Elder Financial Abuse: Disclosure, Schemes, and “Red Flags”

QUESTION 

Elder abuse is a big issue because we serve a demographic in Florida consisting of senior citizens and the elderly. Each year, we have incidences of elder abuse. We train our employees on how to identify and report elder financial abuse. But it seems that there’s no end to it. 

We are now updating our policies relating to elder abuse. We have three questions, and we hope you will provide some guidance. We have plenty of advice from our regulator. However, we would like information based on your firm’s experience. Here are our questions. 

· What are we permitted to disclose about an incident of elder financial abuse?

· What are some of the schemes you have encountered to commit elder abuse?

· What are some indicators of elder financial exploitation you often come across?

 ANSWER 

As you likely know, tellers, financial services representatives, and others who regularly interact with customers are in the best position to identify and report this type of problem. Consider them your front line! 

Abuse and exploitation of the elderly are statutorily defined at the state level. Federal guidelines have been issued not only by the federal prudential regulators but also the CFPB, FinCEN, FHA, VA, USDA, and the GSEs. Several states have certain requirements, such as mandatory reporting of suspected issues. You should consult your local bank or credit union association if you do not know your state’s laws. Be sure you are receiving ongoing guidance from compliance professionals. 

I have written extensively on elder financial exploitation. Here’s an article with downloads and links to some of my writing on this subject. 

I will take your questions one by one. 

What are we permitted to disclose about an incident of elder financial abuse? 

Various federal and state authorities either require or encourage reporting this type of information to the appropriate agency. However, many financial institutions were concerned that they might violate their privacy policy and the provisions of the Gramm-Leach-Bliley Act (GLBA) if they reported their suspicions, especially if their state law was mute on the subject. So in 2013, the federal banking agencies and the National Credit Union Administration (NCUA) issued guidance to clarify that reporting suspected financial abuse of older adults to appropriate local, state, or federal agencies does not, in general, violate the privacy provisions of the GLBA or its implementing regulations. 

In point of fact, specific privacy provisions of the GLBA and its implementing regulations permit the sharing of this type of information under appropriate circumstances without complying with notice and opt-out requirements. The guidance set forth exceptions to the GLBA’s notice and the opt-out requirement that, to the extent applicable, would permit the sharing of nonpublic personal information about consumers with local, state, or federal agencies for the purpose of reporting suspected financial abuse of older adults without the consumer’s authorization and without violating the GLBA. 

Those exceptions are: 

·    A financial institution may disclose nonpublic personal information to comply with federal, state, or local laws, rules, and other applicable legal requirements, such as state laws that require reporting by financial institutions of suspected abuse; 

·    A financial institution may disclose nonpublic personal information to respond to a properly authorized civil, criminal, or regulatory investigation, or subpoena or summons by federal, state, or local authorities, or to respond to judicial process or government regulatory authorities having jurisdiction for examination, compliance, or other purposes as authorized; and 

·    A financial institution may disclose nonpublic personal information to protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability. For instance, this exception generally would allow a financial institution to disclose to appropriate authorities nonpublic personal information to report incidents that result in taking an older adult’s funds without actual consent or in reporting incidents of obtaining an older adult’s consent to sign over assets through misrepresentation of the intent of the transaction. 

To the extent specifically permitted or required under other provisions of law, a financial institution may also disclose nonpublic personal information to law enforcement and regulatory agencies or for an investigation on a matter related to public safety. 

What are some of the schemes you have encountered to commit elder abuse?

I could probably fill several spreadsheets with the number of schemes. We’ve come across many in our audits. It seems that the schemers continue to pop up with new ways to commit elder financial abuse. Here are a few schemes that we’ve found over the years.

Misappropriation of income or assets

Perpetrator obtains access to an elder’s social security checks, pension payments, checking or savings accounts, credit or automated teller machine (ATM) card, or withholding portions of checks cashed for an elder.

Charging excessive rent or fees for service

Perpetrator charges an elder an excessive rent or unreasonable fees for basic care services, such as transportation, food, or medicine.

Obtaining money or property by undue influence, misrepresentation, or fraud

Perpetrator coerces an elder into signing over investments, real estate, or other assets through manipulation, intimidation, or threats.

Improper or fraudulent use of the power of attorney or fiduciary authority

Perpetrator improperly or fraudulently uses the power of attorney or fiduciary authority to alter an elder’s will, borrow money using an elder’s name, or dispose of an elder’s assets or income.

Pigeon Drop

Perpetrator claims to have found a sum of money and offers to split it with an elder, provided the elder first withdraws an amount equal to their share as a sign of good faith.

Fake accident ploy

Perpetrator convinces an elder that the elder’s grandchild or other close relative has been seriously injured or is in jail and needs money for medical treatment or bail.

Telemarketing and mail fraud

Perpetrator persuades an elder to buy a valueless or nonexistent product, donate to a bogus charity, or invest in a fictitious enterprise.

Fake prizes

Perpetrator tells an elder that they have won a nonexistent prize and either asks the elder to send a check to pay the taxes on this nonexistent prize or obtains the elder’s credit card or checking account number to pay for shipping and handling charges for the prize.

Unsolicited work

Perpetrator arrives unexpectedly at an elder’s residence and offers to perform work for a  reasonable fee. After starting the work, the perpetrator insists that the elder pay more than originally agreed before the work will be completed.

Finally, you ask, what are some indicators of elder financial exploitation you often come across?

Let’s call them “red flags” because they are clear and succinct warnings. 

The following red flags could indicate the existence of elder financial exploitation:

Erratic or unusual banking transactions or changes in banking patterns:

- Frequent large withdrawals, including daily maximum currency withdrawals from an ATM;

- Sudden non-sufficient fund activity;

- Uncharacteristic nonpayment for services, which may indicate a loss of funds or access to funds;

- Debit transactions that are inconsistent for the elder;

- Uncharacteristic attempts to wire large sums of money;

- Closing of CDs or accounts without regard to penalties.

Interactions with customers or caregivers:

- A caregiver or other individual shows excessive interest in the elder’s finances or assets, does not allow the elder to speak for themselves or is reluctant to leave the elder’s side during conversations.

- The elder 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.

- The financial institution is unable to speak directly with the elder, despite repeated attempts to contact them.

- A new caretaker, relative, or friend suddenly begins conducting financial transactions on behalf of the elder without proper documentation.

- The customer moves away from existing relationships and toward new associations with other “friends” or strangers.

- The elderly individual’s financial management changes suddenly, such as through a change of power of attorney to a different family member or a new individual.

- The elderly customer lacks knowledge about their financial status or shows a sudden reluctance to discuss financial matters. 

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group