Know the Signs of Elder Financial Abuse

Implement policies and procedures so you can quickly identify and report cases.

August 1, 2012

An elderly member walksinto the credit union lobby to make a withdrawal. Nearby stands the person who drove her there, anxiously waiting for the transaction to be completed. As the member struggles to remember why she’s there, should the teller:

A. Remind the member of her initial withdrawal request;  
B. Complete the transaction immediately to keep the line moving; or
C. Stop the transaction, attempt to identify her companion, call a manager, and report a case of possible elder abuse? 

How the teller responds might be a question of common sense, but it might also be an issue of state law. States are passing laws with increasing frequency targeting elder financial abuse.

Financial exploitation of senior citizens can strip away the savings and other assets that allow this vulnerable group to live without fear of financial dependence on family or government. Perpetrators include unscrupulous fraudsters, caregivers, or even family members.

The state laws are far from uniform. But there’s a growing trend toward adoption of mandatory reporting for identified elder financial exploitation and abuse similar to those in place for medical professionals encountering physical or mental abuse of senior citizens.

It’s important to understand elder financial abuse laws and implement procedures to identify and report cases to the proper authorities. Your league will have information about what, if any, state elder abuse law exists that affects credit unions. But with members in many different states, compliance becomes more challenging. 

Defining exploitation 

The definition varies from state to state. Generally, the laws protect “vulnerable elders” from anyone— including a relative or trusted caregiver—who “assists” or “takes, secretes, or appropriates their money or property, to any wrongful use, or with the intent to defraud” the elderly credit union member.

The California law just cited covers the illegal or improper use of the financial resources of any California resident older than the age of 65.

Your front-line staff should be aware of these typical signs of abuse: 

► Significant withdrawals from the elder’s accounts;
► Sudden changes in the elder’s financial condition;
► Suspicious changes in wills, powers of attorney, titles, or insurance policies;
► The addition of names to the elder’s signature card;
► Financial activity when the elder is incapacitated;
► Missing property, large or unexplained withdrawals from accounts, or transfers between different accounts;
► Statements no longer going to the elder’s home;
► Unfamiliar signatures on checks and other documents; and
► Changes in spending patterns, such as buying items the elder doesn’t need.

 Some suspicious activity might be fairly easy to spot, such as when a caregiver or family member brings the elderly member to the credit union to make changes to accounts or large withdrawals.

Other activity isn’t so easily recognized—for example, when a member no longer signs checks and there’s no power of attorney on file. 

NEXT:  When is reporting required?


When is reporting required? 

The state laws imposing reporting requirements are either mandatory or permissive.

The Maryland mandatory reporting law provides: “…a fiduciary institution shall make an abuse report…if an employee…has direct contact with an elder adult or reviews or approves an elder adult’s financial documents, records, or transactions…and observes…behavior…that leads the employee to…suspect that the elder adult is the victim of financial abuse.”

Some states simply permit reporting when an employee identifies the financial abuse. The Virginia permissive reporting law reads:  “Any financial institution staff who suspects that an adult has been exploited financially may report such suspected exploitation….”

Where do we send reports? 

In most cases, the report of suspected elder financial exploitation or financial abuse may be filed with the Adult Protective Services office in each state or local jurisdiction. When a law makes financial exploitation a crime, a reporting person may file a criminal report with local law enforcement to initiate an investigation.

What if we don’t have an office in the state our members live? 

States with mandatory reporting laws, such as California, specifically include state- and federally chartered credit unions in the definition of financial institution. The laws don’t limit the definition to credit unions with home or branch offices in the state.

As a practical matter, however, it might be hard for a state to assert jurisdiction and assess penalties where the out-of-state credit union’s only activity in the state is providing services to its member in the state.

What should be in the report? 

A typical law requires a report about possible elder financial abuse to include, if known:

► The victim’s name, age, and physical description;
► Location of the person alleged to be in need of protective services;
► Name and location of the person(s) allegedly responsible for the abuse; 
 Nature and extent of the abuse;
► Basis of the reporter’s knowledge; and
► Any other information the reporter believes might be helpful to an investigation.

How do we comply? 

No need to recreate the wheel. Begin with a model based on your Bank Secrecy Act and Identity Theft Red Flags compliance programs: Identify red flags of elder financial exploitation, create a system to detect that behavior, and respond appropriately.

You must determine if you’re operating an office in a state or states with mandatory reporting. If so, you certainly must develop a policy to address the requirements of each state’s mandatory reporting law and procedures that address such areas as:

1. Who’s responsible for identifying financial abuse/exploitation and how will it be done. 
2. Who must filethe report, what information must be in the report, and where it must be filed. 
3. Where and how longthe report will be kept and who will have access.

Use state-provided forms, or develop forms if the state doesn’t suggest any, to ensure you collect the same information in each report. Train staff on financial abuse spotting and reporting.

Consider developing computer analysis that will identify each member older than age 65, spot unusual activity in these members’ accounts, and trigger an investigation and reporting based on the analysis. 

The combination of policy, procedures, staff training, and computer account analysis should meet the requirements in both mandatory and permissive reporting states.

Is staff training required? 

State laws are beginning to require staff training. Maryland’s new law requires a training program to help employees recognize signs of elder financial abuse, including unusual deposit account activity, ATM withdrawals and debit card use by elderly members who’ve never used these services, and suspicious signatures on checks. Also, employees must be trained on how to file abuse reports.

Concentrate first on the requirements for the state where you have an office. As experience develops with identification and reporting, expand the scope as practical to cover reporting in states where members live.

NEXT: What about privacy laws? 

What about privacy laws? 

California allows law enforcement to obtain monthly account statements when it receives a report of financial abuse. The report may include deposit and withdrawal activity—that is, checking accounts that wouldn’t normally be permitted because of state financial privacy laws.

Maryland’s elder financial abuse law is actually an amendment to its state financial privacy law. Where financial privacy laws exist—and even if a state doesn’t have a specific financial privacy law—the reporting statute should protect the reporting and/or disclosing credit union from liability as is the case in California. 

And, of course, the federal privacy law provides exceptions to the notice-and-opt-out requirements, to protect against actual or potential fraud and unauthorized transactions and to comply with state and local laws.

Is the report protected? 

Most states’ elder financial abuse laws include a civil immunity provision that protects reporting employees and credit unions against defamation claims filed by the member or person reported. For example, in Delaware, where reporting is mandatory, the law states: 

“Anyone participating in good faith in the making of a report pursuant to this chapter shall have immunity from any liability, civil or criminal, that might otherwise exist and such immunity shall extend to participation in any judicial proceedings resulting from such report.”

If the state law doesn’t provide at least that level of protection, unfortunately the credit union and its reporting employee may be exposed to lawsuits—but not necessarily successful ones—even where the report is accurate and elder financial abuse occurred.

Will the federal government address elder financial abuse?

There’s no federal legislation afoot that would standardize state compliance requirements. But the Consumer Financial Protection Bureau is seeking public input on elder financial abuse and best practices to address this problem. Although the comment period officially closes on Aug. 13, 2012, this will be an ongoing issue for the bureau’s Office of Older Americans.

Reporting may place a credit union in the uncomfortable position of monitoring more closely private financial behavior of members. But as one credit union compliance officer recently said, “This is one monitoring duty I wouldn’t mind.”

DAVID A. REEDEsq., and BRUCE O. JOLLY, JR.Esq., are partners in Reed & Jolly, PLLC, Fairfax, Va.