Greg's Corner

The Banking Scam No System Caught

By Greg Collier

What began as a flashing message on a computer screen in August 2023 turned into a financial disaster. A woman in her eighties was convinced her bank accounts had been compromised. The alerts urged immediate action, warning that failure to respond would result in catastrophic loss. What followed was not sudden theft but a slow, methodical draining of trust.

Over the course of nine months, she withdrew more than $700,000, nearly all of it accumulated over a lifetime. The transactions were presented not as losses but as protection. She was persuaded that her savings would only be safe if converted into physical assets. Records filed in court describe a series of withdrawals from multiple institutions, including brokerage, retail banking, and international accounts, with large sums funneled into precious metals or sent directly to businesses claiming to offer security. Some funds were even mailed by check. Each transaction was framed as the necessary step in preventing a greater disaster.

There were signs that something was amiss. For decades, her withdrawals had never exceeded modest amounts. A family member had already been assigned in a supervisory role to help manage her finances. Despite these safeguards, the pattern went unchallenged. Institutions that normally flag unusual transfers for fraud detection did not act, even as the withdrawals far exceeded her typical behavior.

The lawsuit now filed against Merrill Lynch and other firms argues that the loss was not inevitable. It claims that systems meant to detect suspicious activity were either insufficient or ignored. It further argues that elderly customers are uniquely vulnerable to psychological manipulation and that financial institutions must recognize emotional coercion as a legitimate fraud risk. Investigators have long noted that modern scams rarely begin with stolen passwords. They begin with manufactured fear.

Financial consequences are often followed by social withdrawal. Retirement savings represent stability, independence, and access to routine pleasures. When they vanish, daily life contracts. Travel becomes unlikely. Regular outings give way to caution. The loss is measured not only in dollars but in freedom.

The lawsuit also exposes a structural gap in the nation’s banking system. Financial institutions in the United States are not required to intervene when a customer willingly transfers money while under false pretenses. Fraud departments are typically designed to block unauthorized access rather than authorized panic. If an attacker forces entry into an account, alerts are triggered. If an attacker instead convinces an account holder to walk out the front door with their own money, silence follows.

Banks often hesitate to freeze or delay transactions initiated by elderly customers, even when the activity conflicts with decades of history. Doing so risks legal challenges for discrimination or interference with personal finances. Privacy rules discourage employees from questioning motives. In many institutions, it is considered safer to remain passive than to intervene.

This type of crime is categorized within the industry as authorized push payment fraud. It represents one of the largest regulatory blind spots in consumer protection. Some countries have already begun addressing it. The United Kingdom now compels banks to reimburse victims in many of these scenarios. The United States has no such requirement, leaving recovery dependent on lawsuits rather than automatic restitution.

This case is therefore not only about one individual’s loss. It is about how fear is monetized and how existing financial safeguards fail to recognize it. Until intervention policies evolve to treat persuasion as seriously as intrusion, more customers will drain their own accounts believing they are saving them.

Protection cannot begin after the money is gone. It must begin the moment fear appears on the screen.