The escalating issue of elder financial exploitation

Elder financial exploitation (EFE) is a pressing and growing concern in the U.S., posing a threat to the financial security and well-being of older adults. EFE involves the illegal or improper use of an elder’s funds, property or assets, often leading to devastating financial and emotional consequences. As the elderly population grows, so does the prevalence of such exploitation.

According to the U.S. Census Bureau, the number of Americans aged 65 and older is projected to reach 80 million by 2040.¹ This significant demographic shift underscores the need for protective measures against financial exploitation as more individuals become vulnerable to such abuse. At the same time, advances in technology have made life more convenient but have also increased financial fraud risks, as scammers turn to mobile devices and social media to scam older adults.

Recent studies highlight the scope of EFE. The Federal Bureau of Investigation (FBI) reported that in 2023, individuals aged 60 and older suffered losses exceeding $3.4 billion due to fraud, marking an 11% increase from the previous year.² The average loss per victim was approximately $33,915. Notably, these figures likely underestimate the true extent of the problem, as many incidents go unreported due to victims’ fear, shame or lack of awareness. The National Adult Protective Services Association (NAPSA) estimates that only one in 44 cases of financial abuse is ever reported, suggesting that the actual losses are significantly higher.³

Financial institutions (FIs) are one line of defense against EFE, but the first line of defense is often family members and trusted individuals in the person’s life. They are in a unique position to recognize early warning signs and intervene before significant financial harm occurs. By staying engaged and aware, they can partner with FIs, whose ongoing relationships with older clients and ability to monitor transaction patterns can help detect unusual activities indicative of exploitation. This type of partnership is vital in the fight against EFE.

In December 2024, a collective statement from five federal financial regulatory agencies, the Financial Crimes Enforcement Network (FinCEN), and state financial regulators provided examples of effective risk management practices.⁴ These included developing robust governance policies, training employees to recognize and respond to signs of exploitation, implementing transaction holds or disbursement delays when suspicious activity is detected and reporting incidents to appropriate authorities promptly.⁵

In addition, FinCEN’s 2024 analysis found that FIs filed 155,415 suspicious activity reports related to EFE from June 2022 to June 2023, amounting to approximately $27 billion in suspicious activities.⁶ This data highlights not only the widespread nature of EFE but also the proactive measures FIs are taking to identify and report such incidents.

Despite growing awareness and proactive measures, addressing EFE remains challenging for many reasons, including the fragmented regulatory landscape in the U.S. There is currently no single federal agency with exclusive responsibility for EFE oversight, and no uniform national code exists to guide FIs in preventing and responding to exploitation. Instead, definitions of EFE and reporting requirements vary widely from state to state. This lack of consistency makes it difficult for national FIs to establish standardized procedures, and it creates barriers for smaller firms that may need to report concerns involving clients who reside in other jurisdictions.⁷

In contrast, the brokerage industry benefits from a more defined regulatory framework through the Financial Industry Regulatory Authority (FINRA). FINRA Rules 4512 and 2165 provide firms with both the tools and authority to act when EFE is suspected. Rule 4512 requires firms to make reasonable efforts to obtain a trusted contact person for every noninstitutional customer account, while Rule 2165 permits firms to place temporary holds on disbursements or transactions for up to 55 days when there is a reasonable belief that financial exploitation is occurring.⁸ These safeguards offer a clear path to action and serve as a model for what broader industry-wide protections could look like. However, until a more unified approach is adopted at the national level, FIs will continue to face challenges in implementing consistent and effective responses to EFE across all customer segments.

Understanding the tactics and signs of EFE

EFE often leads to significant financial and emotional distress for older adults. Perpetrators, ranging from family members to professional scammers, employ various deceptive tactics to manipulate and steal from their elderly victims.

These tactics often include exploiting their trust, cognitive vulnerabilities and lack of familiarity with evolving financial threats. Among the most prevalent scams are tech support fraud,⁹ where scammers impersonate IT professionals to gain access to bank accounts;¹⁰ government impersonation scams, in which fraudsters claim to be from agencies like the IRS or the Social Security Administration to extract payments; and lottery or sweepstakes scams, which deceive victims into paying fraudulent fees to claim nonexistent prizes. In 2023, tech support fraud alone accounted for nearly 18,000 victims aged 60 and older, reflecting the scale of these schemes.¹¹

Elders are also vulnerable to financial abuse from individuals within their trusted circles. Family is still the number one perpetrator of EFE. This type of fraud occurs when formal or informal caregivers/family members misuse their access to an elder’s finances. This may include forging checks, making unauthorized transactions or coercing the elder into financial arrangements that primarily benefit the caregiver.

Similarly, power of attorney (POA) abuse is another prevalent issue where the individual entrusted with managing the elder’s financial affairs exploits this authority for personal gain. Misuse of POA often includes withdrawals, asset transfers or alterations to wills and trusts without the elder’s informed consent. Worse yet, if the elder no longer has capacity, the person with the POA is using their assets for personal gain with apparent legal authority. This type of financial abuse can be particularly challenging to detect, as they are often masked under the guise of “helping” the elder manage their finances.¹²

One red flag of EFE is unusual or erratic financial activity, such as sudden large withdrawals, frequent ATM transactions or wire transfers to unfamiliar recipients. These activities may signal coercion or fraud, particularly if they deviate from the elder’s usual financial behavior.

Behavioral indicators can also provide warning signs of financial exploitation. If an elder appears confused about their financial situation, is unable to explain recent transactions or expresses fear or reluctance to discuss their finances, these could be signs of exploitation.

Strengthening detection and prevention at FIs

FIs can play a role in helping to prevent fraud and abuse. Strengthening detection and prevention efforts requires a combination of employee training, technological tools, proactive customer engagement and legislative change.

Most FIs have internal fraud prevention measures designed to help recognize red flags and help prevent EFE, and some are even creating teams within their fraud, anti-money laundering, customer service or risk departments designated to address EFE. These teams may contact clients, reach out to trusted individuals or work with Adult Protective Services and law enforcement (LE) to get customers help at their door.

Front-line employees may also help detect EFE. Strong training programs can help the front line recognize the warning signs of EFE and ideally should include clear action plans for escalating concerns, including engaging LE and Adult Protective Services.

Many FIs also utilize automated alerts and notifications to inform account holders of activity on their account, allowing them to take immediate action to secure their funds if the transactions are unauthorized.

Call to action

EFE remains a significant and growing concern that leads to billions of dollars of consumer losses each year. FIs, regulatory bodies, LE and community groups can better partner to combat EFE. Some steps include establishing uniformity in Adult Protective Services reporting standards and procedures; establishing legal safe harbors to permit FIs to intervene when the FI believes that EFE is occurring; increasing education to help individuals and their families recognize and report signs of EFE; training FI employees on EFE warning signs and internal reporting protocol; increasing funding for Adult Protective Services offices and elder-focused LE to improve their capacity to prevent and respond to potential EFE; and greater collaboration among regulatory bodies, FIs, LE, community groups and nonprofits focused on elder protection.