22 April 2024

Combating Elder Financial Exploitation: Key Insights for GRC Professionals

Elder financial exploitation (EFE) has emerged as a significant threat, with the Financial Crimes Enforcement Network (FinCEN) receiving reports of over $27 billion in suspicious activity between June 2022 and June 2023. As the population ages, this issue becomes increasingly pressing for financial institutions, regulators, and society.

MBK Search explores FinCEN’s latest EFE analysis and has pulled out these key points from the report:

Banks at the Forefront of EFE Detection

Banks have been leading the charge in identifying and reporting EFE, with 72% of all EFE-related Bank Secrecy Act (BSA) filings coming from these institutions. Two banks alone accounted for a third of all filings, highlighting the banking sector’s critical role in combating this threat.

Scams Outpace Theft in Reported EFE Activity

While elder theft, perpetrated by known and trusted individuals, is a big concern, elder scams by strangers make up the most reported EFE activity. Approximately 80% of EFE-related filings involved scams, with account takeover being the most frequently cited typology.

Adult Children: The Most Common Perpetrators of Elder Theft

Regarding elder theft, adult children of older parents were identified as the most frequent offenders in BSA reports. This troubling trend underscores the need for heightened awareness and prevention efforts within families and communities.

Unsophisticated Methods Pose Significant Challenges

Perpetrators of EFE often rely on unsophisticated means to steal funds while minimizing direct contact with financial institution employees. Tactics such as using compromised identifying information, guessing passwords, or sending spam emails make detection and prevention more difficult.

Key Discussion Points for Governance, Risk, and Compliance Professionals

The rise of EFE presents several critical issues for professionals in GRC:

  • Implementing machine learning and artificial intelligence tools to enhance transaction monitoring and detect anomalous patterns associated with EFE. For example, HSBC has successfully employed AI to identify potential money laundering activities, which could be adapted for EFE detection.
  • Establishing dedicated EFE investigation teams within financial institutions equipped with specialized training and resources to handle these complex cases. Bank of America’s Elder Fraud Prevention Team exemplifies this approach, focusing on protecting older customers from financial exploitation.
  • Develop robust data analytics and visualization tools to identify EFE risk factors and trends, such as suspicious activity by geographic location, age group, or transaction type. JPMorgan Chase’s “Fraud Prevention and Monitoring” system leverages data analytics to detect and prevent fraudulent activities.
  • Enhancing customer due diligence (CDD) and knowing your customer (KYC) processes to identify potential EFE risk factors, such as sudden changes in transaction patterns or the involvement of high-risk individuals. The FFIEC’s “BSA/AML Examination Manual” guides effective CDD and KYC practices.
  • Strengthening information sharing and collaboration among financial institutions, regulators, and law enforcement through initiatives like FinCEN’s “314(b) Program,” which allows financial institutions to share information related to suspicious activities.
  • Implementing comprehensive employee EFE training programs, including red flags, reporting procedures, and escalation protocols. The AARP’s “BankSafe” program offers training and resources for financial institutions to prevent and detect EFE.
  • Developing and distributing educational materials and resources to older customers and their families, focusing on EFE prevention, common scams, and protective measures. Wells Fargo’s “Elder Financial Abuse Prevention” webpage provides a model for this approach.
  • Establishing transparent reporting and escalation procedures for employees who suspect EFE, ensuring that potential cases are promptly investigated and reported to the appropriate authorities. The Consumer Financial Protection Bureau’s “Reporting Elder Financial Abuse” guide outlines best practices for reporting suspected EFE.
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