Banks and other financial institutions are an important line of defense against scammers seeking to defraud the elderly, but too often tellers and branch managers are not trained to recognize the warning signs, says a Government Accountability Office report issued Thursday.
The study, which looked at programs aimed at fighting fraud that targets the elderly in California, Illinois, Pennsylvania, and New York, said that out of misguided concern they might breach federal privacy laws, banks and other financial institutions are sometimes reluctant to share information with agencies that work to protect older people from financial crimes.
"Banks are well-positioned to recognize, report, and provide evidence supporting investigations," said Kay E. Brown, director of Education, Workforce, and Income Security at the GAO. "However, many social-services and law enforcement officials we spoke with indicated banks do not always recognize and report exploitation or provide evidence needed to investigate it."
The report was released at the outset of a hearing Thursday before the Senate Special Committee on Aging in Washington on efforts nationally to combat elder financial abuse.
It comes one year after the indictment of Philadelphia lawyer Michael Kwasnik by a New Jersey state grand jury on charges of stealing $1.1 million from a Cherry Hill widow who had hired him for estate planning and to manage her money.
Along with filing criminal charges, authorities sued Kwasnik, alleging that he; his father, William; and others orchestrated a multimillion-dollar Ponzi scheme that victimized the elderly. A trial date on the criminal charges has not been set.
The GAO report said there was wide agreement that fraud schemes and other forms of theft aimed at the elderly are a burgeoning national problem. But efforts to fight the problem are hampered by poor data collection and the frequent failure of law enforcement and social-services agencies to work together.
The GAO cited a list of long-standing obstacles: poor data collection; scattershot enforcement; the belief by many prosecutors that such cases are too difficult; and too little awareness by the elderly that they might be exploited.
The GAO suggested that states adopt a uniform standard for power of attorney, a frequently abused legal instrument through which many elderly and others sign over authority to manage their financial affairs to another person. Recommended safeguards include a requirement for careful record-keeping by those who have been given such authority, and an option for financial institutions to decline to process financial transactions they deem suspicious.
Banks are uniquely positioned to fight such fraud, which authorities believe totals billions each year.
Scammers typically accompany elderly victims to a bank as they orchestrate fraudulent transactions. And though alert bank employees do report suspicious transactions to Adult Protective Services, local agencies that investigate allegations of abuse of the elderly told the GAO that the record has been spotty.
"Without information to correct banks' misconceptions about the impact of federal privacy laws on their ability to release bank records, APS and law enforcement agencies will continue to find it difficult to obtain the information they need," the GAO said.
In prepared testimony, Paul Smocer, a spokesman for the Financial Services Roundtable, which represents major banks in Washington, said the industry has worked to detect fraud schemes aimed at the elderly. But he acknowledged that financial institutions are at times concerned about being sued after reporting suspicious transactions. Statutes that seek to protect banks from liability in such situations differ from one state to the next, raising uncertainty, he said.
The problem of financial fraud involving the elderly is only going to intensify, he said, if for no other reason than that the population of people 65 and older is expected to double to 71 million by 2030.
Brown recommended that senior officials of federal agencies charged with combating elder abuse draft a national policy to better guide the many state and local efforts.