The American public is aging and as more and more of the population ages, a larger segment becomes vulnerable to exploitation. Between 2012 and 2050, the United States will experience considerable growth in its older population. In 2050, the population aged 65 and older is projected to be 83.7 million, almost double its estimated population of 43.1 million in 2012. These men and women are increasingly subject to elder financial abuse. While credit unions do a fine job identifying those people that they feel are being taken advantage of, there are many questions and concerns regarding the reporting process.
Who do you report to; local authorities, human services, credit union management?
In 2017 the Tennessee General Assembly passed legislation to give credit unions and other financial institutions more tools to assist them if they feel someone is being taken advantage of. Senate Bill 1267 the “Elderly and Vulnerable Adult Financial Exploitation Prevention Act” became Public Chapter on May 11, 2017.
As part of this legislation, the Tennessee Department of Financial Institutions was tasked with working with the associations for credit unions and banks and other state agencies to develop a more robust solution to elder abuse. The Tennessee Credit Union League has worked with the Tennessee Department of Financial Institutions, the Consumer Financial Protection Bureau (CFPB), the Tennessee Commission on Aging & Disability, and other state agencies on this issue. We have compiled information and resources to assist Tennessee credit unions in identifying, reporting, and deterring financial exploitation.
Defining Elder Financial Abuse
According to the National Center on Elder Abuse (NCEA), the definition of elder financial abuse is defined as “illegal taking, misuse, or concealment of funds, property or assets of a vulnerable elder at risk for harm by another due to changes in physical functioning, mental functioning, or both.”
The US Census shows that adults aged 65 or higher are the fastest growing demographic group and abuses against them continue to rise steadily. A 2011 MetLife report estimated that financial losses by seniors were $2.9 billion in 2010. Among the many forms of elder abuse, financial exploitation is increasingly common.
Elder financial exploitation has been labeled “the Crime of the 21st. Century.”
Elder Financial Abuse: Will you know it When You See It?
There are a wide variety of types of elder financial abuse with new schemes and scams being concocted frequently to trick elders and vulnerable adults for personal gain. While not comprehensive, the following is a list of the typical types of elder abuse observed, in many cases perpetrated by a family member or caregiver:
- Theft of property
- Misuse of income or assets
- Forged checks
- Fraudulent use of the power of attorney
- Lotteries and phony contests
- Phony solicitation from charities
- Investment Frauds
- Medical Scams
- Contractor Scams
- Grandparent/Grandchild Imposter Emergency Scam
- Sweetheart/Romance Scams
The credit unions of Tennessee, with a long history of helping members avoid financial pitfalls, are committed to protecting members’ assets and providing timely reports to authorities when signs of abuse are evident. Credit union tellers and member services staff, who interact with members on a daily basis, are in a unique position to detect and take appropriate action when financial abuse of elderly or vulnerable persons is suspected.
Red Flags of Financial Exploitation
Tellers and Member Services personnel can be the first line of defense when looking for signs that indicate elder or vulnerable adult financial abuse may be occurring. While one or two of these ‘red flags’ may not necessarily indicate elder abuse, the more red flags you detect, the more likely it is that you are seeing a pattern of financial abuse.
- Uncharacteristic banking activity: there may be unusual shifts in the senior member’s banking activity compared to the past. These types of shifts may include frequently changing transactions from one branch to another, changes in and frequencies of withdrawals, large withdrawals or transfers from recently opened joint accounts or previously inactive accounts, and frequent ATM withdrawals especially if the member is isolated or has not accessed an ATM recently.
- Suspicious signatures: there may be signs that the signature was forged, or that withdrawal slips, or applications are made out in another person’s handwriting.
- A sudden increase in debt: if a senior or vulnerable adult member has a large loan, takes out a second mortgage if they take out a loan on top of an existing mortgage, or if there are a large amount of credit card transactions, there may be signs of elder financial abuse taking place.
- Additional red flags: a power of attorney is executed by a senior member or vulnerable adult who appears to be confused; there are changes to the member’s property titles, will or other documents relating to their finances; there is somebody else handling the member’s financial affairs with no apparent benefit to the member; bank statements and checks are no longer being sent to the member’s residence; implausible reasons for banking activity stated by the member or accompanying person.
