for employees of financial institutions, broker-dealers and investment advisers 1

For Employees of Financial Institutions,

Broker-Dealers and Investment Advisers

1

Introduction

In 2010, 17,586 reports of neglect or abuse of vulnerable adults were received by the state of Washington’s Department of Social and Health Services, Adult Protective Services (“APS”). Of those complaints, 26% were about financial exploitation of vulnerable adults. The complaints that APS receives about financial exploitation have increased in every year except for one since 2001, for an overall increase of 74%.

Introduction

Introduction

This means that in 2010, at least 4,566 vulnerable citizens of Washington may have had their income or wealth stolen or improperly taken from them. And, because experts believe that the actual number of these incidents is much greater than that which is actually reported, many more seniors and disabled persons have likely been financially exploited each year. And the problem is only growing.

Why Should You Care?

Vulnerable adults typically have fixed incomes. They may have accumulated a nest egg, but may have little or no ability to re-build that nest egg if it is taken from them. They may be physically frail or disabled and may have a memory problem or a cognitive disability, making it impossible for them to pay for their food, housing, health care, and other living expenses if their income or assets are taken from them.

Why Should You Care?

If a vulnerable adult’s income and assets are improperly taken, he or she may need to be supported by the government. This means that the choices that the vulnerable adult may have about where he or she will live, or what services he or she may have, may be limited. It also means that taxpayers will be required to fund his or her care and support.

Why Should You Care?

But most critically, many vulnerable adults who are financially exploited suffer as a result. They may have to leave their home or drastically alter the plans that they had made for their retirement years. They may feel betrayed, sad and embarrassed. Their quality of life and even their physical and mental health may suffer, both in the short-term and in the long-term.

2010 Legislation Allows You to Help

Because of concern about the growing problem of financial exploitation of vulnerable adults, the Legislature adopted a law in 2010, that expands the ability of financial institutions, broker-dealers, and investment advisers to help combat financial exploitation of vulnerable adults.

As an employee of one of these institutions, the law requires you to take this training.

Training for Supervisory and Decision-Making StaffThis training is designed for supervisory and decision-

making staff.

A less comprehensive training has been developed for front-line and non-supervisory staff.

You and your staff must be familiar with your institution’s policies and procedures on VA financial exploitation, and you must be aware of the extent of your decision-making authority under those policies and procedures.

Training topics

This training will cover:

(1) Background information – definitions applicable to this training;

(2) Indicators of financial exploitation of vulnerable adults;

(3) How to report suspected financial exploitation;

(4) Tools available to your institution to help combat financial exploitation

Definitions

We need to address the following questions:

Who are “vulnerable adults” and why are they vulnerable?

How does the law define “financial exploitation”?

Who are the perpetrators of financial exploitation?

Who Are Vulnerable Adults?The definition of a “vulnerable adult” is included in

Washington’s “Abuse of Vulnerable Adults Act”, which is chapter 74.34 of the Revised Code of Washington (“RCW”)

Throughout the rest of this training, we will refer to vulnerable adults as “VA’s”

VA’sVA’s include persons age 60 and older, who need assistance in one or more aspects of their life (whether or not they actually receive the assistance)

This can include persons with physical disabilities, such as people who no longer can take care of all of their physical, day-to-day needs, due to frailty or a chronic illness or disability

It also can include persons with a mental decline or disability, such as a person who has developed confusion, short-term memory problems or decline

VA’sVA’s also include the following persons age 18 or older:

With a developmental disability, such as mental retardation;

Who live in a residential care facility, such as a nursing home, assisted living, or group home; or

Who receive services from a caregiver or a caregiving agency

What Factors Make VA’s Vulnerable?

Physical disability or weakness, dependence on others for bill-paying, transportation, shopping, or for care

Living alone and being isolated

Having few family or friends

Experiencing grief over the loss of a family member, friend, or pet

Suffering from depression or mental illness

What Factors Make VA’s Vulnerable?

Being naturally naïve or overly trusting;

Have a limited IQ;

Having to assume responsibility for finances or other aspects of life after the death of a spouse and lacking the knowledge or experience to manage these aspects for the first time after such a loss. The combination of lack of knowledge and grief may prompt the VA to quickly turn to others for help.

Definition of "Financial Exploitation”

Financial exploitation is defined to include the “illegal or improper use, control over, or withholding of the property, income, resources, or trust funds of the vulnerable adult by any person or entity for any person’s or entity’s profit or advantage other than for the vulnerable adult's profit or advantage.”

