Consider financial education comprehensively for National Financial Literacy Month

By OneDigitalTrust

Recent lawsuits point to both the vulnerability of many older Americans to the scourge of online financial fraud and the opportunity that engaged financial services providers have to help thwart such pernicious crime.

Two such complaints are against a top 5 bank, which is accused of allowing two elderly women in California to lose more than $2 million to so-called “pig butchering scams.” Here, fraudsters posed as IRS agents to win the victims’ trust and trick them into multiple fraudulent transactions facilitated by the bank.

In another case, a top bank and credit union are accused of making 75 international transfers—74 alone through the credit union—by a retired naval officer totaling about $3.6 million. Unfortunately, many transfers were made even after concerns were explicitly reported to adult protective services in the officer’s home county.

The AARP says an estimated $28.3 billion is lost to what it calls elderly financial exploitation (EFE) each year in this country. Some 72% is lost to people the victims know, such as friends and family.

The emotional toll includes embarrassment and anguish and so much more, including, as in the California cases mentioned above, a person losing not only her life’s savings but also her home. Financial services providers are on the frontline in detecting and preventing this criminality, which targets the growing elderly population.

April is National Financial Literacy Month, and we can’t stop at teaching young children to save and spend their allowances wisely. We must consider financial education and wellness more holistically. So, what can a responsible, proactive credit union or its financial advisor do?

Red Flags

First, make sure protocols to safeguard elderly members are standard operating procedure. That begins with training staff to recognize red flags. Those can include unusual withdrawals or Not Sufficient Fund occurrences, newly added co-owners on accounts, or sudden investment decisions inconsistent with a member's known objectives.

Indicators of the latter can include senior members receiving excessive phone calls or visitors pushing dubious financial arrangements. Another indicator is a sudden change in beneficiaries and other terms in the consumer’s estate planning.

Relationship Building

Uncovering such situations requires an engaged relationship with the potential victims, combining a personal and digital touch. Financial services providers should initiate internal reviews and documentation when suspicion arises from unusual account activity. A best practice is assigning a dedicated team to investigate thoroughly. Potential steps include discussing concerns with the member privately, reviewing the legitimacy of transactions, and scrutinizing relationships with any new parties acting on the member's behalf.

Again, that requires a trusted relationship with the member or customer and the determination to act. If your internal investigation uncovers likely malicious activity, cutting off access to the accounts and reporting your concerns to the appropriate authorities is imperative. State adult services, law enforcement and the Consumer Financial Protection Bureau all have protocols for EFE cases. Become part of the solution.

Respecting Privacy While Protecting Everyone

We stress again that it takes an engaged relationship with the older adult and their family to be in a position to discover elderly financial exploitation. And the digital capabilities of your estate planning software must help with the heavy lifting to make you aware of certain estate planning-related actions or events that imply potential financial elder abuse, like taking advantage of probable incapacitation or undue influence. That’s on top of the capacity to safely digitize and share estate documents, provide impact analysis, account information, and powers of attorney with a pre-approved network of family members and trusted advisors, such as your credit union’s financial advisors.

We need to add that while vigilance is essential, you must balance privacy and member preferences against protecting them and your own institution’s interests and liability. Indeed, there can be a fine line between doing too little and doing too much, between inaction and overstepping institutional authority. Digital services facilitate transparency and shared access to respect that is shifting, evolving line and comfort zone for you and your members.

A digital estate planning platform can offer heightened visibility into a member’s accounts to help weed out exploitation opportunities while honoring member desires for privacy and autonomy. The platform can bring elderly individuals' entire advisory team into a secure, unified digital space where abnormalities or suspicious activities become readily apparent.

Elderly financial exploitation will always be with us, but proactive identification and coordinated interventions can curb its effect on your members and your institution. Staff training, documented and followed escalation procedures, aggressive reporting of suspected crimes and selective account freezes can disrupt fraudsters and protect your most valuable assets: those who entrust you with their money, dignity and financial independence. Make relationship building, recognizing red flags and reporting elderly financial exploitation part of your National Financial Literacy Month celebrations in April.

170M Americans need an estate plan. OneDigitalTrust offers a white-label, turnkey estate planning platform with pricing options tailored to the needs of individual credit unions and financial advisors. Contact us today to learn more!