A Minnesota law that took effect Wednesday gives brokers and financial advisers some new tools to report suspicious activity tied to the accounts of potentially vulnerable seniors.
The Safe Seniors Financial Protection Act lets advisers delay certain financial transactions while they investigate, and it makes the process to reporting suspicious activity easier and clearer.
Supporters say the law changes are crucial in the ongoing fight against elder fraud. Nationally, nearly one in five Americans older than 65 have been "taken advantage of financially" either through inappropriate investment, high fees or outright fraud, according to a 2016 poll for the Investor Protection Trust, a Washington, D.C.-based nonprofit.
Some studies estimate older Americans are defrauded of at least $3 billion each year. That number is expected to grow as more of the Baby Boomer generation phases into retirement.
While scams remain a consistent problem, "the most common type of financial exploitation is perpetrated by family members or loved ones or caretakers," which is why seniors often stay silent, said Sean Burke, public policy director at the Minnesota Elder Justice Center.
"Along with the shame of being exploited, often times seniors and vulnerable adults are worried about what might happen to that loved one," said Burke, who estimates only one of every 44 cases of senior financial exploitation gets reported. "Even though they know they've been abused or taken advantage of, they sometimes also want to protect that person."
The new law gives financial professionals a detailed way to report concerns, including a timeline on when to approach their clients about suspicious activity, when to get in touch the state Commerce Department or other regulators and when to delay financial transactions until suspicions are cleared.
Those who act in good faith to report suspicious activity are also now immune to administrative and civil liability for reporting.
The protections and new process will encourage professionals to report fraud when they suspect it and ease fears of violating client trust, said Deb Marquette, manager for vulnerable adult programs for Minneapolis-based Thrivent Financial.
The ability to delay a client transaction when there's concern is especially important, she added. "Once money goes out of certain investment vehicles, that client is immediately subjected to taxes," she said, "even if we could save that investment and get that back, the taxes are gone."
The new legislation lets financial professionals "have a candid conversation with their client, to hit that pause button and make sure that the financial decisions that the elderly or the senior vulnerable adult is making really are in their own best interest," said state Commerce Commissioner Jessica Looman.
Editor's note (Aug. 3, 2019): An earlier version of this story referred to the new law giving bankers and financial advisers more clout. To clarify, the law affects brokers and advisers.