oversight

Elder Justice: Strengthening Efforts to Combat Elder Financial Exploitation

Published by the Government Accountability Office on 2012-11-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                              United States Government Accountability Office

GAO                           Testimony
                              Before the Senate Special Committee
                              on Aging


                              ELDER JUSTICE
For Release on Delivery
Expected at 2:00 p.m. EST
Thursday, November 15, 2012



                              Strengthening Efforts to
                              Combat Elder Financial
                              Exploitation
                              Statement of Kay E. Brown, Director
                              Education, Workforce, and Income Security




GAO-13-140T
United States Government Accountability Office
Washington, DC 20548




                                   Chairman Kohl, Ranking Member Corker, and Members of the
                                   Committee:

                                   I am pleased to have this opportunity to present some of the results from
                                   the latest study in our body of work on elder justice issues. According to
                                   experts, the illegal or improper use of older adults’ funds, property, or
                                   assets is reaching epidemic proportions in this country and has far-
                                   reaching effects on its victims and society, in general. The money older
                                   adults lose in these cases is rarely recovered and this loss can undermine
                                   both the health of older adults and their ability to support and care for
                                   themselves. One study estimated that financial exploitation cost older
                                   adults at least $2.9 billion in 2010. 1

                                   Older adults can be exploited by family members and friends, home care
                                   workers, legal guardians and other fiduciaries, as well as those in the
                                   financial services industry. They also often fall prey to mail, telephone,
                                   and internet scams that offer substantial lottery or other winnings in
                                   exchange for so-called taxes or fees. Because elder financial exploitation
                                   can take many forms, combating it involves state and local agencies, and
                                   their federal counterparts, across social services, criminal justice, and
                                   consumer protection systems.

                                   My testimony today is based on our November 2012 report, which is
                                   being released to the public today. 2 It describes the challenges states
                                   face in combating the many types of elder financial exploitation and the
                                   actions federal, as well as state and local agencies, are taking to
                                   overcome these challenges. To obtain this information we interviewed
                                   state and local officials from social services, criminal justice, and
                                   consumer protection agencies in California, Illinois, New York, and
                                   Pennsylvania—states that vary geographically, and have large elderly
                                   populations and a number of initiatives that aim to combat elder financial
                                   exploitation. We also identified and assessed the activities aimed at
                                   preventing or responding to elder financial exploitation of seven federal



                                   1
                                     MetLife Mature Market Institute et al. (2011), The MetLife Study of Elder Financial
                                   Abuse: Crimes of Occasion, Desperation, and Predation against America’s Elders. This
                                   estimate is based on a study of media reports from April to June 2010.
                                   2
                                    GAO, Elder Justice: National Strategy Needed to Effectively Combat Elder Financial
                                   Exploitation, GAO-13-110 (Washington, D.C.: November 15, 2012).




                                   Page 1                                                                     GAO-13-140T
    agencies; 3 conducted in-depth reviews of six prosecuted elder financial
    exploitation cases that are a non-generalizable sample of elder financial
    exploitation cases; interviewed many experts in this subject area; and
    reviewed relevant documents and published research. We conducted this
    performance audit from November 2011 to November 2012 in
    accordance with generally accepted government auditing standards.
    Those standards require that we plan and perform the audit to obtain
    sufficient, appropriate evidence to provide a reasonable basis for our
    findings and conclusions based on our audit objectives. We believe that
    the evidence obtained provides a reasonable basis for our findings and
    conclusions based on our audit objectives. Our investigative activities
    were conducted in accordance with standards prescribed by the Council
    of the Inspectors General for Integrity and Efficiency.

    We found that state and local social services, criminal justice, and
    consumer protection agencies face many challenges as they work to
    prevent and respond to elder financial exploitation. For example

•   Officials in each of the four states we contacted cited the need for more
    safeguards to prevent exploitation by financial services providers, power
    of attorney 4 agents, and paid in-home caregivers;

•   Officials told us that older adults need more information about what
    constitutes elder financial exploitation and how to avoid it, but social
    services and law enforcement agencies do not always have the
    resources to promote public awareness in this area;

•   Banks are well-positioned to recognize, report, and provide evidence
    supporting investigations in elder financial exploitation cases; however,
    many social services and law enforcement officials we spoke with
    indicated banks do not always recognize and report exploitation or
    provide the evidence needed to investigate it; and




    3
      We reviewed the activities of the Department of Health and Human Services’
    Administration on Aging, Bureau of Consumer Financial Protection, Department of Justice,
    Federal Trade Commission, Department of the Treasury’s Financial Crimes Enforcement
    Network, Postal Inspection Service, and Securities and Exchange Commission.
    4
      An older adult (the principal) can use a legal document referred to as a financial power
    of attorney to appoint another person (an agent) to manage their finances should they
    become incapable of doing so.




    Page 2                                                                         GAO-13-140T
•   According to experts, collaboration between the social services system—
    which protects and supports victims—and the criminal justice system—
    which investigates and prosecutes crimes—can be an effective means of
    combating elder financial exploitation. However, officials in three of our
    four states noted that this collaboration can be difficult to achieve. These
    two systems do not respond to exploitation or carry out their work in the
    same way, so there can be difficulties communicating across disciplines
    and different views regarding limits on information sharing. 5

    In many of the locations we contacted, state or local agencies are actively
    pursuing solutions to at least some of these challenges and there are
    some federal initiatives as well that could help address them. When it
    comes to preventing the sale to older adults of unsuitable or fraudulent
    investments, the Securities and Exchange Commission (SEC) and the
    Bureau of Consumer Financial Protection (CFPB), have each taken steps
    to help older adults avoid being exploited. SEC and CFPB have
    conducted research related to investment fraud that targets older adults,
    and there is a link on SEC’s website to Financial Industry Regulatory
    Authority (FINRA) 6 information consumers can use to check a financial
    services provider’s qualifications and to understand the many
    designations used by securities professionals. CFPB also plans to issue a
    report in early 2013 addressing how information about financial advisors
    and their credentials should be provided to older adults. To prevent
    exploitation by power of attorney agents and paid in-home caregivers, 13
    states have adopted the Uniform Power of Attorney Act in its entirety, 7
    and Napa County, California, now requires paid in-home caregivers to
    submit to a background check and obtain a permit before they can be
    hired.

