A customer of The Cooperative Bank knew that her daughter was slowly siphoning money out of her checking account, but didn’t know how to bring it up with her.
It's the kind of story bank officials hear all too often, said Pete Lee, the Roslindale, Massachusetts, bank's chief information officer.
He has plenty of others. A branch manager says several customers have told her family members were stealing from them but they didn’t know what to do about it. In another example, a customer using Facebook had been tricked into buying more than 100 gift cards of $9.99 each through Facebook Pay. Sometimes scammers tell people they are entitled to a large grant provided they pay a fee for Federal Express to ship the money out.
The steady drumbeat of fraud targeting older customers was one reason the bank decided to harness new technology to help detect such incidents.
“We're always looking out for fraud, not just specifically elder fraud,” Lee said.
Last week, the $482 million-asset bank began a pilot with the New York tech startup Carefull. TCB is offering older customers a free subscription to the service, which uses machine learning to monitor accounts for signs of fraud, abuse and dementia. It also allows a trusted confidante access to the account, but monitors that person’s behavior as well. After all, about half of elder fraud is perpetrated by someone in the victim’s trusted inner circle.
The bank and Carefull were brought together by the consulting firm Alloy Labs, which was helping the bank in its efforts to innovate. Lee and his colleagues realized that in better monitoring older customers’ accounts and letting them designate adult children to help them, they could build relationships with the younger generation, too. Carefull was already working with Alloy’s Concept Lab, a temporary accelerator for startups.
“When we saw what Carefull was doing, it just hit home for us,” Lee said.
Latest forms of elder fraud
Scams against older bank customers have risen during the pandemic.
“It’s no surprise that fraud against older people really hasn't gone down,” said Liz Loewy, who ran the New York City District Attorney’s Elder Abuse Unit for 20 years and is now co-founder and CEO of EverSafe, another New York tech company that has been working with banks and investment firms to monitor older customers’ accounts for six years.
“When you are alone, quarantining and not seeing people who care about you, the scams will go up and they'll be variations on a theme. And we have seen that,” Loewy said.
EverSafe looks for unusual account activity across all accounts a customer has at banks and investment firms, with the customer’s consent. Raymond James is a client, Loewy said.
Romance scams among older adults have gone up, she said.
“Older people get lonely and want companionship just like younger people,” Loewy said. Social Security fraud, in which scammers call from what appears to be a Washington, D.C., number and ask to “verify” information, has also increased.
Some recent scams against older people involve cryptocurrency. In one case, scammers who claimed to work in her bank’s fraud unit told a woman in her 70s (who was not using EverSafe) that all of the funds she had in online banking were at risk and that they would need her to wire the cash in the accounts to a different bank in the form of crypto to keep the funds secure from scammers. She ended up losing $700,000.
“It was absolutely gone and untraceable,” Loewy said. “People don't usually think about crypto and seniors, but it does happen.”
One ruse Todd Rovak, co-founder of Carefull, has seen older people fall prey to in recent years is recurring donations. This isn’t a scam per se because the donations are legitimate. But people who thought they were giving a one-time donation were signed up for monthly contributions unless they saw and checked a small opt-out box.
During the last election year, “both political parties convinced the older population that the world was ending, and they felt compelled to sign up for something that was quietly recurrent,” Rovak said. “It's OK to give of course, but it's not OK to give without knowing that you're getting an ACH deduction every month because you didn't check a box.” Carefull’s engineers wrote a new rule to spot such recurring donations.
Rovak noted that many banks try to teach employees and customers to look for signs of fraud and abuse, but it’s a problem that technology can solve better than humans can.
“Giving someone a pamphlet that says you should talk to your parents is no longer acceptable in a world with this much developed technology,” Rovak said. “The financial services ecosystem has a role to play in protecting these assets, in making sure that families have the right amount of transparency and protection.”
Carefull’s software learns over time what behaviors are normal and abnormal for older customers. Often elder abuse is a slow drain of a customer’s accounts as someone skims money out over the course of years, a pattern that typical fraud-detection software would not pick up on, Rovak said.
Carefull’s software also looks for signs of mental decline, such as repeated missed or duplicate payments.
“There's a period of cognitive decline that happens to a hundred percent of people [as they age] when you stop being able to make good financial decisions,” Rovak said. “Johns Hopkins [University] put out a
Carefull feeds its software information about current scams, such as those reported on AARP’s fraud-watch website. It analyzes bank account transaction data it receives from the data aggregator Plaid. It uses machine learning to improve over time.
“The more data we have, the smarter the rules get, and the more accurate we can be,” Rovak said. “It’s very important to be accurate and not send a lot of false alarms.”
Connecting with adult children
Banks have an additional incentive to protect older customers’ accounts and involve adult children in such efforts, he said.
“Banks throughout the country have aging populations, nine out of 10 people will not use their parents' bank, and there is no connection to the next generation,” Rovak said. “When you speak to that generation, they're doing what we call financial caregiving for their parents. There are 45 million people in the U.S. who are coordinating or contributing to or monitoring the daily finances of an aging loved one.” This group of customers tends to be female, the eldest daughter.
“She thinks she's doing what is right,” Rovak said. “She's logging in with her parents’ login to try and help out, looking for fraud manually. She doesn't know what to look for. She is commingling the money in her own account. Sometimes she's collecting from her siblings to make sure there's enough to pay. That ecosystem is just incredibly inefficient and full of cost and unhappiness and family conflict.”
However, the unfortunate truth is that of the approximately $50 billion of elder fraud that happens every year, about half is from someone the victim knows, Rovak said. It can be hard to discern exactly what is happening and the motives of family members and caregivers involved.
“Our job is to be a second set of eyes, so that you can get back to your life,” Rovak said. He said that the software doesn’t judge — it detects unusual behavior and issues alerts that can be ignored if the noted activity is innocent.
“People dismissing an alert is wonderful,” Rovak said. “Our job is not to say you're doing something bad. Our job is to make sure that we send alerts that are really impactful. We find customers are happier with the second set of eyes when it's technology, they're a lot less happy when it's a human being calling them to ask them about what they're buying.”
Carefull’s software doesn’t make any changes to accounts; it only monitors them in read-only mode.
“It's an [artificial intelligence] brain whose job is to 24/7 look for everything that, frankly, typical banks don't always look for today,” Rovak said.
One of the advantages of using Carefull or EverSafe is that banks can help their aging customers without requiring them to give someone else power of attorney.
“You have an older adult who is terrified of losing financial independence,” Rovak said. “And the banking system typically says, you have a problem. Come back when you’ve given someone your power of attorney.”
This was an issue at The Cooperative Bank. Executives knew this was not a popular option with customers.
“Power of attorney was one of the very first hurdles we had to get over,” Lee said. “That was the third rail. We didn't want to touch that.”
The first few months of the pilot will be a phase of testing and gathering information, Lee said. In the future, the bank might incorporate Carefull’s technology into some new products, such as accounts for caregivers.
The hope is that in addition to fraud reduction, The Cooperative Bank will increase its “share of family” by drawing customers’ children to the bank, Lee said.
