Transcription:
Penny Crosman (00:03):
Welcome to the American Banker Podcast, I'm Penny Crosman. Elder financial exploitation has been a problem for banks for years, and it seems to be getting worse. Almost 9 million incidents of elder fraud occur every year in the U.S. with an average loss per case of about $20,000 adding up to around $113 billion per year, according to the Connecticut Governor's office. According to AARP's latest survey on the subject, 72% of Americans older than 50 lost money due to financial exploitation last year. Overall, 59% of U.S. adults lost money this way. We're here today with Jilenne Gunther, national director of the BankSafe initiative at AARP. Jilenne leads AARP's programs with the financial industry on issues of financial exploitation and solutions to address it. Welcome, Jilenne.
Jilenne Gunther (00:55):
Thanks, Penny. Glad to be here.
Penny Crosman (00:58):
So how did you get into this field?
Jilenne Gunther (01:00):
It's an interesting story. I come from three generations of community bankers. My grandfather was a CEO of a small community bank. Really spent a lot of time in his community volunteering, sponsoring refugees, building and helping build up a large university, getting established. But it was when he was in his nineties and he was retired, that my family discovered that he was being financially exploited. My uncle, who is a banker, saw the red flags of exploitation. Someone was taking cash from his wallet, and so my uncles decided to set a trap and literally using dye packs because who else has access to dye packs other than a banker? And our family literally caught them red handed, and my grandfather was lucky because there were bankers in the family who saw the red flags. But most victims aren't that lucky. As you mentioned, they're losing a lot of money.
Penny Crosman (02:09):
That's fascinating. And who did it end up being? Often it's somebody the victim knows.
Jilenne Gunther (02:17):
It was someone the victim knows it was a paid in-home caregiver.
Penny Crosman (02:24):
Interesting.
Jilenne Gunther (02:25):
That was not a family member, but had built trust with my grandfather over years. And it's not only about the money, but a lot of times with these victims there's shame and embarrassment that goes on with it and also a sense of betrayal.
Penny Crosman (02:41):
Well, yes, and that was one of the questions that I had. There are various statistics out there, but it seems like a lot of people don't report this, as you said, due to shame and embarrassment. So do you think the numbers are actually much higher than they even seem?
Jilenne Gunther (03:01):
They're definitely much higher. So typically when the perpetrator is a family member or a trusted other, one out of 10 will self-report. Whereas if a stranger, two-thirds will report. So actually what it does is it creates this mirage that exploitation is done mostly by strangers, but that's just not true. And when you're looking at the cost, when it's involved with a trusted other, it's a lot higher than if it was a stranger. And there's two big reasons for that. One is if they have a relationship with that victim, they typically already have trust because they have known that person. And secondly, a family member is typically going to know where the assets are held, whereas a stranger has to build that trust and they don't know exactly where the assets are held. And so that's why there's a propensity that we see where when you're looking at perpetrators, the family members are still in a lot more than the strangers.
Penny Crosman (04:13):
So that to me makes for kind of a challenge for banks who are trying to monitor accounts for signs of financial fraud. And I'll ask you about this later, but several states are starting to force banks to report signs of financial fraud to adult protective services and law enforcement, et cetera. But how can a bank be certain, how can a bank even tell if a family member is conducting all kinds of transactions on a person's account, how do they make that distinction between those that are totally upfront and above board and those that are actually some kind of financial exploitation?
Jilenne Gunther (04:59):
That's a great question. And I think it comes down to, what are the red signs of financial exploitation? For instance, if a family member, is there someone coming in with that older adult who is speaking for that older person and being a little bit more aggressive? Are they asking for something that's not typical where they want to be then named on the account, so that becomes a joint account. And part of that is really training your front lines to ask and probe additional questions when they see that red flag. Now, it may not be financial exploitation in all of those cases where you're asking those questions, but when you ask those questions, you get somewhere so that you're able to see, hey, is there suspicion or is there not?
