Seniors take $28.3 billion hit annually from financial exploitation, AARP finds

U.S. seniors lose $28.3 billion annually as a result of financial exploitation, according to a new AARP study released Thursday as elder abuse was highlighted by the financial industry and securities regulators.

The AARP report shows that the vast majority of funds stolen from older Americans are purloined by someone they know. Friends, family members or caregivers are responsible for $20.8 billion, or 72%, of the theft. Exploitation by strangers accounts for $8 billion, or 28%.

The AARP study also found that elderly victims tend to keep the crimes to themselves. Only $7.8 billion of the funds stolen are reported to authorities.

“While strangers often rely on quick and irreversible transactions such as gift cards or wire transfers, perpetrators who know the victim are more likely to gain direct access to their victims’ bank accounts,” Jilenne Gunther, national director of AARP’s BankSafe Initiative and the author of the report, said in a statement. “The keys to stopping this growing problem are consumer education, frontline employee training and strengthened technology to flag suspicious activity.”

The latest technological development — artificial intelligence — may help combat senior financial exploitation, a financial industry official said at an event in Washington Thursday to mark World Elder Abuse Awareness Day.

Darius Kingsley, managing director and head of consumer business practices at JPMorgan Chase, said AI can detect small instances of exploitation, such as bank account withdrawals, that can add up to large amounts over time but may be tough to pick up as individual transactions.

“AI does seem to have an ability to pick up on these patterns in ways humans can’t,” Kingsley said at a Capitol Hill meeting sponsored by the Securities Industry and Financial Markets Association and the National Adult Protective Services Association.

Kingsley said the industry is excited about AI’s potential to address senior abuse but that “it’s going to take a while” to put the technology in place.

Something that perhaps can be done more quickly is to curb some business activities by older customers. Ron Long, a former Wells Fargo Advisors official and longtime leader in the effort to combat senior exploitation, suggested that people over a certain age should have to meet more requirements for certain transactions.

As an example, he cited requiring anyone over 70 to have a trusted contact designated on an account before he or she can wire money to a foreign country. He acknowledged that might cause some concern about unfair restrictions on older Americans. But that could be necessary to protect them.

“That’s a compromise on autonomy. That’s a compromise on dignity,” Long, principal at Life Long Consulting, said at the SIFMA event. “I’m not sure we’re going to educate our way out of this problem. We’re going to bite some ageism off for the greater good.”

State regulators stressed the need for investors to identify a trusted contact whom financial advisors and other can turn to if senior exploitation is suspected.

“One way to help detect and even prevent financial exploitation is to add a trusted contact to investment accounts,” North American Securities Administrators Association President Andrew Hartnett said in a statement. “Having a trusted contact provides another layer of safety.”

In 2016, NASAA approved a model rule for addressing senior abuse that's been adopted by more than 30 states.

“Elder abuse of any kind is devastating, and this agency will aggressively prosecute those who financially exploit seniors in Alabama,” Alabama Securities Commission Director Amanda Senn said in a statement.

Later Thursday, NASAA, the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc. were scheduled to host a webinar on senior financial abuse.