The Financial Crimes Enforcement Network (FinCEN), the arm of the U.S. Treasury that administers the anti-money laundering (AML) laws of the United States, just released the results of a six-year (2013-2019) study of "elder financial exploitation," based on an analysis of Suspicious Activity Reports (SARs). The results show a dramatic increase in SAR filings concerning attempts to separate senior citizens from their retirement funds and an upward trend in the yearly dollar amount of the reported suspicious activity.

Most importantly, FinCEN's findings point to the need for elders, their caregivers and families, and financial institutions to exercise care to protect our senior citizens against – in particular – money transfer scams and thefts through depository institutions, as summarized below.

This is not a new issue – in 2018, for example, 36 states and Puerto Rico addressed elder financial exploitation in their legislative sessions. The Consumer Financial Protection Bureau (CFPB) has issued both consumer and financial institution (banks, thrifts, and credit unions) guidance on numerous occasions. On the securities side, the Financial Institution Regulatory Authority, Inc. (FINRA) has issued practical guidance for protecting senior investors and routinely holds senior investor protection conferences. The Department of Justice has an "elder abuse resource roadmap – financial" to guide reporting of scams and theft directed at senior citizens.

Background

What is a Suspicious Transaction Report, or SAR?

A SAR is a report, filed by any entity subject to the AML laws of the U.S., of "any suspicious transaction relevant to a possible violation of law or regulation." In general, these are transactions that:

  1. Involve funds from an illegal activity or activity conducted to hide or disguise funds gained from illegal activities;
  2. Is structured to evade any reporting requirements;
  3. Serve no useful purpose; or
  4. Facilitate criminal activity.

Who files a SAR?

SARs are filed by financial institutions subject to FinCEN's AML regulations. These include banks, securities brokerages, credit unions, money service businesses (MSBs), and a number of other types of entities active in the financial world. Each is required to have an AML program designed to guard against anyone using a financial institution to facilitate money laundering or terrorist financing. A major requirement of any AML program is to monitor financial activity for, and to report on, suspicious transactions.

SARs are filed with FinCEN electronically. The form has a number of boxes, so that the filer can quickly communicate to FinCEN information regarding the type of suspicious activity. FinCEN's analysis of SARs filed between October 2013 and August 2019 is the basis of its report and this study.

What are the threats?

Over the six-year period, both the number of SARs and the dollar value of the attempted or accomplished illegal activity grew. FinCEN attributes the increase in SARs to several causes, including the fact that, as noted above, both state and federal regulators have given elder financial fraud more attention over this time period. Regardless, elder financial exploitation SAR filings reached nearly 7,500 per month in August 2019. The amount of money at risk rose even more starkly, from $2.2 billion in 2014 to over $5 billion in just an eight-month period in 2019.

Time Period

Suspicious Activity Amount Total

October 2013-December 2013

$821,928,748

2014

$2,205,167,799

2015

$2,243,662,333

2016

$2,983,001,672

2017

$4,802,762,284

2018

$3,738,805,523

January 2019-August 2019

$5,048,710,020

Total:

$21,844,038,379

Specific Risks

The overwhelming number of elder financial exploitation SARs were filed by two types of entities: money services businesses (MSBs) and depository institutions (banks and credit unions). A much smaller number were filed by securities companies and casinos. The remainder of this paper focuses on the types of exploitation associated with MSBs and depository institution SARs.

Money Services Business-related scams 

MSBs fall into a number of categories: money transmitters sending funds from point to point in the United States; remitters sending money from the United States to relatives in home countries (for example, over $36 billion was sent from the United States to Mexico in 2019); check cashers; dealers in foreign exchange; and a provider of prepaid access. FinCEN's analysis showed that senior citizens most often sent money "abroad to receivers with whom the elders had no in-person relationship." The average amount of the scam was $25,432, and the median was $6,105.

Three major types of activities leading seniors to send money to persons unknown make up just over 75% of the scams:

  1. Romance: Scammers establish a romantic relationship with their victims and then request money for "hardships" they experience, or to "visit" the victim (but never do). (26%)
  2. Emergency/Person-in-need: Scammers prey on victims' emotional vulnerability by claiming to be a loved one who needs money quickly to help with an emergency. (25%)
  3. Prize/Lottery: Scammers coerce their victims into sending an "import tax" or "fee" in order to receive the money they have supposedly won in a lottery. (25%)

The clear lesson to be drawn from FinCEN's data is that no one should ever send money to an individual not known to the sender. Even if the person asking is begging for money to be sent immediately on behalf of a favorite niece supposedly in jail in Portugal (the one this author received), stop and check. The odds are very high that the request for money, whether to have the love of one's life travel to meet or to secure a lottery prize in seven figures, is bogus.

Depository institution theft

Unlike MSB scams where the scammer and victim are unknown to each other, depository institution theft most often involves family members or non-family member caregivers. Frequently, the victim is suffering dementia or other incapacitation.

In 46% of the SARs filed during the six-year period ending in August 2019, the reported elder theft involved a family member of the victim. In almost 20% of the cases, the thief was a non-family caregiver to the victim.

The amounts stolen or at risk of being stolen ranged from $52 to $1,186,437. As FinCEN points out, frequently the thefts occurred over time and in small amounts. But—and this is an important but—the total amount stolen or threatened is frequently a substantial amount of a senior citizen's assets.

Impact on senior citizens

The median amount at risk in scam-related SARS is $6,105, and in theft-related SARS it is $15,964. These amounts are 16% and 41% of the median income of households composed of individuals 65 and older. As FinCEN emphasizes, each person or entity in contact with a senior citizen has an obligation to help project against elder financial exploitation by (1) stopping it from occurring by asking appropriate questions and (2) reporting it so that law enforcement can act, and regulatory bodies can provide better guidance to prevent elder financial exploitation.