RCW 74.34.020

Financial exploitation, cont’dFinancial exploitation includes:

Use of deception, intimidation, or undue influence

By a person in a position of trust and confidence with the VA

To obtain or use the VA’s property, income, resources or trust funds

Financial exploitation, cont’dFinancial exploitation also includes:

The breach of a fiduciary duty, or the misuse of a power of attorney, trust, or guardianship appointment

To obtain or use the VA’s property, income, resources, or trust funds

Financial exploitation, cont’dFinancial exploitation also includes:

Obtaining or using a VA’s property, income, resources, or trust funds

Without lawful authority

By a person or entity who knows, or should know, that the VA lacks the capacity to consent

Financial Exploitation – Criminal Conduct

So, financial exploitation includes criminal conduct

This includes stealing from the VA, improperly using the VA’s debit card, stealing the VA’s identity, or forging checks on the VA’s account

Financial Exploitation – Improper Conduct

Financial exploitation also includes conduct that is not necessarily criminal, but is improper

For example, if a professional employed by the VA, or the VA’s power-of-attorney, improperly uses his or her authority to obtain property of the VA, the conduct is “financial exploitation,” even if it is not criminal conduct

Financial Exploitation – Improper Conduct

Misuse of a power-of-attorney by a family member or other person is a very common, and increasing form of financial exploitation.

A perpetrator may believe that because a power-of-attorney document legally authorizes them to take action on a VA’s account, they may use that authority to personally benefit themselves. But this is a misuse of their authority.

Financial Exploitation – Improper Conduct

Attorneys-in-fact under a power-of-attorney or other agents of a VA have a fiduciary duty to the VA. This means that they owe a strong duty of loyalty to the VA and their actions must be taken to benefit the VA or promote the VA’s interests.

A fiduciary is generally not authorized to take actions that personally benefit him or her at the VA’s expense, overcharge the VA for his or her services, or enter into a sale, loan or business transaction with the VA.

Financial Exploitation – Improper Conduct

Alternatively, improperly pressuring or threatening the VA to undertake a financial transaction that benefits the perpetrator, but does not benefit the VA, is financial exploitation.

For example, threatening to send the VA to live in a nursing home or threatening to cut off affection or a source of transportation to the VA unless the VA undertakes a financial transaction is also financial exploitation.

Further examples – improper conductA power of attorney or guardian uses or “borrows” the

VA’s Social Security or pension funds for the power of attorney’s or guardian’s own purposes, not for purchases made on behalf of the VA

A caregiver “borrows” or gets a “gift” of funds from the VA by telling the VA a “sob story” about how he or she cannot afford to buy something he or she needs or wants

Further examples - improper conductA caregiver for a VA who has Alzheimer’s withdraws

funds from the VA’s bank account to use for himself/herself

A neighbor who helps the VA pay his bills writes a check to herself from the VA’s bank account

A guardian transfers property owned by the VA to himself or herself

Not All Poor Choices are Financial Exploitation

But it is important to recognize that not all transactions that fail to benefit a VA are financial exploitation. Unless the VA has a legal guardian, the law presumes that the VA is capable of making his or her own financial decisions, even if a decision appears to be unwise. For example, a VA can give all of her money to her adult son, who just lost his job, even if that leaves her without the ability to pay her bills.

But…

However, if the VA is directed to make a poor, risky or substantial financial decision, and the VA appears to have suffered a decline in his or her physical or mental functioning, seems confused, fearful, or has developed memory problems, financial exploitation may be occurring.

Who Are Perpetrators?

Sadly, perpetrators come from all walks of life. They may be family members, caregivers, professionals, contractors, salespersons, or people who don’t know the VA. Based on statistics, common perpetrators include the following people.

Perpetrators – Family MembersIncludes spouse, a new spouse or recently-acquired

“sweetheart” (after the death of a spouse), an adult child, or more remote relatives.

A family-member perpetrator may be unemployed and live with the VA, may be supported by the VA, or may act as the VA’s caregiver or the person who pays the VA’s bills.

A family member may take action under a power-of-attorney signed by the VA, but the action only seems to benefit the family member, not the VA

Perpetrators – Caregivers, Friends or Volunteers

Other perpetrators include caregivers or other persons who work for the VA in his or her home, staff of a care facility at which the VA resides, neighbors, friends or acquaintances;

These perpetrators may suddenly become involved in providing advice to the VA, managing the VA’s money, or paying the VA’s bills.

Perpetrators – ProfessionalsPerpetrators may also include lawyers, guardians, accountants or other advisers, or clergy or a fellow member of a church or synagogue.

The VA may undertake an unusual, significant or risky financial transaction that does not seem to fairly benefit the VA, on the advice of these types of perpetrators.

Perpetrators – Contractors or SalespersonsThese types of perpetrators may overly-inflate the price of

something the VA actually needs. For example, the VA may need to re-roof her house, and a perpetrator charges her twice the usual rate or performs a shoddy job;

Alternatively, the VA may attempt to sell the VA something substantial that the VA does not actually need, such as new windows, claiming that the VA will receive a substantial rebate or tax break

Perpetrators – Opportunists

Perpetrators also include people seeking funds from the VA to complete a transaction that appears to be highly suspect;

The VA may claim he has been instructed to send funds to someone in order to collect a prize or lottery winnings;

The VA may claim an unknown person claiming to be her distant relative suddenly contacted her and desperately needs money.