In addition to the “red flags” mentioned above, there may be noticeable differences in the member’s behavior that signal a possibility of elder financial abuse. Be on the lookout for these signals and contact your supervisor immediately if any of these behaviors are observed:
- Accompanied by a stranger
- Withdrawals of large amounts of cash
- Coerced into making transactions
- Not allowed to speak for themselves or make decisions
- The accompanying acquaintance appears far too interested in the member’s finances
- Seems nervous or afraid of the person with them
- Concerned or confused about “missing funds” in their accounts
- Unable to answer questions, confused about financial transactions or signing paperwork
- Fearful that they will be evicted and/or institutionalized
- Appears neglected or receiving insufficient care given their financial status
- Bruising or broken bones (other signs of physical abuse)
Tennessee is a Mandatory Reporting State
- Abuse of the elderly and vulnerable adults is against the law, and Tennessee is a mandatory reporting state.
- If you see abuse, or even only suspect that an adult is being abused, neglected, or exploited, you must report it
- Call the Tennessee Department of Human Services Adult Protective Services unit, at 1-888-APS-TENN (1-800-277-8366)
- Or contact your local law enforcement agency.
Financial Institutions often cite concerns about the possibility of being charged with a violation of the federal statutes that govern the disclosure of private financial records as a barrier to participation in reporting programs. However, the law most frequently cited in this regard, Financial Services Modernization Act of 1999, better known as the Gramm-Leach-Bliley Act, does not prohibit reporting to Adult Protective Services (APS) or law enforcement. While the Act does contain extensive privacy provisions there are several exceptions that permit the disclosure of “nonpublic personal information.” And important for the purposes of reporting on Elder Financial Abuse, these exemptions apply to mandatory reporting, voluntary reporting or both.
Specifically, Subsection (e)(3)(B) permits disclosure “to protect against or to prevent actual or potential fraud, unauthorized transactions, claims, or other liability.” Subsection (e)(5) permits disclosure “to the extent specifically permitted or required under other provisions of law… to law enforcement agencies… or for an investigation on a matter related to public safety. In addition, Subsection (e)(8), which permits disclosure “to comply with Federal, State, or local laws, rules, and other applicable legal requirements,” would allow disclosures in connection with an APS investigation. In plain language: reporting suspected financial abuse falls within the exceptions to the Act.
- To further clarify this point on September 24, 2013, the NCUA and seven other regulatory agencies issued a guidance clarifying 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 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. You can read the entire Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults (PDF).
- In addition, there are important protections from civil liability from the Safe Harbor for Regulated Financial institutions From Civil Liability for Suspicious Activity Reporting. Federal law (31 USC 5318(g)(3)) provides protection from civil liability for all reports of suspicious transactions made to appropriate authorities, including supporting documentation, regardless of whether such reports are filed pursuant to the SAR instructions.
- Specifically, the law provides that a bank or credit union and its directors, officers, employees, and agents that make a disclosure to the appropriate authorities of any possible violation of law or regulation, including a disclosure in connection with the preparation of SARs, “shall not be liable to any person under any law or regulation of the United States, any constitution, law, or regulation of any State or political subdivision of any State, or under any contract or other legally enforceable agreement (including any arbitration agreement), for such disclosure or for any failure to provide notice of such disclosure to the person who is the subject of such disclosure or any other person identified in the disclosure.” The safe harbor applies to SARs filed within the required reporting thresholds as well as to SARs filed voluntarily on any activity below the threshold.
Further Clarification on Reporting
In February 2011 FinCEN issued an Advisory to financial institutions on filing suspicious activity reports regarding elder financial exploitation. FinCEN noted that SARs are a valuable avenue for financial institutions to report elder financial exploitation.
Consistent with the standard for reporting suspicious activity as provided for in 31 CFR Part 103… [now codified at 31 CFR § 1020.320], if a financial institution knows, suspects, or has reason to suspect that a transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the financial institution knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction, the financial institution should then file a Suspicious Activity Report.
Financial Exploitation Toolkit
The Tennessee Credit Union League has developed the following Financial Exploitation Toolkit to assist credit unions with training in identifying, reporting, and deterring financial abuse of your aging and vulnerable members.
While each individual credit union will develop its own set of policies and procedures for responding to financial exploitation, the Toolkit below consists of links to important resources, NCUA videos, Sample Policy #2245 from PolicyPro: “Protecting the Elderly and Vulnerable from Fraud,” a convenient checklist, information on a new training opportunity with BankSafe, real-life scams (some Tennessee specific), and a breakdown of action steps permitted by Tennessee law to assist you in your daily efforts to protect your credit union’s most vulnerable members.
