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On March 7, the FTC announced a new legal action and a final settlement issued against individuals and their operations for allegedly engaging in schemes that exploit elderly Americans. The actions are part of an enforcement sweep spearheaded by the DOJ in conjunction with, among others, the FBI, the FTC, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Louisiana Attorney General, which—according to a press release issued the same day by the DOJ—is the largest-ever coordinated nationwide elder fraud sweep, involving multiple cases, over 260 defendants, and more than two million allegedly victimized U.S. Citizens, most of whom are elderly.
According to the FTC’s complaint, the company used deceptive tactics to convince consumers, the majority of whom were older, that their computers were infected with viruses in order to sell expensive and unnecessary computer repair services in violation of the FTC Act, the Telemarketing Sales Rule, and the Restore Online Shoppers’ Confidence Act. Specifically, the company allegedly used internet ads to target consumers looking for email password assistance and once they contacted the consumers, the telemarketers would run phony “diagnostic” tests that falsely showed the consumer’s computer was in danger and needed software and services to be fixed. On February 27, the U.S. District Court for the Southern District of Utah, granted a temporary restraining order against the company and its founder.
The FTC also announced a proposed settlement with a sweepstake operation that allegedly bilked consumers out of tens of millions of dollars through personalized mailers that falsely implied that the recipients had won or were likely to win a cash prize if they paid a fee. As previously covered by InfoBytes, the FTC announced the charges against the company in February 2018, alleging that consumers, most of whom were elderly, paid more than $110 million towards the scheme. The final settlement not only requires the operation to turn over $30 million in assets and cash to provide redress to the victims, but also permanently bans the operators from similar prize promotions in the future. The proposed settlement has not yet been approved by the court.
On February 27, the CFPB’s Office of Financial Protection for Older Americans released Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends, which discusses key facts and trends revealed after the Bureau analyzed 180,000 elder exploitation Suspicious Activity Reports (SARs) filed with Financial Crimes Enforcement Network from 2013 to 2017. Key highlights from the report include:
- SARs filings on elder financial abuse quadrupled from 2013 to 2017, with 63,500 SARs reporting the abuse in 2017.
- Nearly 80 percent of the SAR filings involved a financial loss to an elder or to the filing institution. The average amount of loss to an elder was $34,200, while the average amount of loss to a filer was $16,700.
- Financial losses were greater when the elder knew the suspect, with an average loss of $50,000 when the elder knew the suspect compared to $17,000 with a stranger.
- More than half of the SARs involved a money transfer.
- Less than one-third of elder abuse SARs acknowledge that the financial institution reported the activity to a local, state, or federal authority.
On October 18, the FTC released a report to Congress outlining the agency’s comprehensive efforts to protect older consumers in the marketplace from fraud, identity theft, imposter scams, deceptive credit schemes, and other unlawful practices. The report, Protecting Older Consumers 2017-2018: A Report of the Federal Trade Commission, discusses (i) scams that target older consumers, including technical support scams; business imposter scams; prizes, sweepstakes, and lottery scams; and family or friend imposter scams; (ii) key FTC enforcement actions taken against companies that allegedly engaged in deceptive schemes that targeted or affected older consumers; and (iii) outreach and education efforts, including fraud prevention campaigns and resources for older consumers. Specifically, the report contains analysis of consumer complaint data from 2017, which revealed that older consumers (especially those over 80) were more likely to report fraud than younger people, and that when they reported losing money to fraud, they lost significantly more money than consumers in their twenties. (See previously InfoBytes coverage here on the FTC’s annual summary of consumer complaints received in 2017).
FTC files charges against operations that target elder Americans as part of DOJ’s elder fraud enforcement sweep
On February 22, the FTC announced two separate legal actions taken against individuals and their operations for allegedly engaging in schemes exploiting elder Americans. The two cases are part of an enforcement sweep spearheaded by the DOJ in conjunction with the FBI, the FTC, the Kansas Attorney General, and foreign law enforcement agencies, which—according to a press release issued the same day by the DOJ—includes cases from around the globe involving over 250 defendants accused of victimizing more than a million U.S. citizens, the majority of whom are elderly. Charges were brought against both transnational criminal organizations and individuals who allegedly engaged in schemes including (i) mass mailings; (ii) telemarketing and investment frauds; and (iii) guardian identity theft.
According to the FTC’s announcement, charges were brought against two individuals and their sweepstake operation accusing them of allegedly bilking consumers out of tens of millions of dollars though personalized mailers that falsely implied the recipients had won or were likely to win a cash prize if they paid a fee. Since 2013, the FTC claims consumers have paid more than $110 million towards the scheme. The second complaint was brought against a group of telemarketers who claimed their software and technical support services would prevent cyber threats. However, the FTC alleges that the telemarketers instead charged up to tens of thousands of dollars for “junk” software or older software available for free or for a much lower price, and communicated “phony” reasons for consumers to purchase additional software to avoid the risk of new threats.
