On December 4, an Interagency Statement on Elder Financial Exploitation (the “Interagency Statement”) was issued by the Board of Governors of the Federal Reserve System (FRB), Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corporation (FDIC), Financial Crimes Enforcement Network (FinCEN), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and state financial regulators (collectively, “the Agencies”) to their supervised institutions. The Interagency Statement is intended to raise awareness and offer strategies to better protect the supervised institutions and their account holders from the impacts of elder financial exploitation.
The Interagency Statement focuses on several best practices that supervised institutions may take to effectively identify, prevent, and respond to instances of suspected elder financial exploitation in nine main categories:
- Governance and Oversight. An institution’s policies and practices should include a focus on guarding against elder financial exploitation. These may include employee codes of conduct; internal controls; ongoing transaction monitoring practices; complaint processes to identify, measure, control, and mitigate elder financial exploitation; and open lines of communication across functions that may be in a position to identify elder exploitation (BSA, compliance, fraud prevention, etc.).
- Employee Training. “Clear, comprehensive, and recurring training” on recognizing and responding to elder financial exploitation for the institution’s employees.
- Transaction Holds and Disbursement Delays. Utilizing hold/delay tools appropriately and in compliance with applicable laws and regulations, and consideration of various factors to help establish the legitimacy of transactions.
- Trusted Contacts. Procedures for allowing account holders to designate Trusted Contacts, and clear and effective procedures for when and how to use Trusted Contact information.
- SAR Filings. Detection of possible “red flag” indicators of financial exploitation, citing FinCEN’s 2022 Advisory on Elder Financial Exploitation.
- Timely Reporting to APS, Law Enforcement, and Other Entities/Agencies. Mandatory and permissive reporting to help expedite the investigation of possible elder exploitation. The Interagency Statement also asks institutions to consider establishing procedures for referring clients who may be victims of exploitation to appropriate government agencies for self-reporting, including the U.S. Department of Justice (DOJ)’s National Elder Fraud Hotline, FTC, the FBI’s Internet Crime Complaint Center (IC3), U.S. Postal Inspection Service (USPIS), and the Social Security Administration (SSA), among other federal, state or local agencies.
- Providing Financial Records to Appropriate Authorities. Expedition of document requests for APS, law enforcement, or other authorized agencies in connection with active elder financial exploitation investigations.
- Elder Fraud Prevention and Response Networks. Engaging in cross-disciplinary, collaborative efforts to protect older adults from financial exploitation.
- Consumer Outreach and Awareness. Providing account holders education and timely information on trending scams and frauds to increase awareness.
As scams and frauds are becoming increasingly sophisticated, fraud targeting seniors and vulnerable investors continues to become a bigger threat each year. Reports of elder fraud to the FBI’s Internet Crime Complaint Center (IC3) increased by 14% year over year from 2022 to 2023 and reported associated dollar losses increased by 11% year over year to over $3.4 billion. Financial institutions should consider reviewing their internal risk management practices in consideration of each of the areas of focus outlined in the Interagency Statement.
Bressler provides end to end advisory and compliance solutions and litigation support for investment advisers and broker dealers confronting senior/vulnerable investor issues. www.bressler.com/senior-map