Elder Financial Abuse

Abuse of elderly and impaired adults, including financial abuse, is a terrible tragedy that is increasing at an alarming rate. It comes in many forms, from physical and mental abuse and neglect to financial exploitation. One state (Alaska) has reported that approximately 11% of U.S. citizens age 60 and older suffer from some form of abuse, neglect, or exploitation1. In Alaska, reports of abuse of its long-term care residents have increased by 200% in the past three years, with the most common reports of harm being neglect and financial exploitation.2

Elder persons in the United States have lost at least $2.9 billion as a result of various forms of financial abuse.3 The true amount is undoubtedly much higher as many cases go unreported (MetLife estimates are that less than 3% of cases of financial abuse are ever reported). Elder financial abuse is expected to increase as the baby boomer population ages. Strangers account for 51% of the perpetrators of elder financial abuse, while friends, neighbors and family make up 34% of the perpetrators.4 Individuals in the business sector commit 12% of elder financial abuse, and 3% involves Medicare and Medicaid fraud.5 Victims of financial elder abuse have a relationship of trust and confidence with 90% percent of their abusers.6 Elder financial abuse may involve theft, forgery, deception, con-artistry (by “confidence men” or “cons”), “romance scams,” coercion, and undue influence to obtain money or property, either directly by outright taking, or indirectly by means of a will, power of attorney, or deed.

Older citizens, particularly those with Alzheimer’s disease, dementia, and other complex health problems, as well as other adults who are mentally or physically impaired, are often singled out as victims (as I believe my mother was when her house was burglarized recently). They present attractive targets due to their dependence on others. Dependence makes it more likely that they will rely upon and trust others who falsely present themselves as friends and helpers who have the elder person’s best interest at heart. For example, elder persons who are targeted often live alone and are uncomfortable with technology, which may present opportunities for a “helper” to gain access to bank accounts.

The resulting emotional and physical trauma, sometimes accompanied by a significant financial loss, can have a devastating effect on victims’ lives. Some victims sink into isolation, afraid to go out anymore – to the doctor, the grocery store, or to visit friends. Even those who have not experienced abuse directly often know of others who have, and they suffer from disabling fear themselves.

Elder abuse is perpetrated by strangers, family members, and caregivers. It cuts across all socio-economic, cultural, racial, and ethnic categories. Abuse and neglect of residents in long-term care facilities often goes unreported. Victims often fear that additional abuse will result from reporting the abuse. Some victims are simply unable to understand or report such conduct to the proper authorities, just as they may be unable to protect themselves from conduct that is abusive and sometimes criminal.

Some warning signs of elder abuse may include (without limitation) one or more of the following:

  • secretiveness involving financial matters, correspondence, telephone calls, etc.
  • unusual withdrawals or transfers of money from financial accounts
  • unusual transfer of other assets, such as real property
  • unusual gifts to caregivers or others
  • unusual loans
  • other unexplained losses or changes in financial situation
  • accumulation of unpaid bills
  • new friends or even romantic interests
  • changes to a will
  • change of beneficiary.

In 2010, Congress passed The Elder Justice Act as part of the Patient Protection and Affordable Care Act.7 It is an ambitious piece of legislation, which includes authorizing a grant program for adult protective services and various other programs and social services designed to assist states in protecting the aged and infirm. Unfortunately, as of October 2013, no money has been appropriated to implement the Act, according to the National Adult Protective Services Association (a non-profit organization devoted to strengthening adult protective services programs).8

Federal law permits reporting of elder financial exploitation by banks, notwithstanding privacy considerations.  Under 31 C.F.R. §103.18 (reports by banks of suspicious transactions), banks are not explicitly required to report elder financial exploitation, but banks are required to report a transaction made through the bank that involves $5,000 or more if the bank knows, suspects or has reason to suspect that the “transaction has no business or apparently lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.” 31 C.F.R. § 103.18(a)(2)(iii). That arguably could encompass a transaction that involved elder financial exploitation (if it was for $5,000 or more), and FinCEN states in its advisory to banks regarding the reporting of elder financial exploitation that banks “should” report such a transaction on a Suspicious Activity Report (SAR). Advisory to Financial Institutions on Filing Suspicious Activity Reports Regarding Elder Financial Exploitation, FIN-2011-A003, Feb. 22, 2011.

FinCEN is the Department of the Treasury’s Financial Crimes Enforcement Network.  FinCEN and other federal agencies have sent out an advisory and guidance to banks encouraging them to report elder financial exploitation.  Other federal agencies’ guidance explains that banks do not need to worry about the Gramm-Leach-Bliley privacy law because reporting elder financial exploitation is expressly permitted under it.  Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults. FinCEN specifically requests that banks include the term “elder financial exploitation” in the narrative portion of the SAR, but warns that this term and all information about the victim should not be reported as the subject of the SAR. Id.

The other federal agencies that published a joint “Interagency Guidance on Privacy laws and Reporting Financial Abuse of Older Adults” explaining that Gramm-Leach-Bliley poses no obstacle to reporting elder financial exploitation include the Board of Governors of the  Federal Reserve System, Commodities Futures Trading Commission (CFTC), Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corporation (FDIC), Federal Trade Commission (FTC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC). Id.

