Justice Department Coordinates Largest Ever Elder Fraud Sweep:

260 Global Defendants said to have Targeted 2 Million Americans, Mostly Elder

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On March 7th, federal and state enforcement agencies announced they had embarked on a massive crackdown on financial fraud directed at seniors. As part of the “sweep,” the Justice Department (DOJ) reported the filing of criminal or civil charges against hundreds of alleged offenders as well as the launch of targeted public education efforts throughout the country. According to the United States Attorney General, the coordinated actions reached into every federal district across the country and served to underscore the government’s efforts to protect a vulnerable population and address this complex and widespread problem.

In our last post, Bates Research highlighted the Consumer Financial Protection Bureau’s analysis of five years’ worth of Suspicious Activity Reports (SARs) as they relate to elder financial exploitation. The use of the information contained in these financial institution filings represents an attempt by regulators to create and use data to better understand the scope of the problem and to inform enforcement and public education efforts. In this article, we look at current efforts on the enforcement side, as represented by the actions undertaken last week.

Law Enforcement Narrows its Focus and Increases Collaboration

The Attorney General disclosed that the enforcement sweep emphasized two types of schemes: technical support scams and mass mail fraud. To some extent, this emphasis distinguishes the current announced action from an enforcement crackdown undertaken last February. The prior action covered a broad range of activities from telemarketing to investment fraud, and included, for example, so-called “lottery phone scams,” "grandparent scams,” “romance scams,” "IRS imposter schemes” and “guardian schemes.” Though the Justice Department continues to bring cases against perpetrators of a variety of fraudulent acts targeting seniors, the action announced last week focused on bringing down specific networks and international actors. According to the Attorney General, in the aggregate, this year’s coordinated sweep resulted in 260 defendants being charged for victimizing more than 2 million Americans to the tune of nearly three quarters of a billion dollars.

It is also notable that the level of coordination and the number of agencies involved in this year’s sweep represents an expansion over last year’s effort. Among others, the sweep included the FBI, Immigration and Customs Enforcement’s Homeland Security Investigations, the Federal Trade Commission (FTC), The National Association of Attorneys General, the Secret Service and the Postal Inspection Service.

“Technical Support” Scams

“Technical support” schemes are perpetrated by scammers calling the victim (or using internet pop-up messages) and warning them about computer problems such as viruses or malware. According to the FTC’s Consumer Sentinel Network, over 142,000 complaints have been filed about technical support scams (see Bates coverage about recent findings from this database). It was the number-one fraud category reported by seniors to the Sentinel Network and therefore an imperative for the DOJ.

A specific focus of the sweep centered on so-called “runners,” “money mules,” or “payment gateways.” These participants collect the money from the victim and steer them to call centers (mostly identified in India). The DOJ stated that the FBI and Postal Service “took action against over 600 alleged money mules nationwide” and Secret Service agents seized “elder fraud proceeds in transit from victims to perpetrators.”

In a Fact Sheet, the DOJ described examples of the charges filed against the alleged perpetrators of these technical support fraud schemes. The charges include, among others, wire fraud, aggravated identity fraud, conspiracy to commit money laundering, mail fraud and bank fraud. In addition, the DOJ’s Consumer Protection Branch and the Postal Inspection Service brought “infrastructure”-related charges focused on U.S. citizens facilitating the operation of implicated call centers. The actions included injunctions against entities and individuals to prevent them from conducting or facilitating the fraudulent scheme.

Mass-Mailing Fraud and Transnational Fraud

The second focus of the elder fraud enforcement sweep concerned global, mass-mailing fraud schemes. The DOJ and the U.S. Postal Service pursued actions against direct mailers that defrauded millions of elderly victims out of hundreds of millions of dollars. The schemes involved direct personalized mailings that promised something of value (money or prizes) if the victim sent cash (purportedly for fees or taxes). Law enforcement brought actions that included both criminal charges and civil injunction lawsuits.

Many of the cases cited by DOJ involved national boundaries and transnational organizations. Some of the defendants in these cases were extradited from Canada, Cayman Islands, Costa Rica, Jamaica and Poland. In other cases, like the mass mailing fraud, the perpetrators were apprehended in Spain.

The Attorney General lauded the domestic and international law enforcement collaboration as key to the success of the effort. In announcing this sweep, the DOJ reminded that “The charges are merely allegations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.”

Conclusion

The enforcement sweep is a statement by law enforcement agencies that they are (i) prioritizing the protection of vulnerable seniors from financial exploitation; (ii) increasing collaboration across federal agencies and across state and international boundaries; and (iii) improving their capabilities and effectiveness. These messages parallel the ones regulators are sending as they improve their data collection methods through enhanced financial institution disclosure.

But the progress made from last year to this year on the enforcement side, and the mining and collation of new sources of information that mandatory disclosure offers on the regulatory side, means it’s possibly only a matter of time. The educational outreach ties it all together. That said, the numbers of fraudsters (that we know of) and their creativity, as exemplified in this announcement, is telling. It is important for companies to continue to be vigilant in protecting their most vulnerable investors.

Bates Group closely follows regulatory and enforcement developments on senior financial fraud. For a view of the changing federal and state legislative and regulatory landscape on senior investors, download our complimentary white paper. Learn how to protect your company and its most vulnerable investors with Bates Investor Risk Assessment. For more information concerning financial issues related to vulnerable and senior investors, senior investor expert witnesses, financial crimes, damages analysis, and compliance solutions, please contact Bates Group today.

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