FINANCIAL EXPLOITATION OF VULNERABLE ADULTS

1. FINANCIAL EXPLOITATION OF VULNERABLE ADULTS For Employees of Financial Institutions, Broker-Dealers and Investment Advisers

2. 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%.

3. Introduction

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. Training for Supervisory and Decision-Making Staff • This 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.

10. 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

11. Background Information

12. 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?

13. Who Are Vulnerable Adults?

14. 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”

15. VA’s VA’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

16. VA’s VA’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

17. What Factors Make VA’s Vulnerable?

18. 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

19. 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.

20. How Does the Law Define “Financial Exploitation”?

21. 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

22. Financial exploitation, cont’d • Financial 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

23. Financial exploitation, cont’d • Financial 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

24. Financial exploitation, cont’d • Financial 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

25. 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

26. 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

27. 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.

28. 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.

29. 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.

30. Further examples – improper conduct • A 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

31. Further examples - improper conduct • A 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

32. 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.

33. 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.

34. Perpetrators of Financial Exploitation

35. 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.

36. Perpetrators – Family Members • Includes 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

37. 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.

38. Perpetrators – Professionals Perpetrators 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.

39. Perpetrators – Contractors or Salespersons • These 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

40. 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.

41. Indicators of Financial Exploitation

42. 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

43. Unusual Financial Activity • Withdrawal 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

44. Unusual Financial Activity • Sudden, 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)

45. 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; and • VA 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.

46. 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

47. 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

48. 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

49. Reporting Suspected Financial Exploitation

50. 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).