Of course, this is all at the federal level.  FinCEN emphasizes that banks should continue to report all forms of elder abuse according to institutional policies and the requirements of state and local laws and regulations, where applicable. 

According to the National Adult Protective Services Association (NAPSA), every states has statutes that create an adult protective services program. As of July 2013, 49 states and the District of Columbia impose mandatory reporting of cases of suspected elder abuse, neglect and/or exploitation upon certain persons. Those statutes may also impose criminal penalties if the reporting requirements are not met, in addition to criminal penalties for abuse, neglect and exploitation of elders. Most states do not expressly provide for private rights of action.

Georgia, for example, requires certain persons who have reasonable cause to believe that a disabled adult or elder person has been abused, neglected or exploited to cause certain reports to be made. Those persons generally include any administrator, manager, or employee of a long-term care facility9; employees of financial institutions10; and any physician, osteopath, intern, resident, other hospital or medical personnel, dentist, psychologist, chiropractor, podiatrist, pharmacist, physical therapist, occupational therapist, licensed professional counselor, nurse, social worker, day-care worker, coroner, medical examiner, or other health professional.11

Notably, when such a person is a staff member of a facility, such as a financial institution or hospital, he or she must notify the person in charge of the facility, and the person in charge files (or causes to be filed) the required reports.12 Georgia law requires an immediate report by telephone or in person to the Georgia Department of Human Services and to the appropriate law enforcement agency or prosecutor, followed by a written report within 24 hours containing the information specified in the statute.13 Usually, the report must be made even if the reasonable cause is based upon a privileged communication.14

Georgia’s neighboring states have statutes with similar provisions. Alabama’s reporting requirement is limited to physicians and other practitioners of the healing arts, and it does not include financial institutions or their employees. Virginia defines reporters to include most persons who are licensed, certified, or registered by a health regulatory board; employees or contractors who work with or provide care for adults; and guardians, conservators, and law enforcement officers, but it does not require reporting by financial institutions or their staff.15 West Virginia limits reporters to medical, dental, or mental health professionals; Christian Science practitioners and religious healers; social workers; law enforcement and “humane” officers; state or regional ombudsmen; and any employee of any nursing home or residential facility, but it does not require financial institutions to report cases of elder abuse.16 Other southeastern states - Florida, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee - make “any person” a potential reporting person, including (without limitation) financial institutions, long-term care facilities, and nursing homes.17

Criminal penalties for knowingly and willfully failing to make a required report (or preventing another from doing so) are generally misdemeanors punishable as follows:

Alabama - up to six months imprisonment or up to $50018

Florida - up to 60 days imprisonment or up to $500 or double the pecuniary loss of the victim19

Georgia - up to 12 months imprisonment or up to $1,000 or both20

Kentucky - up to 90 days imprisonment21

Mississippi - up to 6 months imprisonment or up to $5,000 or both22

North Carolina - no criminal penalty found

South Carolina - up to one year imprisonment or up to $2,50023

Tennessee - between 30 days and 11 months and 29 days imprisonment and between $500 and $1,00024

Virginia - up to $500 for first offense and between $100 and $1,000 for subsequent offenses25

West Virginia - up to 10 days imprisonment or up to $100 or both.26

Other states have similar statutory schemes and a few states, such as Florida27 and California28 even provide private rights of action for elder abuse. The trend among states, however, is to emphasize mandatory reporting of elder abuse, neglect and exploitation by professionals likely to have significant contact with elder persons. The mandatory reporting requirements should benefit elder persons in several ways. Most obviously, they will lead to investigations and outreach by authorities to assist elder persons after they have been victimized. They should also make persons with whom elder persons are in contact most frequently more attentive to the problem and, therefore, more likely to look out for and pick up on signs of elder abuse. Equally important, they should cause mandatory reporters to notice that an elder person is impaired or vulnerable, and to try to take some appropriate action before an incident of abuse occurs. In this way, the mandatory reporting requirement may actually operate to counter (at least to some extent) the tidal wave of elder abuse.

On the other hand, the failure of Congress and some states to appropriate sufficient money to fund robust adult protective services activities is a serious problem. As an example, Illinois’ poorly funded and inadequately staffed Vulnerable Adult Abuse Program was revamped in the wake of a media firestorm involving more than 50 vulnerable adults who died after their suspected abuse was reported to the appropriate state agency but never investigated.29

Lack of funding also compromises efforts to train people to identify elder financial exploitation. As a practical matter, without such training, adult protective services statutes have no teeth.

In contrast to the involuntariness of being protected by the state, a lawsuit is a voluntary act. Successful litigation and the threat of more of it can lead to widespread change that is beneficial – not only for the successful litigant but for society at large. We know that products liability litigation, as well as consumer advocacy, has resulted in a safer world for consumers. (If it were not for Ralph Nader, we might still be driving unsafe cars with metal dashboards and no seatbelts.) Yet most states have not expressly provided for private rights of action in their elder protection statutes.

In summary, the efforts thus far represent steps in the right direction, but more needs to be accomplished. Experts say that fighting elder abuse will take more money and resources, along with greater coordination at the federal level. Given the budget standoff in Congress, those efforts have a long way to go.