Elder financial abuse webinar- Paul Hastings & ACFCS 8-27-14

The Rise of GATCA

Preparing for the new reality of global tax compliance and account reporting systems

Elder Financial Abuse and Financial Institutions

Growing Risks and Reporting Requirements

ACFCS WebinarAugust 27, 2014

Presented ByKevin L. Petrasic, Partner, Paul Hastings

Amanda M. Kowalski, Associate, Paul Hastings

Brian KindleExecutive Director

Association of Certified Financial Crime SpecialistsMiami, FL

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• One of fastest-growing types of fraud• Estimated $3 billion in losses in US • 1 in 20 older adults said they had experienced financial mistreatment

in past year, but underreporting is thought to be common

• Can be divided into three broad categoriesUnassociated individuals Businesses or

“professionals”Family members or caretakers

• Grandparent scams• Traveling fraudsters• Telesales and/or

threatening phone calls

• Inappropriate/fraudulent investments

• Fraudulent charities• Lottery scams• Predatory lending• Cyberfraud/identity theft• Medicare fraud

• Abuse of power of attorney

• Abuse of joint accounts, ATM cards, or checks

• Falsified charges or invoices

Overview of Elder Financial Abuse

www.paulhastings.com ©2014 Paul Hastings LLP Confidential – not for redistribution

Elder Financial ExploitationReporting Requirements and Implications for

Financial Institutions


Paul Hastings Global Banking & Payment Systems

Kevin L. Petrasic Amanda M. Kowalski Partner Associate


Overview of Topics

Risks to financial institutions– Expanding area of state and federal oversight– Legal/regulatory risk– Reputational risk

Overview of state laws – Required reporting vs. permissive reporting– Safe harbor provisions

Gramm-Leach-Bliley Act (“GLB Act”) considerations Community Reinvestment Act (“CRA”) implications Consumer Financial Protection Bureau (“CFPB”) activities Overview of compliance for financial institutions


Overview of State Reporting Requirements

Scope of Law– Applicable statute;– Reporting requirement (whether mandatory or permissive), including the state of

mind requirement and applicability to financial institutions and/or their employees;

– Protected group(s) of people;– Meaning of “exploitation,” “financial exploitation,” and/or other relevant defined

terms;– Required or suggested contents of a report;– Timing and procedure for making a report;– Safe harbor provision providing immunity for reporting;– Irregular or unusual features of the applicable statutes.

Financial institutions and/or their employees Mandatory vs. Permissive Statutes

– Mandatory: require financial institution reporting of suspected/known exploitation– Permissive: permit, but do not require, financial institution reporting


Summary of State Reporting Regimes

Reporting Regimes Applicable to Financial Institutions and/or Employees

MandatoryPermissiveBoth


Mandatory Reporting – California

Reporting is required– Any mandated reporter of suspected financial abuse of an elder or dependent adult who has direct contact with

the elder or dependent adult or who reviews or approves the elder or dependent adult's financial documents, records, or transactions, in connection with providing financial services with respect to an elder or dependent adult, and who, within the scope of his or her employment or professional practice, has observed or has knowledge of an incident, that is directly related to the transaction or matter that is within that scope of employment or professional practice, that reasonably appears to be financial abuse, or who reasonably suspects that abuse, based solely on the information before him or her at the time of reviewing or approving the document, record, or transaction in the case of mandated reporters who do not have direct contact with the elder or dependent adult, shall report the known or suspected instance of financial abuse by telephone or through a confidential Internet reporting tool, as authorized pursuant to Section 15658, immediately, or as soon as practicably possible.

Applies to officers and employees of financial institutions – “Mandated reporter of suspected financial abuse of an elder or dependent adult” means all officers and

employees of financial institutions (which includes depository institutions).

Key definitions – Elder - any person residing in CA who is 65 or older;

– Dependent adult - any person between the ages of 18 and 64 years who resides in CA and who has physical or mental limitations that restrict his or her ability to carry out normal activities or to protect his or her rights, including, but not limited to, persons who have physical or developmental disabilities, or whose physical or mental abilities have diminished because of age. (Emphasis added). “Dependent adult” also includes any person between 18 and 64 years of age who is admitted as an inpatient to a 24-hour health facility.


