When an older woman entered her local bank, the teller on duty immediately noticed something was wrong. The usually friendly woman was not smiling. Her eyes darted and her hands shook as she asked if someone could help her with a wire transfer of $2,500. Conversationally, the teller asked if she was buying something exciting, all the while knowing that this was a much larger sum than this particular customer would ordinarily spend (or could afford). The customer immediately burst into tears. She had received a phone call from someone claiming to be her grandson—he was in trouble, he needed money, and if she told anyone of his situation, he would be harmed. Together, the teller and management calmed the woman down, helped her call her grandson to confirm he was alright, and then made arrangements to get her safely home.
Unfortunately, news stories and anecdotes of scams of this sort are becoming alarmingly commonplace. The CFPB now estimates that as many as one in five seniors have been financially exploited, and only a fraction of those incidents were reported to government authorities. Seniors are often perceived as “easy prey” for would-be abusers, due to isolation, cognitive decline, medical issues, or a lack of understanding of technology security, combined with the likelihood they have valuable assets and/or steady retirement income. Not all abuse is as dramatic as the story above. Sometimes, it is a traveling con man offering bogus home repair services, a telemarketing scam collecting credit card numbers for alleged purchases or donations to charity, or a family member or caretaker exploiting a position of power to siphon off assets. As a larger portion of the U.S. population ages, the problem is likely to worsen.
Community banks are in a unique position to help combat this type of fraud. Older customers tend to do more of their banking in person, allowing bankers to develop more familiarity and rapport. Small bank personnel, who see the same faces on a routine basis, are more likely to know their customers’ regular behavior, financial situations, and spending habits and thus are well-equipped to recognize suspicious changes. Regulators, advocacy groups, and banking industry groups encourage bankers to stay vigilant, compassionate, and proactive in protecting their vulnerable customers and community members. Many resources for banks are now available and include these suggestions:
- Train staff to recognize and intercept financial abuse. Recognizing the unique warning signs of elder exploitation is critical, and a multitude of training resources are available from advocacy groups, the CFPB, and state departments of commerce.
- Leverage existing fraud detection programs. If your bank uses models, tools, or other software to monitor for suspicious activity, these can be calibrated to flag potential elder exploitation, as well.
- Ensure your bank has formal requirements for keeping power of attorney and other authoritative documentation on file. Family members or caregivers may attempt to use fraudulent documents or insinuations of authority to gain access to the funds of vulnerable adults.
- Help educate and empower customers. Some banks have developed special programs or approaches for senior customers, such as offering accounts with protective opt-in features, encouraging customers to plan for incapacity, and counseling customers on the benefits—and risks—of joint account ownership and authorized signers. Banks may also stock helpful literature and materials in the lobby to raise awareness among vulnerable customers and those wishing to protect them.
- Implement formal procedures for escalating and reporting cases of suspected exploitation. Give bank personnel guidance on when to report a red flag to management, and give management guidance on when to get the authorities involved.
- Continue to build rapport and trust with aging customers. Customers who view their bankers as a reliable source of support and assistance may be more willing to confide suspicions or reservations and more open to advice.
But what about privacy laws? Federal and state laws restrict when a bank can disclose customers’ confidential information without prior notice to or authorization from the customer. While the best intentions might lead a small-town banker to pick up the phone and alert a customer’s family members to concerns, banks must limit their disclosure to the proper authorities. Federal regulators have released Interagency guidance clarifying that banks may report suspected cases of elder fraud or abuse to the appropriate authorities without complying with customer notice and opt-out requirements. Similarly, most states have instituted policies encouraging financial institutions to report cases of suspected elder financial abuse; some states, such as California, have even gone so far as to require such reporting. In Minnesota, Minn. Stat. § 13A.04 allows financial institutions to notify government authorities of possible financial exploitation of a vulnerable adult and provide access to the relevant financial records. Be sure to check the statutes and guidance applicable to your bank to find the appropriate authority and reporting method.
Admittedly, banks can only act to stop the activity they can see, and unfortunately, much of what banks can do is only possible after fraud has taken place. Raising awareness and involving authorities who have the power to pursue fraudsters are the first steps in curtailing elder abuse. Even where banks are not currently required to monitor for and report exploitation, endeavoring to protect our most vulnerable community members is just the right thing to do.