Penny Crosman (05:55):
So what about when customers and their family members are not physically coming into a branch or an office, they're doing everything online or over mobile apps. How do you ask those questions in that case?
Jilenne Gunther (06:11):
Okay, so one of the things, and that's a great question, Penny, because what we're seeing is that older adults are more online than they have been in the past. But there are a couple of ways banks can look for financial exploitation. One is monitoring analytics. So detecting those add APA transactions or warning for a potential identity theft, for instance. An example that I just gave you is this person had an account where they're the sole owner and then all of a sudden they add another person to that joint account and are they then making transactions or are atypical when they've had the same account for 20 years? And that's one of the positive parts of working with the older population. They tend to have the same accounts they've always had, I think the average is over 20 years. And so you have a lot of data analytics, analytics that look at their past behavior.
(07:23):
So banks can really use analytics to detect these out of pattern transactions. They can determine what device is being used, whether malware is on it, whether the bank's website is being accessed in the bank service area footprint or it's in another country. They can also monitor analytics to detect those red flags. One of the biggest red flags that you can detect is a change of address where the paper statements are delivered or they're to a different address or they're sudden shift from an in branch to online transactions. That's one of the largest red flags of exploitation when it involves a trusted other. And the other thing that is really kind of in the best interest of the financial institution to adopt because it will save hours of a manual investigation when you have those analytics, another way to detect that is using predictive analytics. So software can build a profile of that customer's behavior and they can look for deviations to prevent exploitation before the money leaves the account. So for instance, it could detect an abnormality such as a social security check deposited, deviates from its normal monthly schedule. Machine learning could be used to detect cognitive decline as a model suggests that a change in payment behaviors along with subprime credit scores can predict dementia two and a half years before it's discovered by a physician. And Barclays in the UK uses a model to determine likely victims of financial exploitation and then proactively educates its customers to help prevent this from taking place in the first place.
Penny Crosman (09:24):
With some of those examples where someone has unusual activity, so maybe you're putting a hold on the account or freezing the account or something like that, could that ever backfire? Especially if someone is 50 or 52 and they're suddenly doing more traveling or something, could that ever become an issue where they say, well, I'm not an elderly person so you don't have a right to freeze my account because you have this suspicion because my behavior changed or am I overblowing that idea?
Jilenne Gunther (09:59):
We have not heard a lot of that ever happening. What we have heard from the research — and Virginia Tech conducted research with over 200 financial institutions involved — it was mostly on the free training that we offer, but one of the things they looked at was what interventions are they using that actually prevents the money from ever leaving the account? What is it a bank is doing that prevents that financial exploitation? What interventions are they using to better protect their customers? And there are three rows to the top. It's holding that transaction so they conduct a very quick investigation. It's delaying that transaction, could be just sitting down and having a conversation asking those probing questions. And sometimes it's rejecting that transaction. And that is by far what was the most effective in this study for preventing financial exploitation. And a lot of times what that does, especially when you're talking about financial exploitation, there is this fear that criminals and perpetrators put into the head of the victim. And when you slow any of these transactions down or you take the time to ask those questions, that hits a pause for that person that maybe there's something that's not right, then that's why it's so important to have these holds and delays.
Penny Crosman (11:57):
Now, in your latest survey, you asked people what kind of protections they would like their banks to provide, and 95% of Americans over 50 said they would like to receive notification of unusual activity. But we also write about elder fraud a lot. And we know that often elder fraud happens through somebody impersonating their bank, they can make caller ID look like the call is coming from the bank. They can do the same for a text message. They can create fake websites. How can banks provide these notifications in such a way that customers know they're real?
Jilenne Gunther (12:40):
I think first you've got to really educate your consumers about how you provide that communication. For instance, I've gotten those notifications, which I thought was really helpful. It was a false positive. I was in an airport I'm typically not in, and I made a transaction at the airport and I got this notification, but I also knew that's how my financial institution, it came through their app. So I think you really have to educate your customers, this is how we're going to communicate with you. Just like when you see scams with Social Security and people calling. Social Security is not reaching out proactively to call people, right? So how is it that that financial institution communicates a concern and is also one of the things that people can do? And especially with if someone calls you on the phone, I typically don't do business with somebody who calls me and says that they're my bank typically.