Indicators of Financial Exploitation

Indicators of financial exploitation include:

Unusual financial activity

Sudden change in legal documents or agents employed by the VA

Unusual behavior exhibited by the VA or the suspected perpetrator

Unusual Financial ActivityWithdrawal of or loan transaction for a very large sum for

a questionable or risky purpose, such as financing a sports car the VA cannot drive;

Withdrawal needed to benefit someone with a “too good to be true” or “sob” story;

Withdrawal directed by another person accompanying the VA and the VA appears to be confused or frightened

ATM withdrawals or transactions at unusual places not previously frequented by VA, such as a casino

Unusual Financial ActivitySudden, frequent use of an ATM by a VA with physical

disabilities, or who has never previously used the ATM;

Increase in withdrawals, typically in round numbers ($50, $100, $500);

Withdrawals or transactions that result in a financial penalty;

Sudden change of account beneficiaries or new authorized signers

Increase in checks, unusual checks (such as more frequent checks to caregiver, checks for items not used or usable by the VA)

Changes to Legal Documents or Agents

Sudden involvement of a new lawyer, accountant or other adviser for the VA;

Sudden change in VA’s will, trust, power-of-attorney or durable power-of-attorney;

andVA appears to be confused, uninformed or not to fully

understand the changes;Beneficiaries are changed on documents to a new or much

younger “friend”, caregiver, or sweetheart.

Concerning behavior of the VA

The VA is suddenly reluctant to discuss matters that he or she once routinely discussed with you

The VA has a sudden change of behavior

The VA has become depressed, has lost a loved one, or has developed memory problems or suffered some other physical or mental decline

The VA has become dependent on others

The VA seems fearful, confused, or cannot understand the transaction

Suspicious Behavior of Perpetrator

Accompanies and directs the VA in the transaction

Speaks for or over the VA; appears to intimidate or frighten the VA

Isolates the VA in his or her home; cuts off contact from the VA’s relatives, friends

Recently has taken over as caregiver or manager of VA’s bills or finances

Suspicious Behavior of Perpetrator

The person becomes angry or aggressive if asked about the proposed transaction;

The person is reluctant or unwilling to allow you to speak privately with the VA;

Alternatively, the person is overly “smooth” in response to your questions; his or her answers to your questions are not plausible or are vague

The Law Allows Reporting

You and your staff are considered “permissive” reporters under the law.

A permissive reporter may, but is not required to, report financial exploitation to criminal and civil authorities.

RCW 74.34.020(13), 74.34.050, 74.34.220(4).

The Law Allows ReportingThe law protects persons making reports of financial

exploitation in good faith from facing any liability for reporting:

“A person participating in good faith in making a report under [the Abuse of Vulnerable Adults Act] … is immune from liability resulting from the report… . ”

RCW 74.34.050.

How To ReportReporting to law enforcement can be done by calling

9-1-1 in cases of emergency, or calling local law enforcement’s non-emergency line, in less urgent situations.

Reporting to Adult Protective Services can be done by calling toll-free 1-866-EndHarm (1-866-363-4276) anywhere in the State of Washington.

How To Report

Reporting to law enforcement can be done by calling 9-1-1 in cases of emergency, or calling local law enforcement’s non-emergency line, in less urgent situations.

Reporting to Adult Protective Services can be done by calling toll-free 1-866-EndHarm (1-866-363-4276) anywhere in the state of Washington.

Reporting - Your Employer’s Policies and Procedures

Front-line and non-supervisory staff must be familiar with your institution’s policies and procedures on reporting suspected financial exploitation, who they report to within your institution, and who makes the decision to report to civil and/or criminal authorities.

You must be familiar with the policies and procedures to understand your decision-making authority for reporting.

What Does APS Do When It Receives a Report?

APS is authorized by law to investigate allegations of financial exploitation.

APS is required to report allegations that appear to involve criminal conduct to law enforcement.

APS is required to report allegations that appear to violate licensing or ethics laws or rules to appropriate licensing or certifying agencies or entities.

What Else Can APS Do to Help the VA?

APS can also take legal action to protect a VA, including filing a guardianship for a VA who needs protection and appears to lack legal capacity;

APS may also obtain an emergency restraining order to prohibit a perpetrator from taking further action to improperly take income or assets belonging to the VA.

APS keeps a record of perpetrators, which may prevent those persons from being able to exploit VAs in the future.

Do Others Have Authority to Help the VA?

