • Is withdrawal and spending consistent with past withdrawal or spending patterns?  If it has increased, is there a logical explanation for the increase?
  • Has a person associated with the elder customer produced a durable power of attorney and begun transacting on the account?
  • Does elder customer show signs of confusion, or of being drugged?

“Some of the indicators above have innocent explanations, but many indicate elder financial exploitation. Part of the education process is to explore answers to questions like these, which will develop alternative answers that lead to avenues of investigation,” Gottschalk said.

Here are questions for compliance staff:

  • Has an elder customer with a stable account balance suddenly incurring NSF charges or low account balance?
  • Has an elder customer account shown a large increase in withdrawals and checks to unfamiliar vendors?
  • Do accounts of an elder customer show large transfers into the account from investment accounts, only to be quickly withdrawn?
  • For an elder customer with no or infrequent ATM withdrawals now showing an increased pattern of ATM withdrawals?
  • Has an elder customer with consistent spending patterns now showing a sharp increase in spending?
  • If your institution has issued credit cards to an elder customer, is there a sharp increase in card usage, and a materially larger balance in the account?   Are the vendors being paid via the card consistent with customer transaction history?
  • Have any pension or social security deposits been redirected to a different account that has a joint account holder unfamiliar to the staff?
  • For elder customers with trusts, has an unfamiliar party been appointed trustee by the customer?
  • Has Adult Protective Service social workers made inquiries about the customer and their accounts?

Some of the most “astute reports of elder financial exploitation come from bank investigators who have been approached by tellers and customer service staffs to express their concerns,” Gottschalk said.


elderly problem getting worse

States, regulators step in to protect growing vulnerable populace

The issue of elder abuse is also on the mind of the Financial Industry Regulatory Authority, (Finra), which recently proposed a rule that would allow credit unions and other financial institutions to put temporary holds on accounts belonging to some members they suspect are being financially exploited. Finra is the nation’s chief self-regulatory body for the securities sector.

The rules would permit 15-day holds on accounts, or potentially longer, held by members who are either 65 and over or over 18, and whom an institution “reasonably believes” have mental or physical impairments that render them unable to protect their own interests.

The North American Securities Administrators Association (NASAA) proposed earlier this year a mandatory suspected elder financial abuse reporting requirement for advisors and broker-dealers, as well as their supervisory, compliance and legal professionals, according to Financial Advisor.

The requirement applies if there is a “reasonable belief” that abuse has or is about to occur against anyone who is 65 or older or who has a severe mental impairment. Supervisors were added to the mix to let firms help manage the abuse reporting process, said Montana Deputy Securities Commissioner Lynne Egan.

Washington State, Delaware and Missouri have laws on the books similar to what NASAA is proposing. Bills like the NASAA model have been introduced in the Indiana and Nebraska state legislatures this year.

The issue of elder abuse is likely just as rampant in areas in the United States popular with retirees, such as South and Central Florida. The most populous states are also the ones with the largest number of elderly, according to the US Census Bureau.

In 1993, the most recent data available, nine states had more than one million elderly. California, with 3.3 million, led the way, followed by Florida, New York, Pennsylvania, Texas, Ohio, Illinois, Michigan, and New Jersey.

real grayest states

Compliance teams, investigators getting on board

That is why some banks are teaching staff how to do cognitive assessments on new and current customers or trying to discern mental capacity before allowing a large, out-of-scope transaction.

So while compliance officers may see aberrant transactions in certain accounts of elderly customers, it may appear that no crime has been committed because the accountholder seemed to sign off, but that is where extra training to understand the nuances at play are critical, Gottschalk said.

If the compliance person suspects someone is being controlled or manipulated, they can ask more questions of the individual claiming to represent the elderly person and even halt the transaction and give a call to their  law enforcement contacts.

On the investigations side, these kinds of cases can be a challenge to prosecute because, at first blush, an elderly person may have verbally consented or even put in writing they are signing over their funds or accounts.

Prosecutors in Johnson County are being trained to engage in these assessments, a critical advantage for investigators and prosecutors, allowing them to more completely be on the same page in these cases, according to an official at the Johnson County District Attorney.

Historically, across the country, it has been an issue for law enforcement and prosecutors to recognize the importance of the cognitive functioning of victims in these cases. But with the training occurring and focus on these kinds of cases nationwide, the question of the ability for victims to give consent will become less and less of an issue, according to the official.

*This story has been updated.*


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