Regulators across the financial services industry remain keenly focused on protecting the interests of an aging population, especially where there may be signs of diminished cognitive capacity. Banks should consider various operational and compliance measures to guard against elder financial exploitation. While bank staff are on the front lines in protecting elderly customers, bank directors play a pivotal, top-down role in emphasizing a culture of vigilance, and in defining policy and strategy to combat elder financial fraud.
Be Aware of the Problem
Frontline personnel in branches and call centers are the first and last lines of defense to prevent elder financial exploitation. These personnel are the most likely to interact with elderly clients, many of whom are more inclined to conduct their financial transactions in a branch or over the phone, rather than electronically. Conducting periodic training that highlights real-world scenarios will help personnel recognize the signs of elder financial exploitation. An additional training element that may prove beneficial, but that often goes overlooked, is educating personnel on the psychological and emotional aspects of elder fraud. A customer’s diminished cognitive capacity or potential confusion, fear or embarrassment may be central to a perpetrator’s ability to prey on an elderly client.
Empower Employees to Speak Up
Identifying signs of potential financial exploitation of elderly clients is a great start. However, it is critical that personnel escalate suspicious activity through the proper channels within the bank. Personnel may be reluctant to follow through with escalating an event that is not blatantly fraudulent, perhaps out of fear of delaying a transaction or potentially embarrassing or even angering a client. However, speaking up is prudent, even when in doubt.
Develop the Three Ps
Banks should develop policies, processes and procedures that are easy to understand and follow.
Policies: Clearly define your organization’s views, guidelines and stated mission with regard to elder financial fraud.
Processes: Identify the mechanisms in place to effectively carry out the bank’s stated policies. This may include pre-set withdrawal limits (either daily or monthly), disbursement waiting periods or communications with external sources, such as a trusted contact person for the client, local adult protective services (APS) or law enforcement.
Procedures: Describe the precise steps that personnel should follow to execute the identified processes. What must a teller do in the event that a withdrawal request exceeds an established limit? Who does a call center representative contact in the event of suspicious activity, and what information should be provided? What information should personnel provide to a trusted contact person? What reports must be filed with authorities?
Report Suspected Exploitation
Banks are subject to various reporting requirements at the state and federal levels that relate to suspected elder financial fraud. National banks, state banks insured by the Federal Deposit Insurance Corp. and other financial institutions must file a suspicious activity report (SAR) with the Financial Crimes Enforcement Network (FinCEN) upon detection of a known or suspected crime involving a transaction. FinCEN has provided related guidance, and the electronic SAR form includes an “elder financial exploitation” category of suspicious activity. Several states’ laws and regulations also require that banks report suspected elder abuse to APS or law enforcement.
Banks may consider permitting clients to identify a “trusted contact person” that the bank may contact upon reasonable suspicion of potential exploitation. This is consistent with a March 2016 advisory from the Consumer Financial Protection Bureau (CFPB). Privacy concerns exist when disclosing customer information to a third party. However, the Gramm-Leach-Bliley Act (GLBA) permits disclosure of nonpublic personal information with customer consent. Regulation P under GLBA also grants an exception to the notice and opt-out requirements to protect against fraud or unauthorized transactions, or to comply with federal, state or local laws, rules and other applicable legal requirements. Additionally, 2013 Interagency Guidance “clarifies 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.” A safe harbor from liability also exists for a bank that voluntarily discloses a possible violation of law or suspicious activity by filing a SAR. Bank personnel are also protected from liability in this situation.
Regulators at all levels of, and sectors within, the financial services industry continue to prioritize the interests of elderly customers, especially where there may be signs of diminished cognitive capacity. The banking community has gone to great lengths to support these efforts, and bank directors will continue to play an important role in defining internal policies and emphasizing the importance of vigilance in this area.