QUESTION
We have
read your articles about elder financial abuse. As long-time subscribers, we
know that you have a keen interest in elder abuse. Recently, we found ourselves
in a situation where we had to decide whether to file a SAR.
One of our clients is an elderly man. His wife passed away many years ago. He did not want to do a reverse mortgage. Instead, he did a cash-out refinance. The loan quickly fell into arrears.
His son was deeded an interest in our customer’s property, and the son handled the transaction. But the important point is that our customer never came to us. We never spoke with him. The loan was originated online, although we have a branch near him.
Alarm bells went off when the loan went quickly in arrears. We could not reach our customer, and whenever we tried to speak to him, the son got involved. Our compliance manager did an investigation and decided to file a SAR. She also alerted the police and the FBI. It is now an elder financial abuse case, and we are concerned that our regulator will hold us responsible for not doing enough to prevent this abuse from happening.
Your articles have helped us understand that our older customers could be victims of elder financial abuse. We have two questions:
ANSWER
If you
have followed my views, you probably know that I am very concerned about “Elder
Financial Abuse,” also known as “Elder Financial Exploitation.” I tend to use
these terms interchangeably. Federal and state government agencies use both,
too.
I have published articles, issued white papers, and spoken publicly on this subject. Yet, I am frustrated by the slow pace of awareness on the part of financial institutions concerning such outrageous abuse.
Here are some of my articles on this subject:
Elder Financial Abuse: Prevention and Remedies (Online)
Elder Financial Abuse (Online)
FinCEN: Elder Abuse - Red Flags (Online)
Elder Financial Abuse Epidemic (Online)
Elder Financial Abuse: Prevention and Remedies (PDF)
Elder Financial Abuse (PDF)
The ARTICLES section of our main website has several
articles that indirectly relate to Elder Financial Abuse. My articles contain
numerous helpful references and many resources to assist you in developing a
strong program to prevent elder financial exploitation.
Let’s define broadly what I mean by Elder Financial Exploitation (“EFE”). Put briefly, EFE is the illegal or improper use of an older person’s funds, property, or assets. It is one of the most significant frauds against individual persons, and it is the most common form of elder abuse in the United States.
But only a small fraction of incidents are detected and reported, let alone satisfactorily remedied. Older adults are attractive targets because they may have regular sources of income, significant assets, or equity in their homes. Indeed, older people may be particularly vulnerable due to factors such as isolation, cognitive decline, physical disability, health problems, and bereavements, such as the loss of a partner, family member, or friend. Thus, their ability to protect themselves from individuals seeking to exploit them may be limited, increasing the need for effective interventions. Once victimized, they often experience financial insecurity and the loss of their dignity and quality of life.
And who are the perpetrators? Often, they include family members, caregivers, scam artists, financial advisers, home repair contractors, lawyers, accountants, doctors, and fiduciaries (such as agents under power of attorney and guardians).
Financial institutions can and should play a key role in preventing and detecting Elder Financial Exploitation. A financial institution’s familiarity with older adults may enable it to spot irregular transactions, account activity, or behavior. Prompt reporting of suspected financial exploitation to Adult Protective Services (“APS”), law enforcement, and Long-Term Care Ombudsman[i] – who are advocates for residents of nursing homes, board and care homes, assisted living facilities, and similar adult care facilities – can trigger appropriate intervention, prevention of financial losses, and other remedies.
You might reasonably say, “somebody should do something about this horrendous exploitation!”
Guess what? That “somebody” is you!
In March of 2016, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) published an Advisory for financial institutions on preventing and responding to Elder Financial Exploitation (“Advisory”)[ii], and it also offered accompanying Recommendations as well as a report for financial institutions on preventing and responding to elder financial exploitation (“Recommendations”).[iii] The Bureau noted that banks and credit unions are uniquely positioned to detect an elderly account holder targeted or victimized and take action. The Advisory and Recommendations covered a spectrum of voluntary best practices to assist financial institutions. And nonbank, financial institutions, beware! There are many ways that you can determine if an elderly consumer is financially exploited.
I will mention some things you can do, and then I will provide some guidance on filing a Suspicious Activity Report (SAR) for Elder Financial Exploitation.[iv]
As a financial institution, what are some things you can do about elder financial exploitation?