- NCUA Letter to Credit Unions on Reporting Elder Abuse (PDF)
- NCUA Consumer Protection Update: Reporting Elder Financial Abuse or Exploitation YouTube Video
- NCUA Consumer Report: Scams Targeting Seniors YouTube Video
- CFPB Advisory for Financial Institutions on Preventing and Responding to Elder Financial Exploitation
- CFPB Recommendations and Report for Financial Institutions on Preventing and Responding to Elder Financial Exploitation (PDF)
- Tennessee Commission on Aging and Disability
- Tennessee Adult Protective Services (Overview brochure – PDF)
- PolicyPro: Sample Policy #2245 “Protecting the Elderly and Vulnerable from Fraud” (PDF)*
- Department of the Treasury – FinCEN Advisory (PDF)
- Memorandum on Financial Institution and Law Enforcement Efforts to Combat Elder Financial Exploitation (PDF)
A Prevention and Response Program Checklist
- Train staff members to recognize the red flags of financial exploitation.
- Designate a central point of contact in the credit union for staff to report exploitation and review situations.
- If abuse is suspected the credit union may delay a transaction up to 5 business days or refuse the transaction if applicable.
- If abuse is suspected it must be reported to Adult Protective Services.
- The credit union may obtain a trusted-persons list to contact in the event of possible exploitation.
- May refuse an otherwise valid power of attorney if exploitation is suspected.
- The credit union must respond to a valid request for production of records relating to financial exploitation.
- Develop policy and or procedures to implement the program.
Understanding Tennessee’s New Law regarding Financial Exploitation
On July 7, 2017, a new law took effect in Tennessee that gives financial institutions tools and greater flexibility to help protect their customers who are elderly or vulnerable where the institutions suspect elder abuse or financial exploitation. The new law, which is currently scheduled to sunset on June 30, 2022, is called the “Elderly and Vulnerable Adult Financial Exploitation Prevention Act,”
The Act affords credit unions a process and the authority to take certain actions when there is “reasonable cause” to suspect financial exploitation of an elderly adult (defined as being a person age 65 or older) or of a vulnerable adult (defined as a person age 18 or older who, because of intellectual disability or physical dysfunction, is unable to manage fully his or her own resources, to carry out all or a portion of the activities of daily living, or to protect fully against neglect, exploitation, or hazardous or abusive situations without assistance from others).
Steps a credit union may take when financial exploitation is suspected
- As a preliminary precaution, establishing a list of persons the member would like to have contacted if the credit union suspects the member is a victim of financial exploitation or financial theft;
- Refuse to accept an authorized power of attorney (POA) or durable power of attorney (DPOA) if it is suspected that the agent or attorney-in-fact (AIF) is conducting financial exploitation or financial theft against the member; and
- Authority to delay or refuse a transaction from the account of an elderly member or vulnerable adult.
If you have reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted, you may, but are not required to, refuse a transaction or delay a transaction on the account of:
The elderly or vulnerable adult
On the account that the elderly or vulnerable adult is a beneficiary, including a trust, guardianship, or conservatorship account
Or on the account of a person suspected of perpetrating financial exploitation.
Refuse or delay a transaction if the department of human services or a law enforcement agency provides information to you demonstrating that it is reasonable to believe that financial exploitation may have occurred, may have been attempted, or is being attempted.
Except as ordered by a court, you are not required to refuse or delay a transaction when provided with information by the department of human services or a law enforcement agency alleging that financial exploitation may have occurred, may have been attempted, or is being attempted, but may use your discretion to determine whether to refuse the transaction or hold the transaction based on the information available to you.
If you refuse or hold a transaction based on reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted, you are required to:
Except with regard to an account administered by a bank or trust company in a fiduciary capacity, make a reasonable effort to notify one or more parties authorized to transact business on the account orally or in writing.
No notice is required to be provided to any party authorized on the account if the party is the suspected perpetrator of financial exploitation.
Report the incident if it involves financial exploitation, to the department of human services adult protection services.
Any refusal to conduct a financial transaction or hold a transaction based on your reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted expires upon the earlier of:
Ten business days after the date on which you first refused or held the financial transaction (unless earlier terminated by an order of a court of competent jurisdiction), if the transaction involved the sale of a security or offer to sell a security and the person selling or offering to sell is not required to register pursuant to title 48, chapter 1, part 1;
Five business days after the date on which you first refused or held the financial transaction, if the transaction did not involve the sale of a security, unless terminated earlier by an order of a court of competent jurisdiction;
The time when you reasonably believe that the financial transaction will not result in financial exploitation; or
The time when the member requesting the transaction has been advised of a potential risk in the transaction and the member has requested the transaction continue as long as the member is not the suspected perpetrator of financial exploitation.
