Yesterday, the Consumer Financial Protection Bureau published a report on the issues and trends revealed through Suspicious Activity Reports (SARs) on elder financial exploitation (EFE). In addition to reviewing the data provided through SARs, the Bureau recommends steps that financial services institutions – including both depository institutions and money servicing businesses – can take to protect older consumers.
Rise in SARs Related to EFE
According to the report, EFE is a widespread problem and the most common form of elder abuse. As of April 2013, federal law mandates that financial institutions report suspicious activities through SARs. SAR filings quadrupled from 2013 to 2017. In 2017, financial institutions filed 63,500 SARs related to $1.7 billion in suspicious activity. It is likely that many incidents go unreported, meaning this number represents only a small fraction of actual EFE.
Missed Opportunity to Help Consumers
The report notes that while many financial institutions are filing SARs, fewer than one-third of these SARs are reported to law enforcement or adult protective services. According to the Bureau, “this is a missed opportunity to increase investigation and prosecution, and make it more likely that victims will receive appropriate services.”
SARs from Depository Institutions and Money Servicing Businesses
Both depository institutions and money servicing business – including money transmitters, who accept funds from one person and transmit those funds to another location or person – must report suspicious activities. In 2013, a higher percentage of SARs came from depository institutions. However, this changed in recent years. In 2017, 58% of SARs were filed by money servicing businesses.
Types of EFE
The type of reported EFE activity varied depending on the reporting institution. The report classifies suspicious activities as either scams or non-scams. Scams include schemes involving a transfer of money to a stranger for a promised benefit that the older adult did not receive. Non-scams include activities such as theft by family members, account takeovers, and identity theft. At depository institutions, non-scam activities see the bulk of reporting, whereas scam activities are more prevalent at money services businesses.
Bureau’s Recommendations to Financial Services Institutions
The differentiation discussed above, according to the CFPB, means that interventions can be tailored accordingly. The Bureau recommends the following to the two different types of financial institutions.
For money services businesses:
Money services businesses could prevent more losses by blocking money transfers to people who previously aroused suspicion, providing conspicuous warnings about current scams on money transfer forms, and thoroughly training all agents, from the large chains to the small stores. MSBs could assist victims of fraudulent activity by refunding money transfer amounts and associated fees when appropriate and by ensuring that agents and frontline employees are complying with anti-fraud programs and controls.
For depository institutions:
Depository institutions could prevent or limit losses by improving fraud detection technology to reflect transaction patterns most prevalent when older account holders become victims and by using machine learning to obtain specific and timely information indicating fraudulent activity. Depository institutions can promote use of alerts on checking and savings accounts, and can offer services to enable trusted relatives and friends to help detect elder financial exploitation. Financial institutions, regulators and policymakers could collaborate to identify and consider any changes needed to enable depository institutions to hold transactions while investigating suspicious activity. They might want to look at state activity in this arena. Several states allow transaction holds when staff observe financial exploitation and report it to APS and/or law enforcement. These states provide timeframes for the transaction holds and provide immunity for institutions and employees who take these protective steps.
As the Bureau notes, elder abuse in the form of EFE is a widespread problem and the SAR data shows only the tip of the iceberg. This means that this issue could see the spotlight soon and this might be a great time for debt collectors and other financial institutions to revisit their policies, procedures, and training materials. While creditors often provide requirements for their debt collection agencies to follow for reporting suspicious activity, it never hurts to do a quick pass over those requirements to ensure consistency with the Bureau’s guidance.
By speaking directly with consumers, a well-trained collector is in a position to detect if something feels off about the conversation and put the wheels in motion to potentially stop EFE in its tracks. This, unfortunately, is undermined by the authentication hurdles faced uniquely by debt collectors when they attempt to communicate with consumers. A solution to the authentication issue could be an extra step towards protecting older consumers from EFE.