Today, baby boomers are still one of America’s largest demographics, with the U.S. Census estimating them on target to represent more than 20 percent of the nation’s total population by 2029. More so, this generation is quickly adding to our elder population. According to The Alliance for Aging, since 2012, baby boomers have been turning 65 at a rate of about one every 10 seconds (or about 10,000 each day), and by 2030, it is predicted that the number of people 65 and over will triple to approximately 70 million.
This generation is also one of wealthiest in history. An American Bankers Association report showed that more than 60 percent of the surveyed bank customers are 50 and older, and hold 70 percent of the overall deposit balances. Similarly, recent studies from Nielsen have suggested that this group could control 70 percent of the all disposable income in the next five years.
Unfortunately, as our elder population grows, so too do the cases of elder financial exploitation. According to The Consumer Financial Protection Bureau (CFPB), one in five older consumers have reported being a victim of some form of financial abuse, and the numbers are rising. In Georgia alone, the Department of Human Services said there has been a 207 percent increase in reported cases of abuse from 2016 – 2018. The CFPB has estimated that the annual costs incurred due to these losses to be anywhere between $2.9 and $36 billion, but it is often difficult to determine actual instances of abuse from what could be a random change in an elder customer’s normal banking behavior (such as an unforeseen repair bill or medical expense).
While fraudsters tend to follow the money, tracking – and proving – actual instances of exploitation or abuse can be challenging. This can be especially difficult as more and more of the abusers are those closest to the victims, like children, family or other trusted caretakers. Rather than dedicated or premediated, these abuses are often opportunistic in nature and unless repeated, can go unnoticed and unreported.
A growing number of financial institutions are recognizing the need for better protection and that they are in a unique position to both identify and help mitigate potential exploitation. With the Senior Safe Act, becoming law earlier this year, banks now have some federal guidance for training staff, as well as protection when it comes to risks associated with reporting these cases to authorities. Aside from a few, specific examples, such as being directly involved with suspected cases, banks and their employees are immune from any civil liability or criminal prosecution. However, even with the new federal law, the regulations themselves can still vary from state-by-state. So how can banks help?
Identifying the red flags and other warnings
Generally, there are two lines of detection within a bank that can be critical when it comes to protecting seniors – frontline, customer-facing staff, and back office operational employees.
When it comes to spotting odd behavior or changes in banking patterns, tellers are often the first line of defense. On the bank’s frontline, their role offers them the perfect opportunity to see firsthand the issues that can arise when someone is attempting or actively taking advantage of an older customer. Seniors tend to be fairly strict in their routines, often sticking to particular days or times they visit a branch, usually conducting the same or similar transactions each time, and any change in these patterns should draw attention. Activities such as larger than usual withdrawals or increased visits, or changes like new and/or unfamiliar faces accompanying them, could be potential warning signs and worth considering.
Using standard customer service questions to follow up on any suspicions can often be enough to start a dialogue and help determine if everything is fine or, conversely, could trigger other red flag behaviors. If questions such as: “How’s everything going today?” or “Anything new going on?” causes an elder account holder to become anxious, frustrated or angry, this could be a strong sign that something is wrong. Likewise, abrupt changes in demeanor or a sudden shift in control or account decision making given over to a family member or caregiver could indicate a problem, as well.
While not on the frontlines, a bank’s back-office personnel have access to the broader picture when it comes to account activity. Because they can look at an account over its entire lifespan, they can often spot odd or erratic account behavior precisely. If for example an account holder’s balance began to decrease once someone new moved in with them, or if they added a new person to their account, staff could see the correlation and flag the account for further monitoring or ultimately report the activity.
One of the most vulnerable points for abuse is through the ATM. Because no live interaction is necessary, abusers can withdraw large, steady amounts of cash over a period of time. An increase in overdraft charges can be an especially common red flag for this type of abuse. Often, this signals that someone else could be withdrawing the money as soon as it is deposited. These pattern changes can be monitored by operational staff, who should flag them as unusual behavior. This could help to stop the abuse and protect the customer.
Mitigating the abuse – now and in the future
Unsurprisingly, training and account monitoring are critical for preventing these kinds of exploitation. Elder abuse is a sensitive subject, and staff should be trained on all aspects of the crime; everything from its prevalence, to spotting the red flags, and finally the steps necessary to help review, rectify or report the instances internally. Additionally, many banks are actively educating their customers on the dangers and warning signs of fraud, as well as how to report it themselves.
Providing the bank’s board of directors with all the necessary data and fact-based evidence is crucial. This will allow information to be disseminated quickly to everyone, giving each area of the bank the ability to view any potential issue from all angles and respond in different ways based on their role.
From a regulatory perspective, it is important the bank understands what examiners are looking for when it comes to fraud prevention. Though the Safe Senior Act may offer banks new incentives for developing a policy or procedure, as well as conducting training, it is still not technically required. However, regulators do strongly encourage it, and with banks already having a process in place for reporting suspicious activity, this type of reporting should follow closely.
Instances of elder financial abuse and exploitation are becoming more pervasive as our senior population continues to grow. Sadly, while it may get worse before it gets better, awareness is steadily growing, as are the tools for combating it. Today’s financial professionals, often the first responders, play a major role in helping to curb these crimes. As more and more banks adopt best practices for identifying, mitigating and reporting the abuses and stopping the predators, both the industry and the customers will benefit.
Kenneth Douglas is a CPA and compliance manager at PKM, an Atlanta-based accounting and advisory firm serving public and private organizations in the financial services, insurance and technology industries.