Mandatory Reporting – CA (cont’d)

“Suspected financial abuse of an elder or dependent adult” – Mandated reporter observes or has knowledge of behavior or unusual

circumstances or transactions, or a pattern of behavior or unusual circumstances or transactions, that would lead an individual with like training or experience, based on the same facts, to form a reasonable belief that an elder or dependent adult is the victim of financial abuse.

• “Financial abuse” occurs when a person or entity does any of the following:

(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. (2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. (3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence.


Permissive Reporting – Washington

Reporting is permitted – Permissive reporters may report to the Department of Social and Health

Services or a law enforcement agency when there is reasonable cause to believe that a vulnerable adult is being or has been abandoned, abused, financially exploited, or neglected.

Applies to employees of financial institutions – "Permissive reporter" means any person, including, but not limited to, an

employee of a financial institution, attorney, or volunteer in a facility or program providing services for vulnerable adults.

Key definition – "Vulnerable adult" includes a person: (a) Sixty years of age or older who has the

functional, mental, or physical inability to care for himself or herself; or (b) Found incapacitated under chapter 11.88 RCW; or (c) Who has a developmental disability as defined under RCW 71A.10.020; or (d) Admitted to any facility; or (e) Receiving services from home health, hospice, or home care agencies licensed or required to be licensed under chapter 70.127 RCW; or (f) Receiving services from an individual provider; or (g) Who self-directs his or her own care and receives services from a personal aide under chapter 74.39 RCW.


Permissive Reporting – WA (cont’d)

Broad scope of activities– "Financial exploitation" means the illegal or improper use, control over, or withholding of the property,

income, resources, or trust funds of the vulnerable adult by any person or entity for any person's or entity's profit or advantage other than for the vulnerable adult's profit or advantage. "Financial exploitation" includes, but is not limited to:

(a) The use of deception, intimidation, or undue influence by a person or entity in a position of trust and confidence with a vulnerable adult to obtain or use the property, income, resources, or trust funds of the vulnerable adult for the benefit of a person or entity other than the vulnerable adult;

(b) The breach of a fiduciary duty, including, but not limited to, the misuse of a power of attorney, trust, or a guardianship appointment, that results in the unauthorized appropriation, sale, or transfer of the property, income, resources, or trust funds of the vulnerable adult for the benefit of a person or entity other than the vulnerable adult; or

(c) Obtaining or using a vulnerable adult's property, income, resources, or trust funds without lawful authority, by a person or entity who knows or clearly should know that the vulnerable adult lacks the capacity to consent to the release or use of his or her property, income, resources, or trust funds.

Safe harbor provision for good faith reporting– A person participating in good faith in making a report under this chapter or testifying about alleged

abuse, neglect, abandonment, financial exploitation, or self-neglect of a vulnerable adult in a judicial or administrative proceeding under this chapter is immune from liability resulting from the report or testimony. The making of permissive reports as allowed in this chapter does not create any duty to report and no civil liability shall attach for any failure to make a permissive report as allowed under this chapter.


Mandatory and Permissive - Hawaii

Hawaii law requires financial institutions to report financial abuse of an “elder” pursuant to the dependent elder abuse statute, Haw. Rev. Stat. § 412:3-114.5. – “Elder” means a person 62 or older

Hawaii law permits any person to report the financial and economic exploitation of a “vulnerable adult” pursuant to the adult protective services statute, Haw. Rev. Stat. §§ 346-221 et seq. – “Vulnerable adult” means a person 18 years of age or older who,

because of mental, developmental, or physical impairment, is unable to:(1) Communicate or make responsible decisions to manage the person's own care or resources; (2) Carry out or arrange for essential activities of daily living; or (3) Protect oneself from abuse, as defined in this part.