·
Report
all cases of suspected EFE to relevant federal, state, and local authorities
The reporting should be done whether it is mandatory or voluntary under state or federal law. Note that In 2013 the eight federal regulatory agencies with authority to enforce the privacy provisions of the Gramm-Leach-Bliley Act (GLBA) issued Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults (“Guidance”).[v] The Guidance clarified that reporting financial abuse of older adults to appropriate authorities does not, in general, violate the privacy provisions of GLBA. Since then, new laws have been passed since the publication of the 2016 Advisory, such as the Senior Safe Act,[vi] which I discuss below.
·
Understand
the Reporting Requirements in your State
·
State
Laws authorizing delays in Disbursing Funds
However, state policymakers and key stakeholders continue to explore to enable banks and nonbanks to delay disbursements if they suspect that an older account holder has been or will be defrauded. The proposed or actual legislative changes suggest that policymakers seek additional ways to prevent EFE entirely or to limit the losses that older adults may incur when targeted.
·
The
Senior Safe Act, a federal statute enacted in 2018, encourages Reporting of EFE
and provides Immunity in Specified Situations
The federal Senior Safe Act, effective June 2018, provides that financial institutions are not liable for disclosing suspected EFE to covered agencies[xi] if the institution has trained its employees on identifying EFE.[xii] The Senior Safe Act applies to depository institutions, credit unions, investment advisers, broker-dealers, insurance companies, insurance agencies, insurance advisers, and transfer agents.[xiii]
In addition to institutional immunity, the Senior Safe Act provides individual immunity for those who “served as a supervisor or in a compliance or legal function (including as a Bank Secrecy Act officer) for, or, in the case of a registered representative, investment adviser representative, or insurance producer, was affiliated or associated with, a covered financial institution.”[xiv] To establish immunity, the report must be made in good faith and with reasonable care, and the employee must have received appropriate training on how to identify and report elder exploitation.[xv]
In its 2016 Recommendations, the CFPB recommended that financial institutions establish clear, efficient training protocols to enhance their capacity to detect EFE.[xvi] The CFPB Recommendations stress that training curricula should include indicators of potential EFE, and the CFPB compiled a list of warning signs in an appendix.[xvii] The Bureau recommended that training programs describe what actions to take when employees detect problems. It also recommended that the training describe the roles and responsibilities of management, frontline staff, and other employees to reduce ambiguity and promote efficient and timely action when staff suspects or observes EFE.[xviii]
·
Training,
Training, Training
It
is “mission critical” that your organization provides periodic training to
employees regarding Elder Financial Abuse. In February 2011, the Financial Crimes Enforcement Network
(FinCEN) published an advisory that described potential signs of elder
financial exploitation that might trigger the filing of a Suspicious Activity
Report (SAR).[xix]
A whole training course could be built around it!
The
advisory described numerous possible signs of elder financial abuse, such as:
·
Erratic
or unusual banking transactions or changes in banking patterns:
o
Frequent
large withdrawals, including daily maximum currency withdrawals from an ATM;
o
Sudden
non-sufficient fund activity;
o
Uncharacteristic
nonpayment for services, which may indicate a loss of funds or access to funds;
o
Debit
transactions that are inconsistent for the older adult;
o
Uncharacteristic
attempts to wire large sums of money; or
o Closing of CDs or accounts without regard to penalties.
·
Interactions with older adults or caregivers:
o
A caregiver or other individual shows excessive interest
in the older adult's finances or assets does not allow the older adult to speak
for himself, or is reluctant to leave the older adult's side during
conversations;
o
The
older adult shows an unusual degree of fear or submissiveness toward a
caregiver or expresses a fear of eviction or nursing home placement if money is
not given to a caretaker;
o
The
financial institution is unable to speak directly with the older adult, despite
repeated attempts to contact him or her;
o
A new caretaker, relative, or friend suddenly begins
conducting financial
transactions on behalf of the older adult without proper documentation;
o
The
older adult moves away from existing relationships and toward new associations
with other “friends” or strangers;
o
The older adult's financial management changes suddenly,
such as through a change of power of attorney to a different family member or a
new individual; or
o
The
older adult lacks knowledge about his or her financial status or shows a sudden
reluctance to discuss financial matters.