(13:47):
In fact, this happened to me the other day and I said, I'm sorry, I need, and it was actually not my bank, it was the pharmacy. And they were asking me identifying questions and I said, I'm sorry, you have initiated this call. I don't feel comfortable. I'm going to hang up and call the main number. And she said that was fine. And so I think it's those types of things that as a consumer you need to do. But I think from the bank perspective, you really have to educate your consumers. And we're seeing a lot of that. We know Chase is educating people on how they contact their customers. We're seeing that from TD Bank as well. So I think those are kind of the proactive steps that banks can take to say, this is how we reach out to you. The other thing is, which we can go even further, is when you get evidence that a criminal is using that for your financial institutions, you almost have a duty to proactively communicate that to your customers. Here's what these criminals are doing. This is not us though that the customers are alerted to it.
Penny Crosman (15:16):
Another thing in your survey was that 92% of the consumers that you surveyed who are over 50 said they would like their bank to provide extra monitoring to prevent unauthorized withdrawals. Are you seeing banks do this, put extra monitoring on older consumers accounts, and what does that look like? Is that a matter of just setting the filter on a fraud detection software program a little higher setting the bar higher?
Jilenne Gunther (15:47):
No, it could come in a variety of different manners. I think you have existing fraud vendors out there who are providing those kind of controls. What would be great to see is if they're incorporating specific tools for this type of crime of financial exploitation. Banks could be looking at existing analytic firms like Eversafe and Carefull to better protect their older customers who are using those analytics. So they are incorporating that technology. We're also seeing that banks are self-creating these internally as well so that their extra measures, as you say, kind of turn it up higher, but it's really supplementing what they already have with this specific crime. And there's really kind a huge opportunity to incorporate this technology. In fact, I was just in the United Kingdom talking to bankers there and one of the things they said they have loved and they said was, you have to have analytics to fight this. It helps so much more when you have that footprint of a customer and you know how their banking and their habits, it gives you the ability to spot these, especially as our population moves online. But I want to be careful too because older adults still like that personal in-person touch. So they are going into the bank they are calling.
Penny Crosman (17:31):
That can be helpful, I suppose, in trying to suss out what's really going on. What else? I wanted to ask you about some state laws that have come out relatively recently where several states, including Texas and California, have laws that kind of force banks to do more to help older victims of financial exploitation. For instance, some of these laws require banks to report suspected fraud to adult protective services and law enforcement agencies. Some of them require banks to hold or block transactions that appear to be part of an elder fraud scheme. And also I think most of these laws require the banks to train employees. And as you've been talking about, educate older customers about the signs of fraud. Are these laws making a difference so far or are they too new to really tell yet?
Jilenne Gunther (18:34):
So reporting to adult protective services and law enforcement has been around decades. And what it does is oftentimes people won't know that someone's being financially exploited. So sometimes that trigger actually happens at the financial institution and there's only so much a bank can do. So being able to report that to law enforcement or adult protective services is really key. Not only can they investigate it, but adult protective services specifically can help provide services for that older adult as well. Maybe that older adult, for instance, will see they're not only being financially exploited, but they're also being physically abused by someone. And so they can really help get that person out of that situation. So that addresses the part about reporting. And then the second part is about the report and hold laws. One of the things that Virginia Tech did a study where they looked at different interventions that would be helpful, what actually leads to the effectiveness of preventing the financial exploitation. And what they found was that freezing holding and delaying that transaction are actually really helpful.
Penny Crosman (20:11):
Thank you, Jilenne, for joining the podcast today and to all of you, thank you for listening to the American Banker Podcast. I produced this episode with audio production by Adnan Khan. Special thanks this week to Jilenne Gunther at AARP. Rate us, review us and subscribe to our content at www.americanbanker.com/subscribe. For American Banker, I'm Penny Crosman and thanks for listening.