The Rising Threat of Elder Financial Exploitation: Key Insights and Actions for Financial Institutions
When I started in banking as a teller many years ago, an older customer would visit the bank regularly. He had just lost his wife, and it seemed as if visiting the bank wasn’t a task but gave him something to do. I was working part-time through college and didn’t fully understand the patterns of this elderly customer. However, one day, the bank’s BSA Officer contacted the branch manager and inquired about the activity and conversations with this customer. It was alarming to find out that the customer had withdrawn around $10,000 a month to send to an unknown individual who had been threatening him for several months. As a naive banker in my early 20s, I was in disbelief that anyone would attempt to take that much cash from an elderly gentleman who recently lost his wife.
Although that event took place several years ago, because of stories like that, FinCEN, along with five other federal agencies and state financial regulators, have joined together to issue the Interagency Statement on Elder Financial Exploitation, which is a statement for supervised institutions with examples of risk management and practices that can be utilized to combat elder financial exploitation. In this article, I will provide you with a summary of the joint statement.
The joint statement begins with a brief introduction addressing the purpose of issuing the guidance. This is followed with a background on what elder financial exploitation (EFE) is and the increasing concern and financial impact related to EFE. After providing a brief background on the topic, the joint statement proceeds with nine sections for financial institutions to consider as it relates to mitigating risk with elder financial exploitation. Section 1 reminds financial institutions to establish policies and practices to better protect their customers or members. It states that financial institutions should implement or enhance their risk-based policies, internal controls, employee code of conduct, ongoing monitoring, and complaint process to identify elder financial exploitation.
Section 2 of the joint statement focuses on employee training. Many times, frontline employees are exposed to the happenings of the customers or members when fraud occurs. However, sometimes it’s not recognized until it’s too late. With that being said, the joint statement addresses the importance of training and keeping employees informed based on their job duties. It is recommended that institutions train customers or members facing employees on red flags to identify and report potential EFE.
Next, let’s move on to section 3, which addresses the use of transaction holds and disbursement delays. This section of the joint statement refers to the use of Regulation CC. In addition, there is mention of the fact that state law can come into play. Keep in mind that some state laws permit financial institutions to temporarily hold a transaction or delay the disbursement of funds when any type of financial exploitation, including elder fraud, is suspected. Financial institutions should utilize the laws and regulations to hold funds if needed. At the same time, institutions want to ensure that the information is clearly disclosed to the consumer or member.
Section 4 addressed the use of trusted contacts. Within the guidance, it is recommended that financial institutions consider establishing policies and procedures that enable account holders to designate one or more trusted contacts for employees to contact when elder financial exploitation is suspected. The joint statement states that if an institution implements a process of establishing a trusted contact, then it would be beneficial for the process and procedures to be clear and effective to appropriately disclose to the account holder and trusted contact how the institution suspects EFE.
Next, the joint statement addresses filing SARs involving suspected elder financial exploitation. This section reiterates the requirement for when to file a SAR. In addition, it refers to FinCEN’S 2022 Advisory on Elder Financial Exploitation for red flags to consider as it relates to identifying suspicious activity and filing a SAR. As a reminder, the joint statement addresses the requirement to include the statement “EFE FIN-2022-7002” in the SAR field 38 (d) and mentions elder financial exploitation in the narrative. In addition, a reminder about the confidential nature of a SAR is provided.
The next section of the joint statement addresses reporting to law enforcement, Adult Protective Services (APS), and other appropriate entities. This includes providing timely notice and taking action to potentially recover funds. Although privacy provisions under the Gramm-Leach-Bliley Act should be considered, it does not prevent financial institutions from reporting elder financial exploitation to the appropriate local, state, or federal agencies. In addition, you will want to consider verifying with your institution’s state law as you may be required to report the activity to APS, local law enforcement, and/or regulatory authorities. Also, section 6 within the joint statement provides a reminder that a financial institution should have procedures in place for referring potential victims to the U.S. Department of Justice (DOJ), the Federal Trade Commission (FTC), the FBI, and the Internet Crime Complaint Center (IC3). The joint statement addresses that some of these agencies or programs may be able to assist the victim with recovering stolen funds.
Section 7 states that financial institutions may need to provide expedited documentation to APS, law enforcement, or other authorities in some cases. Financial institutions should refer to FinCEN’s FAQs on “Supporting documentation” regarding the documentation relied on to file a SAR with APS, law enforcement, or authorities.
Next, the joint statement addresses having financial institutions engage with elder fraud prevention and response networks, including professionals from various agencies and organizations, to help protect older adults from financial exploitation. The guidance indicates that response networks can help supervised financial institutions to engage in cross-training, multidisciplinary case review and coordination, and to provide community education efforts related to EFE.
Lastly, section 9 of the joint statement addresses the importance of consumer outreach and awareness. The more the consumer knows about scams and fraudulent attempts of elder financial exploitation, the less likely they are to engage in the scam and become a victim of EFE. Financial institutions can assist with informing consumers by providing timely information and awareness of potential scams. The joint statement concludes by referencing a list of free resources provided by government agencies to be utilized as outreach and awareness efforts to prevent elder financial exploitation. The list includes three pages of linked resources available from various government agencies. Overall, don’t let your customers or members become victims of elder financial exploitation. I recommend conducting training on the red flags related to EFE and monitoring your elderly customers or members’ activity for potential fraudulent activity. Lastly, if you suspect that a customer or member is a victim of financial exploitation, be sure to report it appropriately. For more questions about elder financial exploitation, don’t hesitate to contact our knowledgeable advisors.