The following is a guest blog post by Kevin E. Hansen, Ph.D., J.D., LL.M. This post is part of SIFMA’s “Protecting Senior Investors” blog series, raising awareness and sharing information to help prevent elder financial exploitation. See our full series here. 

Financial exploitation continues to be a pervasive crime affecting older and vulnerable adults in the United States, with some characterizing it as the “Crime of the 21st Century.” While research has attempted to define and quantify the prevalence and cost of financial exploitation for well over twenty-five years, it remains a crime that is difficult to detect in time to avert improper or illegal transactions. Studies have estimated the financial loss to older adults somewhere between $2.6 billion annually[1] (MetLife Mature Market Institute) and $2.9 billion annually (U.S. Government Accountability Office). Even these estimates of financial loss are, by now, dated and hampered by limited scope of research. Information from the National Center on Elder Abuse suggests that for every case of financial exploitation reported to adult protective services (APS) or law enforcement, approximately four to five cases remain unreported and, as such, uninvestigated.

While the older adult population, usually defined as those aged 65 and older, continues to grow, states have incrementally increased their statutory authority to protect older or vulnerable adult victims and prosecute offenders. Financial exploitation is exclusively reserved for the prosecution of financial crimes committed against those deemed “vulnerable” in the majority of states, where the victim has a demonstrated inability to protect himself or herself from a potential perpetrator, or is deemed vulnerable based on the type of care or services received. Despite the common image of stranger scams and paid caregiver thefts, the perpetrators of exploitation are more often family members or trusted friends of the vulnerable adult. They may appear to be helping the older adult make decisions, but those decisions ultimately are not for the benefit of the vulnerable adult. Where there is a history of family conflict, where an adult child feels he or she is “entitled” to their parents’ money, or where the adult family member is reliant upon the vulnerable adult for basic needs (e.g., food, housing, financial support), the potential for financial exploitation increases exponentially.

As of 2017, approximately 36 states have laws addressing the specific crime of financial exploitation. These specific financial exploitation laws typically require that the victim be a “vulnerable adult” or “dependent adult” (i.e., the victim is impaired mentally or physically in some way), although some states use age-based victim criteria (e.g., the victim is 50 or 60 years of age or older). Six states recognize a “common scheme or conspiracy” to commit exploitation and fourteen states have language addressing the illegal actions of fiduciaries. While some states have and use their financial exploitation statutes, there are cases where a general theft statute (e.g., theft by swindle, theft by false representation, corporate theft) is the more appropriate crime to charge, either because of unique factors in the case, because the prosecutor does not have to show the victim was a vulnerable adult, or because, potentially, the penalty is higher for the perpetrator if convicted. Additionally, what is quite important to note is that the majority of states have laws that address the “attempt” at committing a crime, including the attempt of financial crimes. These “attempt” laws often look at the intentional preparation for and steps toward committing the actual crime, when an actual theft does not occur, and prosecutors can still charge the actor. One essential key to protecting the intended victim is the opportunity for financial professionals to stop a transfer or transaction before it occurs.  Federal agencies’ actions in the last few years have clarified financial professionals’ ability to be proactive and halt a suspicious transaction, to ensure the security of their client’s financial assets.

Ultimately, the goal of professionals in all aspects of the financial services industry should be to report crimes when they are initially suspected, such as an attempt to improperly access or use an older adult’s funds, to allow law enforcement to promptly investigate and determine if charges are appropriate against an alleged perpetrator. To promote reporting of suspected crimes, guidance was issued from seven federal agencies (e.g., Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, Federal Trade Commission, National Credit Union Administration, Office of the Comptroller of the Currency, Securities and Exchange Commission) that reporting suspected financial exploitation does not constitute a breach of the Gramm-Leach-Bliley Act, which generally controls around duties to notify customers about information-sharing. Additional protections for financial professionals (e.g., broker-dealers, investment advisors, depository institution or credit union employees) are included in the “Senior$afe Act” which has been introduced by a bipartisan group of legislators and is moving through Congress.

In the majority of cases, reporting financial exploitation before it occurs – and working to stall or stop any pending transactions that could financially hurt the vulnerable adult – is the best course of action. By the time an exploitation cases are prosecuted, the perpetrator may have wasted away the resources of the vulnerable adult, such that restitution of what had been taken is impossible. Early in the process, there is an opportunity for county APS to step in and help provide protection for the vulnerable adult, but their involvement is also dependent upon early, proactive reporting of suspected exploitation by financial professionals who are familiar with the type of improper or illegal activity occurring. By working cooperatively with local law enforcement and county APS, financial services professionals have the opportunity to make a substantial, positive impact on protecting the financial resources and stability of their older adult clients, which is a beneficial service and one that may save their lives as well as their savings.

Kevin E. Hansen, Ph.D., J.D., LL.M., is an Assistant Professor, Health Care Administration Program, at the University of Wisconsin – Eau Claire.

 

[1] In media-reported cases of exploitation.