APS may refer cases to others, who may take further action to protect VAs:Law enforcement and the prosecuting attorney may take action to criminally prosecute perpetrators;Advocacy and social services organizations may provide legal representation or services to VAs;Licensing or certifying entities may take regulatory action against perpetrators.

Making a Referral to APS or Law EnforcementThe law allows you to share the following information with APS, law enforcement and the prosecuting attorney (RCW 74.34.040): Name and contact information of the VA and perpetrator; All facts about the suspected financial exploitation; Your contact information;

Referrals - ContinuedAny other helpful information may also be shared;

The information may be used in a criminal or civil prosecution, but is otherwise confidential (RCW 74.34.040; 74.34.095)

Sharing Information and Documents

You can provide access to or give copies of records that are relevant to suspected financial exploitation to law enforcement, the prosecuting attorney, or DSHS, whether your institution has initiated an investigation or when requested as part of an investigation by one of those other entities

(RCW 74.34.215(4)(b); 74.34.220(4))

Sharing Information and Documents

The records and information that you can share with APS, law enforcement, or the prosecuting attorney may include records relating to the most recent transaction or transactions that may constitute financial exploitation, as well as relevant historical records (RCW 74.34.220(4))

You and your institution are immune from liability for sharing this information in good faith (RCW 74.34.220(5))

Short-Term Transaction Freeze

The law authorizes you to refuse a transaction if you believe that financial exploitation of a VA may have occurred, may have been attempted, or is being attempted. RCW 74.34.215.

This allows your employer to refuse a transaction requiring disbursal of funds contained in the account of a VA, an account on which the VA is beneficiary, or an account owned by the person suspected of perpetrating financial exploitation.

Short-Term Transaction Freeze

A short-term transaction freeze can also be imposed at the request of APS, law enforcement and/or the prosecuting attorney’s office (RCW 74.34.215(1), (2))

Remember, you can provide access to or share documents and information with APS, law enforcement or the prosecuting attorney (RCW 784.34.220(4))

Short-Term Transaction Freeze is Discretionary

The law allows, but does not require, you to impose a transaction freeze (RCW 74.34.215(1)).

You may use your discretion, which is guided by your institution’s policies and procedures on when a transaction freeze may be imposed.

Short-Term Transaction Freeze – Immunity from Liability

There is no liability to you or your institution for a decision to impose, or a decision not to impose, a short-term transaction freeze when the decision is made in good faith. RCW 74.34.215(7);

A decision is made in “good faith” if it was made honestly and for a lawful purpose.

Morris v. Swedish Hospital, 200 P.3d 261 (2009)

Notification of a Transaction Freeze

Reasonable efforts must be made to notify the following persons when a transaction freeze is imposed (RCW 74.34.215(4)):

All parties authorized to transact business on the account (orally or in writing); and

APS and law enforcement (follow your institution’s policies and procedures).

Maximum Length of a Short-Term Transaction Freeze

For transactions involving the sale or offer to sell a security, the transaction freeze can last as long as 10 business days;

For transactions which do not involve the sale or offer to sell a security, the freeze can last as long as 5 business days.

Maximum Length of a Transaction Freeze

If the institution determines that financial exploitation is not occurring, it should immediately lift the transaction freeze, even if this occurs before the maximum 5 or 10 business days allowed by law (RCW 74.34.215(5);

However, the length of the transaction freeze can be lengthened or shorted by a court order.

RCW 74.34.215(6)

How is the Decision to Impose a Transaction Freeze Made?

Your institution’s staff must be familiar with transaction freezes and who to report to when they believe a transaction freeze may need to be imposed.

You must be familiar with your institution’s policies and procedures on how to make the decision to impose a transaction freeze, and the extent of your authority in that decision-making process.

Summary

Financial exploitation of VA’s is a growing problem which can substantially harm a VA. Financial exploitation may cause a VA victim to suffer, physically and mentally. It has a very real and negative impact on VA victims and society.

Given this concern, the Legislature has given you and your employer greater authority to help combat financial exploitation.

Summary

VA’s may be vulnerable because of physical and mental changes or conditions. They may be dependent on others or suffering from depression or the loss of a loved one.

Family members, caregivers, professionals or strangers may try to take advantage of these vulnerabilities. They may try to justify their actions by saying that they can take more of the income or assets of a VA than they are entitled to because they are helping the VA, but that is not true.

Summary

You and your employer can report financial exploitation to APS and law enforcement and share information with them.

Your employer also can impose a short-term transaction freeze in cases when financial exploitation is suspected.

Summary

It is important for you to be familiar with and understand your employer’s policies and procedures on reporting financial exploitation and short-term transaction freezes;

It is critical for you to understand who you report to when you believe financial exploitation should be reported, or when you believe a short-term transaction freeze should be considered.

Summary

Together, we can make a difference for our vulnerable adult citizens!

Thank you for your time and attention to this important topic.

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