Senior $afe Act

When President Trump signed into law the Senior $afe Act of 2018,  senior Americans gained a new defense against financial abuse.The Senior Safe Act is part of a larger bill that revises many of the provisions of Dodd Frank relating to credit unions, community banks, and small regional banks, formally known as S. 2155 or the Economic Growth, Regulatory Relief and Consumer Protection Act. The law was enacted on May 24, 2018. 

The Act enlists financial institutions as allies in the fight against financial abuse of older adults by allowing banks, credit unions, investment advisers and brokers to report suspected fraud to law enforcement without fear of being sued, as long as they have trained their employees in how to detect suspicious activity. Under prior laws, concerns about lawsuits resulting from false claims of fraud or abuse discouraged banks from reporting that an older adult might be the victim of fraud. The new law formalizes the ability of banks and other financial providers to report such suspected abuse.

The purpose of the Act is to encourage a collaboration between regulators, financial firms, and legal organizations in order to prevent senior financial abuse by providing immunities for reporting under bank privacy laws. It also encourages the development of education and training at financial institutions by conditioning these grants of immunity on the requirement that financial institutions provide training programs regarding recognizing and dealing with elder financial exploitation. The Senior Safe Act will not only improve financial services firms’ ability to spot elder abuse, but will also increase the reporting rate, giving law enforcement more opportunities to catch the bad guys.  

Specifically, the act provides that a “covered institution” and certain individuals therein will not be liable for disclosure of information made to “covered agencies” in connection with the suspected exploitation of a senior citizen if (i) the disclosing individual was employed by the covered financial institution at the time of the disclosure in a supervisory, compliance, or legal function; (ii) before the time of the disclosure, that individual received training in identifying and reporting senior exploitation (as described in Section 302 of the Act) and; (iii) the disclosure was made in good faith and with reasonable care. The language of the Act does not designate what the immunity is provided for, though the legislative history of the Act indicates this is an immunity for “bank privacy laws” in general. “Covered institutions” include credit unions, depository institutions, investment advisors, broker-dealers, insurance companies, insurance agencies, and transfer agents. “Covered agencies” include state and federal regulatory agencies, law enforcement agencies, and local agencies responsible for providing adult protective services. The Act describes certain parameters for the “Section 302” senior issue training.  This includes instructing individuals on how to “identify and report the suspected exploitation of a senior citizen,” recognize common signs of financial exploitation, and handle reporting and disclosure considerations with appreciation of the need to protect the privacy and respect the integrity of the individual customer.  Section 302 also provides that institutions relying on immunity under the Act must keep training records and implement the programs “as soon as practicable.” For individuals who begin employment after the Act’s effective date, the training must be implemented no later than a year after the individual becomes employed.

According to a 2016 report by the AARP Public Policy Institute, one in 5 older Americans are victims of financial exploitation each year. Data shows that these victims lose approximately $3 billion annually, or more than $120,000 each, “equivalent to a typical 50-plus household retirement savings account.” Members of the older population are targeted not only because they have accumulated $18 trillion in assets (67 percent of all U.S. bank deposits), according to AARP, but also because they are more likely to suffer from problems with memory and judgment, making them vulnerable to fraud. Many of the losses go unreported. In her endorsement of the legislation, AARP SVP Joyce Rogers stated that “Elder abuse is an often-hidden phenomenon that affects hundreds of thousands of seniors, and financial exploitation is the most prevalent form of elder abuse.” 

While this is a good law that serves a useful purpose, it is not mandatory.  It does not require reporting of financial abuse nor does it require the implementation of elder abuse training programs at financial institutions. Rather, it strongly encourages both by providing immunities and making the immunities contingent on this training. In some respects, this federal law is just catching up with laws enacted by individual states. In the past 10 years, many states have passed laws making reporting of financial abuse more commonplace. In fact, in some states, reporting suspected financial abuse is mandatory. Thus, although applicable nationwide, this new federal law brings protections to institutions and agencies in states where no reporting statutes have previously been adopted. But make sure you check your own state laws regarding elder abuse.

As a compliance officer you can help your institution protect its senior customers. As you can see, this law requires training for the immunity to be effective. In addition to a good training program make sure your institution:  

  • Has policies and procedures designed to address issues that may arise when assisting elderly clients,

  • Addresses how your institution monitors and meets the changing needs of clients as they approach retirement age,

  • Has policies and procedures designed to handle situations in which a client exhibits diminished capacity or financial competence,

  • Provides regular training to all staff, including back office personnel, on recognizing and preventing financial abuse of the elderly and other vulnerable clients.

The Senior $afe Act is intended to empower and encourage financial service representatives to identify warning signs of common scams and help prevent seniors from becoming victims. When announcing the introduction of the legislation in January 2017, Senators Susan Collins (R-Maine) and Claire McCaskill (D-Mo.), the chairman and former ranking member of the Senate Aging Committee, hailed it as “a much-needed step in the fight against financial exploitation of seniors.” Added McCaskill: “We’ve got to give financial professionals the ability to combat fraud when they see it - while protecting the privacy of their customers.”

The legislators did their part, now help your team do theirs. Train them and then remind them, if they see or suspect elderly financial abuse, report it. Abuse trumps privacy and the law will protect the reporter. 

by Bart Hall