Risk indicators for senior financial fraud and abuse: new red flags

Elder financial abuse is a terrible crime, and it has not gotten nearly the attention it deserves. Today the Consumer Financial Protection Bureau (CFPB) issued a important report to financial institutions about what they can do to spot this issue. The World Privacy Forum has testified about senior identity theft — including financial and medical forms of the crime. It is a real problem, with big numbers.

The CFPB discussion of senior financial fraud, including identity theft is helpful and practical. In its report, Recommendations and report for financial institutions on preventing and responding to elder financial exploitation, the bureau recommended that if financial service providers notice address changes followed by account changes, or requests to send account statements to a third party address, that these are flags for identity theft. These indicators hold true in our experience with the issue. One of the first thing that tends to happen in serious cases of identity theft is the change of address, and this is often true for medical identity theft, too.

The CFPB noted clusters of risk indicators, based on their research:

Transaction pattern changes:
Abrupt increases in withdrawals; new spending patterns following the addition of a new authorized user; atypical ATM withdrawals; unusual gaps in check numbers.

Identity theft and coercion:
Address changes followed by account changes; new third party speaking for the older adult; older consumer is confused by or unaware of account changes; requests to send account statements to a third party’s address.

Behavioral changes:
Older consumer appears newly distressed, unkempt, or unhygienic; older consumer mentions lottery or sweepstakes opportunities or winnings; older adult inquires about international wire transfers.

If financial institutions see these red flags, they do not need to be able to prove beyond a doubt that senior fraud or abuse is occurring, they need only “reasonable suspicion” to start an investigation. Adult Protective Services (APS) is a key reporting focus for issues. Each state has different qualifications for intervention by APS.

In some states, a senior must meet an age qualification (60, or 65, for example.) In some states, seniors must also meet an eligibility criterion of having a condition that diminishes their capacity. In a few states, APS covers adults from 18-59. The national association of Area Agencies on Aging can help find local resources. The Eldercare Locator website, which is a government website, is loaded with information and resources to help seniors or caregivers with help. www.eldercare.gov

The CFPB’s red flag risk indicators are intended for financial institutions, but they are excellent updated flags that everyone should be aware of. I agree with the CFPB approach that identity crime indicators are best seen in clusters, and I find this a good way to begin approaching these problems. I would add to the CFPB list below that medical identity theft is a very serious issue for elders, in addition to the financial crimes. Please see our Medical ID Theft FAQ for more information about that. Seniors are at high risk of medical identity crimes in part due to the ease of abuse of public insurance. Changes of address and uncharacteristic medical billing are among the indicators of trouble for this crime, which can overlap with financial fraud.

Complete list of CFPB’s elder risk indicators

This list is from CFPB’s report Recommendations and report for financial institutions on preventing and responding to elder financial exploitation.

A. Interactions with older consumers, caregivers and other third parties

  1. A previously uninvolved relative, caregiver or friend begins conducting financial transactions on behalf of an older consumer—or claims access or privileges to the consumer’s private information—without proper documentation
  2. An older consumer associates with new “friends” or strangers
  3. A caregiver or other third party shows excessive interest in the older consumer’s finances or accounts, does not allow the consumer to speak for him or herself, or is reluctant to leave the older consumer’s side during interactions with the financial institution
  4. An older consumer exhibits an unusual degree of fear, anxiety, submissiveness or deference to a caregiver or other third party
  5. An older person expresses excitement over a financial opportunity, prize, or windfall
  6. An older consumer lacks knowledge about his or her personal financial status or accounts, or is reluctant to discuss financial matters
  7. An older consumer appears to neglect or experience a decline in appearance, grooming, or hygiene

B. Account activity

  1. Large increases in account activity, such as daily maximum currency withdrawals from an ATM
  2. Large gaps in check numbers, or “out of sync” check numbers
  3.  Uncharacteristic non-sufficient funds activity or overdrafts
  4. Uncharacteristic debit transactions (including unusual ATM use)
  5.  Uncharacteristic lapses in payments for services
  6. Disregard for penalties when closing accounts or certificates of deposit
  7. Abrupt changes to financial documents, such as a new power of attorney, a change to a joint account or a change in account beneficiary
  8. Excessive numbers of payments or payments of large sums to a caregiver or third party
  9. New account use soon after adding an authorized user
  10. Statements mailed to an address separate from customer’s residence 11. New activity on an inactive account or joint account
  11. Signatures that do not match or appear suspicious
  12. Uncharacteristic requests to wire money

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–Pam Dixon