Why Financial Systems Are Failing Veterans: Part 2 – Trapped by Fraud, Abandoned by Banks

In a world increasingly reliant on digital platforms for job applications and financial transactions, scams targeting vulnerable populations—like veterans—are becoming alarmingly common. For example, a 2023 report found that veterans were twice as likely to fall victim to financial fraud compared to non-veterans, highlighting the urgent need for systemic change. While awareness campaigns often focus on prevention, little is said about what happens after someone becomes a victim. For veterans who have already sacrificed so much for their country, the aftermath of being scammed reveals a systemic failure in our financial institutions to provide meaningful support and justice.

The Veteran’s Journey Through the Scam: A Systemic Failure

Imagine this: A veteran, transitioning back to civilian life, responds to what appears to be a legitimate job offer on a reputable platform like Indeed. The position—a personal assistant—promises flexibility and the opportunity to make a meaningful impact, with tasks like coordinating charitable donations for a children’s hospital. After submitting their resume, completing an application, and speaking with a recruiter, the veteran is hired.

Facilitating charitable contributions to a children’s hospital might involve tasks such as managing a certified check intended for the purchase of gift cards. In such cases, individuals may interact with seemingly credible people, such as someone posing as a hospital social worker, claiming these gift cards would support families of sick children. The process appears legitimate, reflecting the increasing sophistication of modern fraud schemes, and includes steps like scrutinizing the check and contacting the issuing bank to verify its authenticity. With assurances about the check’s validity, it is deposited and subjected to an extended hold period of seven business days, a timeframe intended to identify any irregularities. Once the funds are cleared, they are used to fulfill the required tasks, with no immediate indication of fraud.

Later, however, the bank WILL reverse the deposited funds without prior notice or explanation, placing the burden of clarification entirely on the victim. It often takes weeks before any explanation is provided, and even then, the check is typically labeled as either altered or fictitious. These vague labels fail to provide clarity, as they describe distinct types of fraud. Despite taking diligent steps to verify the check’s legitimacy, the bank WILL reclaim the victim’s personal funds without warning and restrict access to their account. This effectively passes the liability of the scam onto the victim, treating them as though they were complicit in the fraud. Such institutional responses not only exacerbate the financial harm caused by the scam but also leave victims without adequate support or recourse.

Financial Institutions’ Response: Punishment Over Protection

In cases like this, financial institutions often fail to differentiate between victims and perpetrators. Instead of providing support, they restrict accounts, impose penalties, and leave the victim to shoulder the financial burden. For veterans, many of whom rely on every dollar to rebuild their lives after service, this punitive response can be devastating.

Here are some of the systemic failures that compound the harm:

1. Lack of Transparency: Victims are rarely provided with a detailed explanation of the bank’s decision-making process. This lack of clarity leaves victims struggling to understand why certain actions were taken and what recourse, if any, they have. Even when victims stay in constant communication with their financial institutions, they often receive no meaningful updates or assistance.
2. Account Restrictions: Restricting a victim’s account without offering alternative solutions leaves them unable to pay bills, access emergency funds, or continue their financial recovery.
3. Blame Culture: By defaulting to suspicion, financial institutions risk alienating customers who genuinely need help.
4. Inadequate Support: There are no clear protocols for assisting scam victims, leaving them to navigate the aftermath alone.

The Ripple Effect

For veterans, the consequences of financial scams extend far beyond monetary losses. They face:

• Emotional Distress: Feelings of shame and helplessness are common, as victims blame themselves for falling for the scam.
• Loss of Trust: The experience erodes confidence in financial institutions, making veterans hesitant to seek help in the future.
• Barrier to Stability: With restricted accounts and depleted funds, veterans struggle to maintain housing, pay bills, or meet basic needs.

A Call to Action: Building a System That Protects Victims

The treatment of scam victims, particularly veterans, must change. Financial institutions, nonprofit organizations, and policymakers have a responsibility to create systems that protect victims rather than penalize them. Specifically, there is an urgent need for the establishment of a victims’ advocate system or a dedicated representative within financial institutions. Such systems have been effective in other areas, such as healthcare advocacy programs, where patient advocates help individuals navigate complex processes and find equitable solutions. This advocate would serve as a consistent voice for victims, working collaboratively to ensure they are not further penalized by the banks themselves.

For the billions of dollars spent annually on fraud prevention—an estimated $9.6 billion globally in 2022—the impact has been underwhelming. Despite these expenditures, reports indicate that financial fraud continues to grow, with U.S. consumers losing a staggering $8.8 billion to scams in the same year. These figures underscore the urgent need for better allocation of resources and systemic reform. A fractional percentage of these funds could be redirected to create a robust victim advocacy program, providing personalized support to those who fall prey to scams. This system would offer:

1. Dedicated Representation: A single point of contact for victims to navigate the aftermath and advocate on their behalf within the financial system.
2. Enhanced Communication: Clear and consistent updates about the investigation and resolution process.
3. Restorative Justice: Solutions that prioritize the victim’s financial recovery rather than imposing further losses.

Veterans Deserve Better: Turning Words Into Action

Veterans have already given so much to this country. When they fall victim to financial scams, our systems should offer them a safety net, not a punishment. By changing how we respond to these situations, we can ensure that veterans and other vulnerable populations are treated with the dignity and support they deserve. It’s time for financial institutions to step up and fulfill their role as protectors, not gatekeepers.

If you’ve been impacted by a similar situation, know that you are not alone. Share your story, advocate for change, and let’s work together to hold financial institutions accountable for creating a system that serves everyone, especially those who have served us.

About the Author

Andrew "Ace" Linares is the President and Chairman of the Board of Directors at HATSOFF, a nonprofit organization dedicated to empowering transitioning service members and veterans. A seasoned executive and advocate, Ace has a deep commitment to addressing the complex challenges faced by the veteran community, including financial barriers, mental health, and homelessness.

With expertise in nonprofit management and the ethical integration of AI for social good, Ace has been instrumental in pioneering innovative initiatives such as the Valor-Guard Initiative and HatsApp. These programs leverage technology to provide proactive support, including suicide prevention and resource navigation for veterans.

Ace’s visionary leadership and dedication to systemic change make him a trusted voice in discussions on veterans’ welfare. His work continues to inspire solutions that honor and empower those who have served.