·
While
you’re at it, train the public!
o
Make
it a feature of your training to raise public awareness among older adults and
their caregivers about preventing, identifying, and responding to elder
financial exploitation.
o Encourage the distribution of important publications, such as Money Smart for Older Adults, a financial resource tool that serves as a useful source of public “training” and information.[xx]
o Review the resources in Administration for Community Living's website on Protecting Rights and Preventing Abuse, and make them available to older adults.
o Review the resources in the CFPB's website on Working with Older Adults, and make those resources available to the public.
o Use the CFPB's Office of Financial Protection for Older Americans website on building a "Elder Protection Network." This opportunity provides resources to build an elder fraud prevention and response network, by mobilizing key stakeholders in the community to prevent, detect, and respond to elder financial abuse.
How do
SARs play a role in tracking down perpetrators of this kind of exploitation?
Your second question is an essential extension of the foregoing actions you can take to prevent elder financial abuse. Let’s begin with an unambiguous statement: a financial institution should file a Suspicious Activity Report (SAR) when it suspects elder financial exploitation.
The CFPB recommends that financial institutions file SARs when it suspects EFE.[xxi] In 2011, the CFPB highlighted in FinCEN’s Advisory that SARs are a valuable avenue for financial institutions to report the financial exploitation of older adults.[xxii]
In February 2019, the CFPB published a research
report, Suspicious Activity Reports on Elder
Financial Exploitation: Issues and Trends.[xxiii] The CFPB analyzed SARs
filed by a broad spectrum of financial institution types from 2013 to 2017
regarding suspected EFE. Over 180,000 SARs describing suspicious activities
targeting older adults were filed during this timeframe.[xxiv] SAR filings quadrupled
from 2013 to 2017, but these SARs likely represent only a tiny fraction of
actual incidents.[xxv]
During the study period, SAR filings by depository institutions increased each
year.[xxvi] SARs involving EFE show
that elder financial abuse is widespread and damaging, with an average loss of
$41,800 among adults over age 70 who sustained a loss.[xxvii]
While financial institutions are filing an increasing number of SARs involve EFE, in most cases the SARs do not indicate that the financial institutions are reporting EFE directly to APS or law enforcement. Less than one-third of these SARs (28 percent) state that the filing institution reported the activity directly to APS or law enforcement or other authorities.[xxviii]
If a financial institution is not reporting to APS or law enforcement or other first responders, this may be a missed opportunity to strengthen prevention and response. More reporting to the relevant law enforcement agencies can increase investigation and prosecution. Many financial institutions communicate with local law enforcement entities, which assist them in understanding when, where, and how to report. Robust reporting to enforcement authorities can increase the likelihood that victims will receive appropriate services.
Furthermore, make it a top priority to respond expeditiously to requests for documentation, according to relevant laws, by federal and state government entities involved in investigating reports of elder financial abuse. Indeed, some states have enacted laws mandating that financial institutions produce financial records pertinent to suspected EFE to APS or law enforcement when requested. State statutes also differ regarding the specific agencies to which financial institutions must disclose records.
Your
financial institution’s policies and procedures should set forth an expedited
process for providing documentation to appropriate law enforcement or
supervisory agencies. In fact, FinCEN has advised financial institutions to
provide SAR information and supporting documentation to authorized
investigatory agencies, as sampled in the following quotes:
“Financial institutions must provide all documentation supporting the filing of a SAR upon request by FinCEN or an appropriate law enforcement or supervisory agency.”[xxix]
And timely compliance is mandated
for maintaining safe harbor provisions:
“Disclosure of SARs to appropriate
law enforcement and supervisory agencies is protected by the safe harbor
provisions applicable to both voluntary and mandatory suspicious activity
reporting by financial institutions.”[xxx]
When working to expedite sending documents to law enforcement and other agencies with authority to access SARs, I recommend that a financial institution utilize the services of legal counsel in the document production involving the SAR supporting documentation.
