Elder financial exploitation (EFE) has seen a sharp rise, with victims losing over $28 billion annually. This grave issue compels financial institutions to navigate complex legal standards when responding to suspected exploitation. Institutions must decide whether to place transaction holds or file suspicious activity reports (SARs) with a clear understanding of the facts and applicable guidelines. The dual standards of “reasonable belief” and “reasonable suspicion” often govern these actions.
The AARP’s findings highlight the steep financial impact of EFE, underscoring the need for vigilance. The “reasonable belief” standard, often employed to justify transaction holds, combines subjective assessments (personal understanding of potential exploitation) with objective evaluations (what a reasonable person in a similar position might conclude). This standard has been formalized in many states, drawing guidance from models like the NASAA Model Act.
Conversely, the “reasonable suspicion” standard governing SAR filings applies lower evidentiary requirements. Under the FinCEN advisory, financial institutions must report transactions that may relate to criminal activity, even if they lack firm proof. Indicators could include sudden account activity shifts, customer distress, or an overly involved caregiver.
Best practices for financial institutions include contacting financial professionals related to the account, engaging with the customer, and reviewing historical transaction data. Documentation is another core safeguard for institutions. As several enforcement actions highlight, regulators scrutinize both the adequacy of SAR filings and the institution’s investigative rigor.
To address ongoing challenges, institutions must adapt their practices to the evolving landscape of EFE. With the aging U.S. population and advancing technologies, the risks of exploitation will remain significant. By balancing subjective and objective evaluations and embedding robust documentation practices, financial institutions can enhance protections for vulnerable adults while mitigating their own liability. Learn more about these legal nuances in the original Bloomberg Law article.