    We found that law enforcement authorities in some locations have
    devoted resources to promoting public awareness of elder financial


    5
        Brandl et al, Elder Abuse Detection and Intervention, (New York: 2007).
    6
     FINRA is a self-regulatory organization that writes and enforces rules for brokers and
    brokerage firms.
    7
      Among other things, the Uniform Power of Attorney Act (1) explicitly defines the duties of
    the power of attorney agent, including fiduciary duties such as acting in good faith and
    keeping careful records; (2) allows a third party to refuse to honor a power of attorney
    agreement if there is a good faith belief that the principal may be subject to abuse, and
    requires the third party to report to APS; (3) allows co-agents to be appointed for
    additional third-party oversight; and (4) imposes liability on agents who violate the law.




    Page 3                                                                         GAO-13-140T
exploitation. For example, the Pennsylvania Attorney General’s Office has
published a guide on how seniors can avoid scams and fraud, and in
Cook County, Illinois, the Senior Law Enforcement Academy within the
Sheriff’s Department instructs older adults in how to prevent elder
financial exploitation. In addition, each of the federal agencies we
reviewed independently produces educational materials that could help
prevent elder financial exploitation.

We also identified state, local, and federal activities encouraging banks to
work with social services and law enforcement, and activities to promote
and support collaboration between the social services and criminal justice
systems. Illinois, for example, requires bank employees to receive training
in how to report exploitation. Although we could identify no federal
requirements for banks to train employees to recognize or report elder
financial exploitation, the Administration on Aging (AoA) is considering
collaborating with one large national bank on a project to develop such
training. Financial institutions are required to file Suspicious Activity
Reports (SAR) of potentially illegal bank transactions that involve,
individually or in the aggregate, at least $5,000 with the Financial Crimes
Enforcement Network (FinCEN), which has issued an advisory to banks
that describes elder financial exploitation and its indicators and asks
banks to specify “elder financial exploitation” when applicable in their
SARs.

In each of the four states we contacted, there are also local initiatives to
help bridge the gap between social services and criminal justice
agencies. In some Pennsylvania and New York counties, multidisciplinary
groups meet to discuss and help resolve all types of elder abuse cases.
The Philadelphia Financial Exploitation Task Force and financial abuse
specialist teams in some California counties, on the other hand,
concentrate only on elder financial exploitation cases. Some steps have
also been taken at the federal level to promote and inform collaboration
between the social services and criminal justice systems in states. For
example, a few grants to combat elder abuse or other crimes from AoA
and the Department of Justice have required or encouraged collaboration,
such as the use of multi-disciplinary teams, in states.

Elder financial exploitation is a complex, nationwide problem, and
combating it effectively requires a concerted, ongoing effort on the part of
states and localities, as well as support and leadership at the federal
level. Each of the seven federal agencies we reviewed is working to
address this problem in ways that are consistent with its mission.
However, preventing and responding to elder financial exploitation also


Page 4                                                            GAO-13-140T
                  calls for a more cohesive and deliberate national strategy. The Elder
                  Justice Coordinating Council (EJCC)—a group of federal agency heads
                  charged with setting priorities, coordinating federal efforts, and
                  recommending actions to ensure elder justice nationwide—can be the
                  vehicle for defining and implementing such a national strategy. To this
                  end, we are recommending that the EJCC develop a written national
                  strategy for combating elder financial exploitation. We suggest that this
                  strategy ensure coordination of public awareness activities across federal
                  agencies; address the need to identify and disseminate promising
                  practices and other information states and localities can use to prevent
                  exploitation; educate the public; promote agency collaboration; and
                  promote investigation and prosecution of elder financial exploitation. Our
                  report also recommends a number of actions individual federal agencies
                  should take to better support state and local social services and law
                  enforcement agencies, such as studying the feasibility of requiring that
                  consumer complaints to the Federal Trade Commission’s (FTC)
                  Consumer Sentinel Network database include victim’s age or an
                  indication of whether the complaint involves elder financial exploitation.

                  We provided a draft of this report to the seven federal agencies that we
                  reviewed. CFPB, FTC, and the Department of Health and Human
                  Services (HHS) provided comments. CFPB and HHS supported GAO’s
                  recommendations. FTC did not believe they should examine the feasibility
                  of requiring victim’s age in complaints. GAO maintains the importance of
                  its recommendation.

                  Chairman Kohl, Ranking Member Corker, and Members of the
                  Committee, this concludes my statement. I would be happy to answer any
                  questions you might have.



Contacts and      For questions about this testimony, please contact Kay Brown at (202)
                  512-7215 or brownke@gao.gov. Contact points for our Office of
Acknowledgments   Congressional Relations and Public Affairs may be found on the last page
                  of this statement. Individuals who made key contributions to this
                  testimony include Clarita Mrena, Eve Weisberg, Andrea Dawson, and
                  Brittni Milam. Also contributing to the report were James Bennett, Gary
                  Bianchi, Jason Bromberg, Alicia Cackley, Paul Desaulniers, Holly Dye,
                  Eileen Larence, Jean McSween, Chris Morehouse, Claudine Pauselli,
                  Almeta Spencer, Kate Van Gelder, and Craig Winslow.




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                  Page 5                                                          GAO-13-140T
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