I will close this FAQ with some final thoughts. Timely reporting of suspected EFE remains critically important and can lead to effective responses and limitation of losses. The CFPB’s research underscores the prevalence of EFE and the devastating financial harm that it is causing nationwide.
Legislative trends suggest that policymakers will continue to seek ways to increase and enhance reporting of suspected EFE to government entities that can help victims or take action against perpetrators.
Over the years, policymakers have sought ways to train the staff of financial institutions to recognize and report EFE situations. In some states, agencies have been able to delay or refuse disbursements when they believe financial exploitation of an older adult has occurred or will likely occur.
Catching the crooks begins with the financial institution’s commitment to preventing elder financial abuse.
Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group
[i] Under the federal Older Americans Act, each state is required to have an Office of the Long-Term Care Ombudsman that addresses complaints and advocates for improvements in the long-term care system. Local ombudsman staff and volunteers work to resolve problems of individual residents.
[ii] Advisory for Financial Institutions on preventing and responding to Elder Financial Exploitation, CFPB, March 23, 2016.
[iii] Recommendations and Report for Financial Institutions on Preventing and Responding to Elder Financial Exploitation, CFPB, March 23, 2016
[iv] Reporting of Suspected Elder Financial Exploitation by Financial Institutions, An Update to the 2016 Advisory and Recommendations for Financial Institutions on Preventing and Responding to Elder Financial Exploitation, CFPB, July 2019. This issuance has been helpful in outlining certain affirmative actions.
[v] Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults, Federal Reserve, CFTC, CFPB, FDIC, FTC, NCUA, OCC, SEC, September 23, 2013
[vi] Senior Safe Act, 12 U.S.C. § 3423 (2018)
[vii] National Adult Protective Services Association, Get Help, (Adult Protective Services (“APS”) are a social services program provided by state and/or local governments nationwide serving older adults and adults with disabilities who are in need of assistance). If APS finds that a person has experienced or is at risk of experiencing financial exploitation, APS can decide what services, if any, are necessary for the vulnerable adult’s safety or well-being, and recommend a service plan.
[viii] For instance, see, Fla. Stat. § 415.1034(1)(a) (“Bank, savings and loan, or credit union officer, trustee, or employee . . . knows, or has reasonable cause to suspect”); Ga. Code Ann. § 30-5-4(a)(1)(B) (“any employee of a financial institution . . . having reasonable cause to believe . . .”).
[ix] Reporting of Suspected Elder Financial Exploitation by Financial Institutions, An Update to the 2016 Advisory and Recommendations for Financial Institutions on Preventing and Responding to Elder Financial Exploitation, CFPB, July 2019.
[x] North American Securities Administrators Association (NASAA) Model Act, NASAA Model Legislation or Regulation to Protect Vulnerable Adults from Financial Exploitation, § 7(1)(a), adopted Jan. 22, 2016, updated 2019
[xi] Op. cit. 6 at § 3423(a)(1)(D)
[xii] Idem at § 3423(a)(2)(B)
[xiii] Idem at § 3423(a)(1)(D)
[xiv] Idem at § 3423(a)(2)(B)(i)
[xv] Idem at § 3423(a)(2)(B)(ii)
[xvi] Op. cit. 3, Recommendations, at 3.2
[xvii] Idem at 3.2.1
[xviii] Idem at 3.2.2
[xix] See Advisory to Financial Institutions on Filing Suspicious Activity Reports Regarding Elder Financial Exploitation, FinCEN, FIN-2011-A003, February 22, 2011
[xx] Money Smart for Older Adults, FinCEN, June 2013
[xxi] Op. cit. 3 at 3.4.3
[xxii] See Advisory to Financial Institutions on Filing Suspicious Activity Reports Regarding Elder Financial Exploitation, FinCEN, February 22, 2011
[xxiii] Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends, CFPB, February 27, 2019
[xxiv] Idem at 1.0
[xxv] Idem
[xxvi] Idem, see Appendix B
[xxvii] Idem at 4.0
[xxviii] Idem at 5.0
[xxix] Guidance: Suspicious Activity Report Supporting Documentation, FinCEN, FIN-2007-G003, 1, June 13, 2007
[xxx] Idem at 2
