NASAA finds 90% of B-Ds have team or process to address senior-fraud issues

Nearly 2,300 suspected senior-fraud/exploitation cases reported by 61 firms in study

Jun 15, 2017 @ 6:10 pm

By InvestmentNews

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Some 2,300 cases of suspected senior-related fraud or exploitation were reported to authorities in 2015 by 61 broker-dealers that contributed to a newly-released report on elder fraud by the organization of state securities regulators.

The report, from the North American Securities Administrators Association, includes information about firm supervisory procedures, training, escalation and reporting of senior issues, resolution of senior issues and use of trusted contact forms. It was intended to provide an inside look at the dangers seniors face from financial fraud and exploitation, and broker-dealer procedures to help protect senior clients, NASAA said in a release.

The study found that 45% of the suspected abuse or exploitation cases that were reported involved customers in the 81-90 year age group. Reporting by firms to adult protective services occurred in at least 62% of internally escalated cases, but less frequently to local law enforcement (4%) or state securities regulators (less than 1%).

The study also collected examples of how broker-dealers prevented or resolved senior issues, NASAA said.

More than half of the examples involved attempts by family members or third parties to access senior customers' accounts or funds or other potential forms of unauthorized access. In one example, a broker-dealer contacted adult protective services because an elder client on a church ministry trip met a prisoner (serving a long sentence for murder) and was attempting to add the prisoner as a beneficiary to her million-dollar account.

According to NASAA, additional senior-related schemes that broker-dealers said they thwarted or reported include:

• A client who believed someone needed assistance to collect a $7 million settlement delayed due to identity theft.

• A client who thought a large inheritance was coming from China due to the death of a business partner, but instead was educated by the broker-dealer on advance fee scams.

• A client who tried to send $200,000 in a $4.5 million sweepstake scam, but instead the broker-dealer contacted the client's son.

• A client who wanted to send a wire transfer to a European woman needing money to come to the United States.

The study found that while 54% of the responding firms lacked a formal policy defining senior customers, 90% had either a dedicated team or at least some type of internal process for addressing senior issues. In addition, 95% provided some type of training on senior issues, with the most common topic being how to recognize signs of elder financial abuse. Also, 94% had a formal process to internally report concerns regarding diminished capacity and/or elder financial abuse.

NASAA noted that 81% of firms indicated that they had a decision-maker responsible for reporting concerns to agencies or authorities outside of the firm. Less than half (41%) had developed a form for customers to identify an emergency or trusted contact person.

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