Both statutes include safe harbor provisions shielding good faith reporters from civil and criminal liability


Key Points

Broad scope of state laws and application to various groups of people, both in state and out of state

State of mind trigger varies by state– Some states require knowledge; some use more relaxed

“reason to believe” standard; others use “reasonable person” standard

Significant gray area for financial institutions and their employees, especially where federal law (e.g., the GLB Act) is implicated


Gramm-Leach-Bliley Act

Privacy concerns regarding sharing of information for purposes of reporting Interagency Guidance issued in 2013

– Clarifies that “reporting suspected financial abuse of older adults to appropriate local, state, or federal agencies does not, in general, violate the privacy provisions of the GLBA or its implementing regulations.”

Specific exceptions from notice and opt-out requirement may apply (15 U.S.C. 6802(e)(2), (e)(3)(B), (e)(5) and (e)(8))– Comply with federal, state, or local laws, rules, and other applicable legal

requirements – Respond to properly authorized civil, criminal, or regulator investigation, or

subpoena or summons – Protect against or prevent actual or potential fraud, unauthorized transactions,

claims, or other liability– Disclosure to law enforcement agencies (to the extent specifically permitted or

required under other provisions of law and in accordance with RFPA)– Disclosure with the consumer’s consent or consent of the consumer’s legal

representative Signs of elder financial abuse may trigger the filing of a SAR


Community Reinvestment Act

Potential opportunity to earn CRA credit under the traditional investment and service tests, as well as under the community development test for limited-purpose banks

To qualify for CRA credit, a bank can engage in a number of activities related to preventing elder financial exploitation, including: – consumer awareness and education on banking and financial

matters; – support of non-profit organizations that provide training and

educational programs promoting financial literacy; and – investing in, and making grants and in-kind donations to,

organizations that provide programming for low- and moderate-income individuals.


CFPB Activities

Launched public inquiry in June 2012– Learn more about elder financial exploitation; identify best

practices for elder financial management MoneySmart for Older Adults

– Money Smart for Older Adults is a tool designed to be delivered to older adults and their caregivers by representative of financial institutions, adult protective service agencies, and others that serve this population.

Joined in issuance of Interagency Guidance in 2013 In June 2014, issued “Protecting Residents from

Financial Exploitation,” a manual for assisted living and nursing facilities


CFPB – Office for Older Americans

Initiatives have included: – Developing guides for family members and others with legal authority to handle

money for older relatives or friends, but who may not have formal training. • The guides will help people understand proper record keeping, good frameworks

for investing, and other basics of managing a vulnerable adult’s money. They also will help people recognize and respond to financial exploitation.

– Producing a guide for people who operate group living centers dedicated to serving older adults, such as nursing homes or assisted living facilities. The CFPB is also establishing partnerships with organizations to help distribute this information.

– Partnering with the FDIC to create Money Smart for Older Adults, a community education and training program for older adults and for caregivers.

– Coordinating with stakeholders in several states to create and sustain multi-disciplinary older American protection networks.

• The CFPB is also developing strategies to communicate that the GLB Act generally does not prohibit companies from reporting suspected elder financial exploitation. For many of them, this is often a point of confusion.


Compliance Considerations

Identify potential areas of exposure – Identify state reporting requirements in states where your

financial institution does business Review, revise, and develop robust compliance procedures

for financial institution and/or employee reporting in both mandatory and permissive jurisdictions– Consider developing specialized programs to assist customers

at risk of elder financial abuse Consider potential CRA credit opportunities Remain up to date on regulatory developments, including

CFPB activities – For additional discussion, see Paul Hastings Client Alert,

“Compliance Risk Management: What Financial Institutions Need to Know About Reporting Elder Financial Exploitation”



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Preparing for the new reality of global tax compliance and account reporting systems

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Elder financial abuse webinar- Paul Hastings & ACFCS 8-27-14

Economy & Finance

global tax compliance

suspected financial abuse

elder financial abuse

financial abuse

glb act

vulnerable adult

financial institutions

receiving services