How can banks detect elder financial explotiation?

Financial abuse of the elderly

Elderly financial exploitation can be classified in two broad categories: 

1. exploitation by a person known to a victim: a family member, acquaintance, caregiver, person acting with power of attorney, or court appointed fiduciary.

2. exploitation by a stranger: a scammer, con artist, fraudulent salesperson, or contractor. 

Elder financial exploitation by a person known to the victim

When an elder is financially abused by a person known to them, it’s usually someone they rely on for support with day-to-day living.  Caregivers and family members have an intimate understanding of the senior’s personal life, which they abuse for personal gain. 

It starts gradually. Abusers may alter legal documents, such as a will or power of attorney, to gain control of the senior’s assets and financial accounts. Then, the elder is forced or manipulated into signing over their assets, which leads to sudden and unexplained withdrawals or changes in banking behavior. Small amounts are siphoned off bit by bit, but the results can be catastrophic. 

Elder financial exploitation by a stranger

Though losses are usually higher when the abuser is known to the victim, elderly people frequently fall prey to exploitation by strangers.  

Seniors are seen as more trusting, naive, lonely, and easily confused; some are compulsive, less adept with technology, and more likely to believe the ‘pitch’ of the con artist; many have assets and savings. As such, elderly people have become a particularly lucrative target for scammers, who use a wide range of tactics to trick their victims. The following make up around 75% of elder financial exploitation cases: 

• Romance scam – a perpetrator establishes a romantic relationship with an elder and convinces them to send money for plane trips to visit them, problems with overseas businesses, and foreign taxes or fake hospital bills. In some cases, like pig butchering, the abuser is also a victim.
• Emergency/person-in-need – a perpetrator convinces an elder that their loved one has been seriously injured or is in jail and needs their money quickly for medical treatment or bail. 
• Lottery scam – a perpetrator calls an elderly person and informs them about winning a lottery or sweepstakes and demands taxes or other fees before the victim can receive the prize. Victims are often tricked into sending multiple transfers to cover other administrative or processing costs. Instead of sending money, elders may be requested to provide credit card numbers or bank account information as part of the verification or payment process.
• Investment scam – most scams involve sending money abroad to a beneficiary, whom an elder has no relationship with. Unaware victims are known to send money in amounts ranging from $500 up to above $500,000 over time.
• Pig butchering scam – victims are tricked into making fake crypto investments, and then recruited by the criminals to scam more vulnerable people with the same fake investments. Scammers usually target the middle aged, but elderly people seeking new connections while grieving a life event (such as a divorce, or the illness or death of a partner) are increasingly falling victim. 

Where does the money flow?

Money service businesses (MSBs) are most often used to transfer the proceeds of the cross-border elderly scams. Western Union, for example, can be used to send money overseas with very few identification checks.  

Scammers trick victims into sending money with MSBs so they can immediately withdraw the proceeds in cash. This prevents victims from recalling the funds after they realize they have been scammed. Many con artists operate or conduct money-receiving procedures in African and Asian countries. 

Similarly, gift cards are used to for anonymous money transfers. Gift cards are easy to find and buy online and at big retail stores and have fewer protections. The scammers only need the gift card code – not the physical card – to extract the funds of make a purchase. 

Once the elderly person has been persuaded to purchase a gift card and reveal the details, the scammers immediately cash out, often from an overseas location. The victim has little to no chances to get it back. 

Perpetrators may also use elderly people as money mules to avoid triggering AML/CFT controls. Criminals use coercion, deception, or monetary incentives to make elders transfer money between accounts. 

The job of the bank is to understand the patterns of behaviour and the follow the flow of money. 

The impact on victims

Elder financial exploitation can lead to catastrophic financial losses and significantly impact the well-being and financial security of the elderly. 

Those who have been victimized frequently find themselves in a position where they struggle to cover their expenses. Exploiters strip their victims of assets and income to the point where many face eviction notices. Those who are being targeted often have a limited understanding of financial matters and feel overwhelmed when discussing their financial situation. 

But the repercussions extend far beyond monetary loss. Elder abuse victims face a 300% increased risk of mortality, deteriorating health, and profound psychological distress. The COVID-19 pandemic further exposed elderly individuals to greater risk. 

Sadly, those who have been swindled once are at a greater risk of being scammed again. Scammers keep track of those who have fallen in the past and distribute the lists of potential leads to other con artists. It is common for some seniors to be victimized multiple times. 

Elders are the largest and fastest growing demographic. The situation will get worse unless we act. 

How can banks protect the elderly from financial abuse?

Banks can play a key role in detecting elder financial exploitation. Every channel of exploitation leaves a trail of data in a banks system, which they can use to follow the money. 

Banks also hold demographic and socio-economic information on their customers, all of which can be used to detect victims, offenders and money mules. 

Banks have a huge opportunity and duty of care to protect individuals who are trusting them to provide security for their assets.  

By understanding the ‘personas’ most likely to be targeted by scammers or abusive caregivers, banks can tailor their monitoring systems to flag activities that deviate from normal banking behaviors for these specific groups. 

Sudden large withdrawals or unusual transfers by an elderly customer, for example, can be a significant red flag. Banks can monitor for these red flags and then use reference data to understand if there are other warning signs of elder abuse. 

If there are, banks can help to stop payments from being made and notify law enforcement. 

What does this look like in practice?

To effectively incorporate these strategies, banks must ensure that their staff, especially those in customer-facing roles, are well-versed in the signs of elder financial exploitation and understand how to respond appropriately when they suspect abuse. 

They must leverage technology to deploy advanced analytics and machine learning tools to analyse transaction patterns and customer behaviour for signs of exploitation, using persona-based typologies as a guide. 

Then, banks must work closely with law enforcement and social services to report suspected cases of financial abuse, ensuring a coordinated response that prioritizes the safety and well-being of the victim. 

And they should offer resources and workshops to help the elderly and their families recognize and protect themselves from financial scams and exploitation. 

By adopting these strategies, banks can play a critical role in safeguarding their elderly customers from financial abuse, ensuring their financial stability and fostering a trusting relationship that extends beyond mere transactional interactions. 

The RedFlag Accelerator

Less than 1% of financial crimes are convicted. The current system is not working. We need a better way to detect elder abuse. This is where the RedFlag Accelerator comes in. 

The core innovation of the RedFlag Accelerator is its persona-based typology system. By categorizing those involved in financial transactions into distinct personas—victims, perpetrators, facilitators, and money launderers—the system helps banks to spot suspicious behaviors and transaction patterns indicative of elder financial exploitation. This approach not only sharpens the focus on what’s relevant, but also helps banks and AML vendors to understand the complex dynamics of financial abuse. 

One of the standout features of the RedFlag Accelerator typologies is its ability to help banks significantly reduce the volume of false positives that plague traditional rule-based systems. By doing so, it ensures that financial institutions can concentrate their investigative resources on high-probability alerts, thereby increasing the efficiency of detection efforts 

The RedFlag Accelerator aims to not only detect but also educate, offering a comprehensive guide that outlines the patterns of behavior, transactions, and risk factors associated with elder financial exploitation. 

To learn more, download our free elder abuse investigation guide and follow six easy steps to help you improve your detection of elder abuse.