Yesterday, 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 issued a joint statement to provide covered financial institutions with strategies and examples of effective risk management and other practices to identify, prevent, and respond to elder financial exploitation. The agencies emphasized that the joint statement does not establish new supervisory expectations or impose new regulatory requirements.
This is an area where we frequently receive questions from clients, since it involves balancing the desire to prevent elder financial exploitation with worries about treating consumers differently because of age, which is a protected characteristic under the Equal Credit Opportunity Act.
The agencies noted that a recent study estimates annual losses from elder financial exploitation in the U.S. at $28.3 billion. In addition, the U.S. Department of the Treasury’s 2024 National Money Laundering Risk Assessment described elder financial exploitation as a growing money laundering threat, linked to over $3 billion in reported financial losses annually.
The agencies provide examples of risk management and other practices that supervised institutions could consider adopting:
- Governance and Oversight: Financial institutions should consider enhancing or creating risk-based policies, internal controls, employee codes of conduct, ongoing transaction monitoring practices, and complaint processes to identify, measure, control, and mitigate elder financial exploitation. Effective actions include open lines of communication among departments responsible for researching and responding to unusual account activity, such as Bank Secrecy Act compliance, fraud prevention, and consumer protection.
- Employee Training: Supervised institutions may benefit from providing clear, comprehensive, and recurring training for their employees on recognizing and responding to elder financial exploitation. Training may include identifying red flags for different types of financial exploitation, proactive approaches to detecting and preventing exploitation, and detailing actions for employees to take when they have concerns. Customer-facing employees should be trained to identify transactional and behavioral red flags when conducting transactions for older adults.
- Using Transaction Holds and Disbursement Delays: Supervised institutions have used transaction holds and disbursement delays to prevent consumer losses and respond to situations involving elder financial exploitation. These practices should be used in compliance with applicable laws and regulations. Some state laws permit institutions to temporarily hold a transaction or delay a disbursement of funds when they suspect financial exploitation, including elder fraud.
- Using Trusted Contacts: Supervised institutions may establish policies allowing account holders to designate one or more trusted contacts that employees can contact when elder financial exploitation is suspected. A trusted contact might be a family member, attorney, accountant, or other trusted individual authorized to be contacted if the institution cannot reach the account holder or suspects exploitation.
- Filing SARs Involving Suspected Elder Financial Exploitation: Financial institutions are required under federal laws and regulations to file Suspicious Activity Reports (SARs), which may include elder financial exploitation. FinCEN issued a June 15, 2022 Advisory on Elder Financial Exploitation setting forth guidance for identifying and reporting this issue in SARs. In addition, financial institutions can voluntarily file SARs for suspicious activities related to elder financial exploitation that do not meet the requirements for mandatory filing.
- Reporting to Law Enforcement, Adult Protective Services (APS), and Other Entities: Timely reporting of elder financial exploitation increases the likelihood of the recovery of funds. Some states require certain institutions to report suspected elder financial exploitation to APS, local law enforcement, and/or regulatory authorities. In states without mandatory reporting, there may be avenues for voluntary reporting to relevant authorities.
- Providing Financial Records to Appropriate Authorities: Supervised institutions may expedite documentation requests for APS, law enforcement, or other investigatory agencies for active elder financial exploitation cases. Institutions should make all supporting documentation available to FinCEN or any federal, state, or local law enforcement agency upon request.
- Engaging with Elder Fraud Prevention and Response Networks: Supervised institutions can help protect older adults from financial exploitation by engaging with elder fraud prevention and response networks that include professionals from various organizations. These networks can improve coordination among institutions, law enforcement, APS, and local aging service providers.
- Consumer Outreach and Awareness: When consumers are informed about specific types of scams, they are more likely to recognize a scam and are less likely to lose money. Supervised institutions can support their account holders by providing information about trending scams and ways to avoid them. Institutions are encouraged to share resources provided by government agencies with their account holders or as part of community outreach efforts.
Our Take
The joint agency statement outlines various programs and practices that financial institutions should consider employing to protect the nation’s vulnerable elderly population from financial exploitation.
The interagency guidance suggests that financial institutions consider creating or enhancing risk-based policies, procedures, internal controls, transaction monitoring practices, and complaint processes to address the problem of elder financial exploitation as long as those policies od not result in age discrimination that is prohibited under the Equal Credit Opportunity Act. However, we find it notable that there was no specific discussion in the guidance about potential discrimination against elderly consumers, even in the context of taking actions like transaction holds and disbursement delays, which suggests that the regulators may view preventing elder financial exploitation as a legitimate reason to treat older applicants differently when suspicious circumstances occur. We believe this will continue to be a difficult area for financial institutions to deal with, especially as it relates to identifying “red flags” for elder financial exploitation, but we hope that regulators will be understanding if these “red flags” sometimes lead to different treatment for elderly consumers.
From a litigation perspective, we also note that there has been a ramp-up in third-party fraud scams victimizing aging Americans, often resulting in the victims or their families instituting lawsuits to recover from the financial institutions banking the elderly. Importantly, these agency recommendations provide guidance, but do not confer a private right of action on the victims. Our financial services litigators and regulatory enforcement attorneys regularly represent financial institutions sued by victims of elder financial exploitation, defend government investigation and enforcement actions related to elder fraud, provide advice regarding best practices, and stay abreast of developments in this area of the law.