Healthcare providers could encourage their patients to notify their financial ... but as the banking industry transition
Age-Friendly Banking Practices are Most Cost Effective Before Fraud Occurs The latest model for Age-Friendly Banking is one of prevention. Instead of focusing on recouping the $2.9 - $36.48 billion older adults lose to fraud each year, the new model seeks to stop the money from ever leaving a bank account. Investigating and prosecuting financial crimes against older adults in any significant manner has proven too costly and time consuming for law enforcement agencies, regulators, and Adult Protective Services (APS) alone. However, banks and other financial institutions have a unique opportunity to stop fraud at the point of transaction. Banks collect data on users’ individual and group behaviors – everything from average ATM withdrawals to the number of checks used per month – during the course of regular operation. Banks, as financial services providers, also routinely interact with customers either face-to-face or remotely. This combination of data about how an individual should be acting and the ability to contact customers as soon as a transaction is flagged as suspicious provides a low-cost platform for intervention. Banks, as financial services providers, are legally obligated in many states to report suspected fraud and financial abuse to a variety of organizations ranging from APS to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Banks are also legally required to keep records of all customers and their transactions and to train staff in
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spotting and reporting financial fraud in accordance with various financial crime prevention laws. Thus, the institutional framework and processes for preventing financial abuse against older adults already exist. By pivoting existing resources to focus specifically on crimes involving the elderly, banks can catch fraudsters before or during the attempted theft. Once a transaction is identified as possibly fraudulent, banks are allowed, and sometimes obligated, to freeze the processing of the transaction and to consult with the account owner. Usually, the bank simply calls the account holder and asks them if they made the transaction, then processes the transfer if it was authorized. However, older adults often authorize transactions that are ill advised due to cognitive decline and loss of fluid intelligence. Bank representatives can help prevent this “authorized fraud” by asking the older adult if they are sure that they are not the victim of a scam and to reflect on the nature of the transaction. After the bank politely raises questions about the validity of the transfer, older adults often realize their error and rescind the transaction. This small addition to an already standard fraud control practice can save the bank, customer, and public from costly fraud. Banks are also uniquely positioned to lead the revision of the financial independence model for older adults. Currently, older adults are able to spend their money as they wish and retain full fiscal autonomy. However, this model leads to the aforementioned lapses in judgment, errors that can cost significant portions of an older adult’s wealth. The revised fiscal independence model calls for customized account features and debit cards – specifically, the ability to restrict access and usage, both on the part of the older adult and on the part of the caregiver. For example, one option is debit cards that can be customized to prevent online purchases, wire transfers, international transactions, or to only allow usage at certain merchants. These cards coupled with third party monitoring, such as view-only accounts or alerts when the account holder attempts to engage in suspicious behavior, work to prevent the older adult from ever even being able to make the fraudulent transaction. This model limits the autonomy of older adults, but allows them to retain the ability to make routine purchases while simultaneously mitigating risk. Providing increased personalized monitoring to older adults can also help to identify early signs of cognitive decline caused by diseases such as Alzheimer’s or Parkinson’s disease. For instance, an increasing rate of flagging a bank customer’s transactions as fraudulent, or changes in the client’s banking behaviors and habits, could signal the onset of cognitive issues. This information could be shared with the older adult and his or her healthcare professional to assist in early detection of these cognitive illnesses. The same concept could also work in reverse. Healthcare providers could encourage their patients to notify their financial services provider about cognitive issues to assist the banks in identifying high-risk older adults. Collaborative crossdiscipline initiatives like this one, first introduced by Dr. Jason Karlawish and Dr. Dan Blazer, are an integral part of new preventative model. This new preventative model, however, raises questions about autonomy and agency. No one wants to be told or to recognize that they are suffering from cognitive decline and now require financial monitoring. Older adults have quite literally worked a lifetime for their wealth and may not yield their financial autonomy lightly. Likewise, many would argue that sharing
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financial and health data between healthcare and financial services providers, as Drs. Karlawish and Blazer’s “whealthcare” model suggests, constitutes a violation of privacy, even if the older adult authorizes the sharing.1 Adding to the issues of privacy and agency is the issue of cost. While banks can train staff to recognize elder abuse and examine existing data relatively cheaply, the cost of contacting older adults each time a transaction appears suspicious would likely be significant. Older adults require personalized physical interaction with their financial services provider, but as the banking industry transitions towards increased reliance on online platforms, this contact becomes an increasingly added cost. Based on the estimated billion-dollar losses to elder abuse fraud, added preventative measures would likely cost less than the losses to the bank; however, the cost of losing one’s financial agency and privacy may still outweigh the benefits. Ultimately, financial institutions have the rare opportunity to reshape the elder abuse prevention landscape. Banks are able to act not only on the individual consumer level, but also as funders of other preventative programs and as policy advocates through the banking industry’s robust lobby. Multi-sector involvement and the passage of new laws and regulations is required to ensure that this new preventative model can be effective. The key to successful prevention is early detection of financial fraud or changes in financial capacity. Currently, older adults often make dozens of fraudulent payments before their exploitation is recognized. By that time they have already lost thousands of dollars, which cannot be retrieved. The more that data is shared and the greater the number of participating organizations and programs, the easier early detection of fraud will be. The whole model, therefore, rests on financial services institutions’ willingness to be operational, financial, and political leaders.
1 For more information, please read Drs. Karlawish and Blazer’s article on whealthcare at http://www.forbes. com/sites/jasonkarlawish/2016/06/04/whealthcare-preventing-financial-fraud-and-promoting-cognitive-health-and-wealth/#6ccbd0389e6a.
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