Elder Financial Exploitation: What Crypto MSBs Need To Know

June 3, 2019
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If you know someone over the age of 60, then they are unfortunately at risk for something called elder financial exploitation (EFE).

EFE is a major societal problem, and unfortunately, a growing trend in the crypto space that has implications for AML compliance and reporting processes of crypto businesses.

First, what is EFE?

FinCEN and the Consumer Financial Protection Bureau (CFPB) define EFE as the illegal or improper use of an older person’s funds, property, or assets.

EFE is the most common form of elder abuse in the United States, and with it becoming more prevalent in cryptocurrency, crypto MSBs can play an important role in solving the problem (or at least reducing it) by taking actions that protect vulnerable older adults. Let’s take a closer look at the issue, and what crypto business owners can do to help fight financial criminals.

How EFE Works

EFE takes many forms. Elders can be victimized by close friends and family members just as easily as perfect strangers. Think of emails convincing people they’ve won the lottery but requiring they send money to cover the taxes before they can receive their winnings. Think of the phone calls saying a grandchild has been abducted in another country and won’t be released until a ransom is sent. Scammers can get very creative, and vulnerable people become victims every day.

According to a 2018 report by the U.S. Securities and Exchange Commission (SEC), the elderly are vulnerable to financial exploitation for three primary reasons.

First, about one in five people over the age of 65 have some type of cognitive impairment. Financial impairment is one of the first signs of cognitive impairment, so they’re susceptible to financial scams and abuse. Second, seniors often have greater wealth and easily accessible funds making them a target for abuse. Third, the number of elderly people in the United States continues to grow, which means there are more people for scammers to scam.

In recent years, the number of financial scams that target the elderly has increased. A February 2019 study from the Consumer Financial Protection Bureau found that the number of suspicious activity reports (SARs) filed to report elder financial exploitation quadrupled between 2013 and 2017 with 63,500 SARs filed to report EFE in 2017.

Clearly, the problem of EFE is big and continues to grow. The average amount lost by older adults in EFE SARs was $34,200 in 2017, and the loss was more than $100,000 in 7% of those SARs. When a filing institution lost money, the average loss per filer was $16,700.

To make matters worse, these statistics represent only a small fraction of elder financial exploitation. The vast majority go undetected and unreported.

Elder Financial Abuse in Crypto

Elder Financial Exploitation - BitAML Blog

Elder financial abuse is common in crypto, so it’s in every crypto MSB’s best interest to develop policies, processes, and procedures that detect, prevent, and report suspected EFE as part of a comprehensive BSA/AML compliance program.

MSBs accounted for 58% of the EFE SARs filed in 2017. That’s up from 15% in 2013. In total, 69% of the EFE SARs filed by MSBs in 2017 described scams by strangers. Bloomberg estimates that 5 million elderly Americans are victims of financial exploitation scams by strangers every year.

Cryptocurrency presents an attractive method for scammers to exploit seniors, since they tend not to be familiar with virtual currencies. Scammers can confuse seniors suffering from cognitive impairment and quickly acquire large amounts of money from them to purchase crypto from MSBs if the latter don’t have a program in place to detect and prevent it.

The good news is that crypto MSBs can make a real difference and protect the vulnerable and their businesses at the same time.

Common Signs of Elderly Financial Exploitation

FinCEN has identified a number of red flags that could signal an instance of EFE. These signs fall into two primary categories based on how your MSB can detect them:

Account Behaviors

Account behaviors include unusual or erratic transactions or changes in typical transaction patterns such as:

  • Frequent large withdrawals, particularly daily maximum withdrawals from an ATM
  • Sudden insufficient funds
  • Sudden nonpayment for services when payments are usually made consistently
  • Unusual large wire transfers
  • Closing accounts despite the penalties
  • Inconsistent debit transactions


Interactions include unusual interactions with customers or caregivers such as:

  • Caregiver is extremely interested in the elder’s assets and finances
  • Caregiver is controlling the elder’s speech and actions
  • Elder is fearful of the caregiver or what will happen if they don’t do what the caregiver says
  • Caregiver insists on speaking for the elder and interferes with MSB having direct communication with the elder
  • A new person starts handling financial transactions for the elder without the necessary documentation
  • Elder breaks off existing relationships and moves to new ones with new people
  • Sudden change in the elder’s financial management or power of attorney
  • Elder doesn’t know what’s happening with his or her finances or doesn’t want to discuss them

It’s important that your employees understand these red flags and actively look for them to reduce the number of EFE instances and help law enforcement investigate them.

What Crypto Businesses Can Do To Combat Elder Abuse

The most important thing your crypto business can do to combat elder financial abuse is to develop a comprehensive compliance program that not only includes policies and procedures to detect, prevent, and report suspicious activity related to EFE but also to properly train your employees.

Yes, training is one of the five pillars FinCEN requires in your BSA/AML compliance program, but training shouldn’t just include policies and procedures when it comes to EFE.

Make sure your training teaches employees about the growing problem of elder financial exploitation. Share the staggering statistics so your employees understand their role in helping to protect the vulnerable and being part of the solution to the problem.

As a result of their efforts, they’ll not only protect the vulnerable but they’ll also protect your business, their jobs, and their money.

Key Takeaways for Elder Financial Exploitation and Cryptocompliance

Elder financial exploitation is a growing problem, but your crypto MSB can detect and prevent it with a solid compliance program that incorporates BSA/AML and EFE policies and reporting processes at the state and local levels. This includes developing financial exploitation policies and thoroughly training your employees.

If you need help developing your elder financial exploitation policy or have any questions about EFE and cryptocompliance, the experts at BitAML can help. Contact us to schedule a free consultation.

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