New CFPB Report finds SARS Filings on Elder Financial Exploitation Quadrupled from 2013 to 2017

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A recent analysis by the Consumer Financial Protection Bureau (CFPB) of Suspicious Activity Reports (SARs) related to elder financial exploitation provides the most detailed look to date at the size and scope of this issue. The Report, issued by the CFPB’s Office of Financial Protection for Older Americans, covers SARs filings between 2013—the date the Financial Crimes Enforcement Network (FinCEN) introduced the category on its electronic forms—and 2017. According to the CFPB, the Report represents the first publicly available analysis of the non-public data provided by financial institutions on senior financial abuse.

Bates Group has been following the issue of senior financial exploitation for some time. The findings from the CFPB analysis affirm previous reports that senior financial abuse is pronounced, but that the current number of SARs filings “likely represent a tiny fraction of actual incidents.” In this article, we review the findings and recommendations contained in the new Report.

The SARs Data

The CFPB Report was based on an analysis of the over 180,000 SARs on elder financial exploitation filed during the period. The numerical data paints a dramatic picture, with activities totaling more than $6 billion. Over the period of review, the number of relevant SARs filings quadrupled to over 63,000 by 2017. By that year, financial institutions reported suspicious activities totaling $1.7 billion.

Almost 80 percent of the SARs filed involved an actual monetary loss to older adults or the financial institution. The findings from these SARs can be broken down into two broad categories affecting: (i) individuals and their losses, and (ii) institutions and their actions.

For older adult victims in general, the average amount lost was $34,200, though losses exceeded $100,000 in 7% of the SAR cases. The CFPB states that, on average, losses were about $50,000 when the older adult knew the suspect and about $17,000 when the suspect was a stranger. Further, senior adults ages 70 to 79 had the highest average monetary loss at $45,300. Thirty three percent of the victims categorized in the SARs were seniors over the age of 80. (For a description of many of the types of financial exploitation, please see previous Bates Research article here.)

As for the financial institutions that submitted the SARs, by 2017, money service businesses comprised 58 percent of the filings, while depository institutions accounted for most of the remainder. The average loss incurred by all institutions was approximately $16,700. For the suspicious activity related to a money service businesses, the CFPB found that 69% of the SARs were scams by strangers, where the average monetary loss (including both individuals and institutions) was $32,800. When the suspicious activity was related to depositary institutions, only 27% of the SARs involved strangers, but the average monetary loss, primarily related to checking and savings accounts, was $48,300.

Another important finding was that under a third of financial institutions actually reported the suspicious activity to a local, state, or federal authority. For money services businesses, the CFPB states that only 1% reported the SARs to authorities.

CFPB Recommendations

The CFPB SARs analysis confirms that the problem of senior financial fraud is prevalent. The information and filing of these SARs is lauded as a “useful and untapped resource for monitoring elder financial exploitation.” The failure to report the suspicious activity to law enforcement or state adult protective services, however, is seen as a significant gap in protections for consumers and represents “a missed opportunity to increase investigation and prosecution.”

The CFPB also concludes that using SARs offers law enforcement a way to tailor “interventions” and develop new strategies in response to the types of suspects and activities, e.g. money services versus depository institutions. As a result, CFPB suggests that law enforcement should mine the Treasury database of SARs, on its own, to enhance investigations and initiate prosecutions.

Conclusion

The CFPB Report is notable for its use of SARs as a new data source to measure aspects of the problem of senior financial exploitation. Last October’s Federal Trade Commission’s Report (see Bates’ coverage) came to similar conclusions on information it collected primarily through the Consumer Sentinel Network, an online database that provides law enforcement agencies with secure access to consumer reports on fraud. Both the FTC and the CFPB are explicit in stating that these databases are not capturing the full scope of the problem.

There is clearly potential, however, in the different informational tools that are now becoming available. These new data sets can provide new and deeper insights into the problem of elder financial exploitation. One of the most significant data points in the CFPB Report, for example, is the increase in the filing of SARs from an average of about 1,300 filed per month in 2013, when the category of elder financial exploitation was added to electronic SARs filings, to about 5,300 filed per month in 2017. As more SARs are filed annually, and as they begin to reflect a greater share of the problem, we should expect the conclusions drawn from them to be more grounded.

 

Bates Group closely follows the 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.