On October 18, President Trump signed the Elder Abuse Prevention and Prosecution Act, which establishes new requirements aimed at improving the DOJ’s response to elder abuse crimes. Among other things, S 178 expands data collection and information sharing provisions to prevent financial crimes committed against seniors. The law also broadens the federal criminal code to include “email marketing” fraud, such as marketing measures designed to induce the commitment to a loan. Other notable provisions include enhanced penalties for fraud and increased training for federal investigators and prosecutors. Further, the law requires the FTC’s Bureau of Consumer Protection and the DOJ to appoint elder justice coordinators to oversee enforcement, consumer education efforts, and policy activities related to elder justice issues.
CFPB, Treasury, and FinCEN Release Memorandum Emphasizing Financial Institutions’ Role in Preventing Elder Financial Exploitation
On August 30, the CFPB, Treasury Department, and Financial Crimes Enforcement Network (the agencies) issued a joint memorandum concerning elder financial exploitation (EFE). The agencies note that EFE—which is defined as “the illegal or improper use of an older person’s funds, property or assets”—has become the most common form of elder abuse in the U.S. The Memorandum on Financial Institution and Law Enforcement Efforts to Combat Elder Financial Exploitation emphasizes that financial institutions can play a key role in detecting, responding to, and preventing EFE, encourages collaboration with law enforcement and local adult protective service agencies to facilitate the timely response to reports, and outlines guidance relating to the filing of suspicious activity reports (SARs). According to the memorandum, “SARs can play an important role in the fight against EFE by providing information and references to any supporting documentation that can trigger an investigation, support an ongoing investigation, or identify previously unknown subjects and entities.” The agencies cautioned, however, that “access to SARs and their use is restricted under federal law” and that law enforcement agencies should contact FinCEN for assistance in SAR-related inquiries.
On March 13, the FDIC announced enhancements to Money Smart for Older Adults, its financial education program geared toward preventing elder financial exploitation. The program, which the FDIC developed in partnership with the CFPB, was designed as a response to the growing concerns about financial abuse of senior citizens, which often goes unreported. Statistics provided by the National Adult Protective Services Association show that “only one in 44 cases of financial abuse comes to the attention of authorities, and 90 percent of victims are exploited by a relative, friend, or trusted acquaintance.” The program, which covers topics such as identity theft and scams that target homeowners, also provides tools to help better educate seniors on money management and financial awareness. The recently-announced enhancements include new information and resources aimed at preventing elder financial exploitation.
The DOJ, OFAC and the U.S. Postal Inspection Service (USPIS), as part of an effort to stop an international network of mass mailing fraud schemes that target elderly and vulnerable victims, conducted a joint enforcement action against an international payments processor and money services business based in Canada. The agencies alleged that the payment processor engaged in money laundering and mail fraud by knowingly processing payments on behalf of the perpetrators of more than 100 different mail fraud campaigns, collectively involving tens of millions of dollars. OFAC designated the payments processor as a significant transnational criminal organization (TCO) pursuant to Executive Order 13581. OFAC also designated as TCOs a global network of 12 individuals and 24 entities across 18 countries based on their association with the payment processor. As a result of today’s action, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are prohibited from engaging in transactions with them. Additionally, USPIS obtained a warrant through the Eastern District of New York to seize the funds in a U.S. bank account that was allegedly used to process payments received through fraudulent mailings. According to OFAC, the payment processor “has a nearly 20-year history of knowingly processing payments relating to these fraudulent solicitation schemes, which result in the loss of millions of dollars to U.S. consumers.”
On Thursday, April 21, the CFPB will hold its next Community Bank Advisory Council meeting in Washington, DC. According to the April 5 Federal Register publication providing notice of the meeting, both the CFPB’s strategic outlook and elder financial abuse are discussion topics included in the agenda.
On March 23, the CFPB simultaneously issued a report and an advisory providing financial institutions with information on the financial exploitation of older Americans and recommendations on how to prevent and respond to such exploitation. The report combines the CFPB’s “expertise regarding elder financial exploitation” with knowledge gained from interviews conducted between May 2014 to March 2016 with various stakeholders, including, but not limited to, representatives of individual banks and credit unions of various sizes, trade associations, technology vendors, and law enforcement. According to the CFPB, the release of recommendations outlined in the report and advisory mark the “first time a federal regulator has provided an extensive set of voluntary best practices to help banks and credit unions fight [financial exploitation of older Americans].” The CFPB recommended that financial institutions (i) establish protocols for ensuring staff compliance with the Electronic Fund Transfer Act; (ii) train staff to detect the warning signs of financial exploitation and respond appropriately to suspicious events; (iii) maintain fraud detection systems that provide analyses of the types of products and account activity associated with elder financial exploitation; (iv) report cases of suspected exploitation, which includes filing Suspicious Activity Reports with FinCEN when necessary; and (v) collaborate with stakeholders, including law enforcement, at the local, regional, and state level.
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Tim Lange to discuss "Update from 2019 NMLS Conference" at the California Mortgage Bankers Association Mortgage Quality & Compliance Committee webinar
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Jon David D. Langlois to discuss "Transaction management-issues surrounding purchase & sale agreements, post acquisition integration & trailing docs" at the Investment Management Network Residential Mortgage Servicing Rights Forum
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program