SAMPLE ARTICLE: Montana Commissioner Warns of Elder Financial Fraud and a Look at this Growing Problem
Montana’s Commissioner of Securities and Insurance, Troy Downing, recently gave a presentation on Elder Fraud, which was covered by the Sidney Herald in an article written by Greg Hitchcock dated August 23 and updated on August 25, 2023. A few of the statistics cited in the article caught our attention. Here is additional context to this astonishingly big problem.
Commissioner Downing was promoting the work of his Office’s Financial Abuse Specialist Team. A brochure for the program is posted on the website. That document states that “Financial Abuse Costs Seniors $36.5 billion in the United States each year.” In the presentation, Commissioner Dowling reportedly said that “Seventy five percent of fraud is against seniors.” He went on to say that just one in 44 cases of fraud go unreported.” The first seemed quite high and the second quite low (so low that it appears to have been a misquote or he misspoke as it seems more likely that one in 44 are reported rather than unreported.) We were unable to confirm with the Commissioner prior to publication.
When looking for a source for the exact numbers in the presentation, it appears they may have come from a 2019 CNBC article written by Sharon Epperson and Jessica Dickler. They report that “Various studies estimate that seniors in the U.S. are scammed out of anywhere from $3 billion to $37 billion a year. … only 1 in 44 cases of financial abuse ever comes to light, according to National Adult Protective Services Association, or NAPSA.” The 1 in 44 statistic remains on the organization’s website today. In addition, it states that 90% of abusers are family members or “trusted others.”
To put some context around these numbers, we consulted the FBI’s Elder Fraud Report 2022 (FBI Report) and the Federal Trade Commission’s 2022 consumer fraud data. The Federal Trade Commission (FTC) has an interactive tool that provides very interesting data, by age group. There are some differences that may impact how insurance fraud might be more likely to occur for those in the three “senior” age groupings (60-69, 70-79 and 80+). For example, for the 20-29 age group, fraudulent contact is most often made through social media and the fraud is perpetrated most often through a payment app or service. However, for the three groups of seniors, contact is most often made through social media for the 60-69 group, and a phone call for the 70-79 and 80+ age groups. The payment method for all three is most often credit cards.
The FBI Report focuses on internet crime that is reported to the agency via its Internet Crime Complaint Center (IC3), so the type of criminal activity is more limited, but the focus is exclusively on fraud against people who are elderly. In the introduction, the FBI Report states, “In 2022, total losses reported to the IC3 by elderly victims increased 84% from 2021. Tech and Customer Support schemes continued to be the most common type of fraud reported, with 17,800 complaints filed by victims over 60. Monetary losses due to Investment Fraud reported by victims over 60 increased over 300%, more than any other kind of fraud, largely due to the rising trend of crypto investment scams. In almost every crime type tracked by the IC3, losses involving cryptocurrency increased. Overall, cryptocurrency-related losses reported by the elderly increased by 350%.” Remembering that only about one in 44 frauds get reported, these numbers are likely just a small fraction of the actual fraud perpetrated against people over 60.
This is the graphic the FBI Report uses at the beginning to illustrate the size of the problem.
While their data suggests the number of victims over 60 was highest during the peak 2020 COVID-19 year and has dropped significantly since then, the size of the losses has grown dramatically.
Unfortunately, the FBI Report does not have a separate line item for insurance fraud when it lists the various crime types. A word search for “insurance” results in no hits in the FBI report. But within the categories that are listed, insurance fraud can occur in most. For example, “Tech Support” is by far the fraud that impacted the most complainants over 60 in the FBI Report.
Where the FBI report explains what they mean by “Tech Support” they also bring in Customer Support and Government Impersonation. And here they note that call centers “overwhelmingly” target those in the over 60 age group. “Victims over 60 lost more to these scams than all other age groups combined, and reportedly remortgaged/ foreclosed homes, emptied retirement accounts, and borrowed from family and friends to cover losses in these scams. Almost 100 elderly victims reportedly lost over $1 million to these scams, while the majority lost between $1,000 and $10,000.”
As insurance becomes more based on technology, this becomes more of a concern. “While the number of victims and losses from Government Impersonation scams are significantly lower, the fraud tends to occur over a longer period as it takes the victim longer to realize they are caught in a scam. Tech and Customer Support scammers take advantage of victims’ unfamiliarity with technology, online banking, and newer payment methods, like cryptocurrency, to quickly take as much money as possible. It is not uncommon for the scammers to execute a combination of the two scams or re-victimize a previous victim with the other form of scam.”
The fraudsters seem to be quite good at getting folks over 60 to use cryptocurrency, a connection also made in the 2019 article and Commissioner Dowling’s presentation. Downing said, “With unregulated cryptocurrency and bitcoins, secret apps, romance scams, grandparent scams, bait clicking, and pyramid schemes, many people get manipulated and get their bank accounts emptied by unscrupulous criminals.” The FBI Report provides this data.
In this context, the Financial Crimes Enforcement Network (FinCEN) issued an Advisory on Elder Financial Exploitation on June 15, 2022, saying, “Amid rampant fraud and abuse targeting older adults, FinCEN urges financial institutions to detect, prevent, and report suspicious financial transactions” using the Suspicious Activity Reporting (SAR) program. That Advisory provides 12 behavioral red flags (e.g., “An older customer’s account shows sudden and unusual changes in contact information or new connections to emails, phone numbers, or accounts that may originate overseas.”) and 12 financial red flags (e.g., “Uncharacteristic, sudden, abnormally frequent, or significant withdrawals of cash or transfers of assets from an older customer’s account.”). The advisory includes SAR filing instructions when elder financial exploitation meets the standard for filing a SAR (i.e., “...a financial institution knows, suspects, or has reason to suspect a transaction conducted or attempted by, at, or through the financial institution involved funds derived from illegal activity...”).
Because insurance companies are often at a lower risk for classic money laundering, the mandate to file SARs may be overlooked in the case of elder financial fraud. It should not be.