The credit union may extend the time permitted in this section to refuse or hold a transaction based on a reasonable belief that additional time is needed to investigate the transaction or to prevent financial exploitation.
A court of competent jurisdiction may enter an order extending the time that you must refuse a transaction or hold based on reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted.
The credit union, or an employee of the credit union, is immune from all criminal, civil, and administrative liability:
For refusing or not refusing a financial transaction, or holding or not holding a financial transaction
For actions taken in furtherance of the determination, if the determination was based upon a reasonable belief.
The credit union is authorized to offer to an elderly or vulnerable adult the opportunity to submit and periodically update a list of persons that the elderly or vulnerable adult authorizes the credit union to contact when the credit union has reasonable cause to suspect that the adult is a victim or a target of financial exploitation.
The credit union, or an officer or employee of the credit union, that has reasonable cause to suspect that an elderly or vulnerable adult is the victim or target of financial exploitation may convey the suspicion to one or more of the following, providing that the person is not the suspected perpetrator:
Persons on the list, if a list has been provided by the elderly or vulnerable adult;
A co-owner, additional authorized signatory, or beneficiary on the elderly or vulnerable adult’s account; or
A person known by the credit union to be a family member, including parent, adult child, or sibling.
When providing information under this section, the credit union may limit the information and disclose only that the credit union has reasonable cause to suspect that the elderly or vulnerable adult may be a victim or target of financial exploitation without disclosing any other details or confidential personal information regarding the financial affairs of the elderly or vulnerable adult.
The credit union may choose not to contact one or more of the persons on the list if the credit union suspects that the person or persons are engaged in financial exploitation.
The credit union, or an employee of the credit union, will be immune from all criminal, civil, and administrative liability for contacting a person or electing not to contact a person under this section and for actions taken in furtherance of that determination if the determination was made based on reasonable belief.
Contact with any person and any information provided under the above provisions will be exempt from the customer consent and customer notice provisions of present law.
Power of Attorney
A credit union is authorized to refuse to accept an acknowledged power of attorney if the credit union has reasonable cause to suspect that the principal is or may be the victim or target of financial exploitation by the agent or persons acting for or with the agent.
A credit union, or an employee of the credit union, will be immune from all criminal, civil, and administrative liability for refusing to accept a power of attorney or for accepting a power of attorney and for actions taken in furtherance of that determination if the determination was based upon reasonable belief.
Under present law, the Financial Records Privacy Act provides that a financial institution may furnish information records to a federal, state or local official or agency in response to a subpoena lawfully issued by the official or agency.
Present law provides that a financial institution may presume that a subpoena that appears valid on its face has been lawfully executed.
This amendment revises this presumption to add that it applies if the subpoena shows on its face that it is in compliance with notice and delay provisions of present law or administrative subpoena issued by the department of human services pursuant present law.
This amendment requires a financial institution to provide access to or copies of records that are relevant to suspected or actual or attempted financial exploitation, as described above, in response to an administrative subpoena issued by the department of human services, adult protective services.
The records requested must be limited to historical records as well as records relating to the most recent transaction or transactions that may comprise financial exploitation not to exceed 30 calendar days prior to the first transaction that was reported, or 30 calendar days after the last transaction that was reported.
A financial institution will have up to 14 business days to respond to an administrative subpoena.
The department of human services must provide notice to the customer whose records are requested not later than 30 days after receipt of the records from the financial institution, however, the department may delay the notice to the customer by seeking a judicial delay.
Under present law, in all judicial proceedings, the reasonable expenses of a financial institution in producing records in response to a subpoena are taxed as costs, without regard to the amount of any bond, and in all other instances, the issuer must pay the financial institution’s reasonable expenses incurred in complying with the subpoena.
Present law provides that charges by the financial institution at rates that do not exceed those established by the internal revenue service are deemed reasonable unless otherwise determined by the appropriate court after notice and a hearing.
This amendment adds that charges established by the financial institution’s fee schedule will also be deemed reasonable.
Under present law, a bank initiating an interpleader action (a suit between two parties to determine a matter of claim or right to property held by a third party) is entitled to recover from the funds tendered the costs of the action, including reasonable attorney fees,
This amendment extends this provision to a financial institution “joining in, joined on, or defending in any manner” an interpleader action.
This amendment encourages the department of financial institutions, within existing public or private resources, to consult with financial service providers, the commission on aging and disability, and the department of human services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.