Regulators and bankers seem to be on the same page in the area of elderly financial abuse.
Identifying and reporting such abuse is likely to become a bigger issue as more baby boomers retire. Regulators are issuing guidance, and state lawmakers are passing laws, to tackle the issue.
Rather than fretting about extra work, bankers are applauding those efforts.
"As a bank, we have so much more experience with fraud that we may be able to help avoid a situation where there's a financial loss," says Dana Paull, compliance manager at Heritage Oaks Bank in Paso Robles, Calif. "Our education efforts are going to help make this more manageable. If we teach customers about potential fraud, then they can prevent it themselves."
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In September, eight federal agencies, including the Consumer Financial Protection Bureau, released guidance stating that financial institutions could
The CFPB took the lead on releasing the guidance after banks and credit unions said it was unclear whether Gramm-Leach-Bliley barred them from reporting suspected abuse, says Nora Dowd Eisenhower, the CFPB's assistant director for the Office of Older Americans.
"Many banks and credit unions do report elder abuse and that is something we want to applaud them for," Eisenhower says. "The bank teller who sees someone on a regular basis . . . can prevent this harm before it happens. It is very hard to recover" lost funds once the fraud takes place.
Clarification "takes away an overhang or potential roadblock" for banks in reporting fraud, says Robert Singer, a lawyer at Brooks Pierce in Greensboro, N.C.
Under federal regulation, several factors generally determine whether a suspicious activity report for suspected elder abuse must be filed with the Financial Crimes Enforcement Network, says Donna Wilson, a lawyer at Manatt, Phelps & Phillips. Those factors include the monetary value involved and identification of a suspect.
Generally, regulators expect financial institutions, where appropriate, to incorporate elder abuse red flags into their fraud and identity theft prevention compliance programs, Wilson says.
"The focus on elder financial abuse is the latest step in an evolutionary process by the federal and state regulators to deal with fraud," Wilson says. "You have this glut of baby boomers, who are steadily advancing in age. By many measures they hold a great deal of wealth . . . making them an attractive target."
Many states also have laws that require financial institutions to report suspected abuse, Wilson says.
For instance, California was among the first states to require financial institutions to report suspected elder abuse, Paull says. Heritage Oaks, a unit of the $1.1 billion-asset Heritage Oaks Bancorp (HEOP), provides annual training to employees on spotting abuse. The bank also encourages its staff to take note of "anything remotely suspicious," Paull says.
Small banks have an advantage in identifying potential fraud, industry experts say. Branch employees are often familiar with clients, so they are able to notice if a transaction is out of the ordinary.
Reporting suspected abuse can be tricky and requires a great deal of subjectivity, Paull says. About a third of fraud is committed by someone close to the victim, such as family members, friends or neighbors, according to the MetLife report.
"This can create moral challenges when deciding whether to report," Paull says. "You have to do what's best for the client's welfare based on your knowledge of the client and the situation."
Legislators in North Carolina recently adopted a law, set to become effective Dec. 1, that "dovetails with federal regulations" about reporting elder financial abuse, Singer says. The law requires banks with reasonable grounds to believe an elderly or disabled client is being taken advantage of to report the incident to the appropriate local authorities.
Though the state law will add some costs to banks, most institutions backed it, including the North Carolina Bankers Association, which was involved in crafting the legislation, Singer says.
"Relationships are the soul of banking," Singer says. "This seems to have some tangible benefits to their customers."
The American Bankers Association and the Independent Community Bankers of America backed the federal guidance issued late last month. Many banks already report suspected abuse, so the guidance just provided some clarification, representatives for the trade groups say.
Empire National Bank in Islandia, N.Y., has not yet needed to report any cases of suspected abuse, but it still trains its staff on what to look for, says Douglas Manditch, the $455 million-asset bank's chairman and chief executive. If an employee spots potential fraud, Empire National would likely report it to local authorities first to allow for a quicker response.
"Our branch employees are sensitive to their customers," Manditch says. "Our employees know what is ordinary for our customers, so if something was out of the ordinary, they can pick it out easier."
