Elder Justice: Federal Government Has Taken Some Steps but Could Do More to Combat Elder Financial Exploitation
Published: 2013-05-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Elder financial exploitation is the illegal or improper use of an older adult's funds or property. It has been described as an epidemic with society-wide repercussions. While combating elder financial exploitation is largely the responsibility of state and local social service, criminal justice, and consumer protection agencies, the federal government has a role to play in this area. GAO was asked to testify on the different forms elder financial exploitation can take and the ways federal agencies can help combat it. This testimony is based on information in a report issued in November 2012 (see GAO-13-110). To obtain this information, GAO interviewed public officials in California, Illinois, New York, and Pennsylvania--states that had large elderly populations and initiatives to combat financial exploitation; officials from seven federal agencies; and experts in this field. GAO also reviewed federal strategic plans and other relevant documents, research, laws, and regulations.
section_title: What GAO Found
paragraphs: Older adults are being financially exploited by strangers who inundate them with mail, telephone, or Internet scams; unscrupulous financial services professionals; and untrustworthy in-home caregivers. Local law enforcement authorities in the four states GAO visited indicated that investigating and prosecuting the growing number of cases involving interstate and international mass marketing fraud--such as "grandparent scams," which persuade victims to wire money to bail "grandchildren" out of jail or pay their expenses--is particularly difficult. In addition, older adults, like other consumers, may lack the information needed to make sound decisions when choosing a financial services provider. As a result, they can unknowingly risk financial exploitation by those who use questionable tactics to market unsuitable or illegal financial products. Local officials also noted that it is difficult to prevent exploitation by in-home caregivers, such as home health or personal care aides, individuals older adults must rely on.
GAO identified several ways the federal government is, or could be, supporting state and local efforts to combat elder financial exploitation.
With regard to mass marketing scams, GAO has recommended that the Department of Justice reach out to law enforcement authorities in states to clarify how they can obtain the federal assistance needed to handle interstate or international mass marketing fraud.
To help prevent exploitation by financial services professionals, the Securities and Exchange Commission links to a public website where the qualifications of individual financial services providers can be found, and the Consumer Financial Protection Bureau has issued guidance on how best to convey this information to older adults.
To prevent exploitation by in-home caregivers, the Centers for Medicare and Medicaid Services provides grants that fund background checks for employees of agencies that provide these services.
Other federal efforts are broader in scope and help combat all types of elder financial exploitation. For example, each of the seven federal agencies GAO reviewed has independently undertaken activities to increase public awareness of this exploitation; however, GAO has recommended that the federal government develop a more strategic approach to these efforts. Further, recognizing the importance of collaboration among those interacting with older adults, GAO has recommended measures to educate bank staff on how to identify potential exploitation and improve collaboration among social service and law enforcement agencies, among others, as they respond to reports of exploitation. GAO has also noted the need for more data on the extent and nature of elder financial exploitation, some of which can be collected from consumer complaints filed with federal agencies. Finally, preventing and responding to elder financial exploitation calls for a more cohesive and deliberate national strategy. To this end, GAO has recommended that the Elder Justice Coordinating Council--a group of federal agency heads charged with setting priorities and coordinating federal efforts to combat elder abuse nationwide--develop a written national strategy for combating elder financial exploitation.
section_title: What GAO Recommends
paragraphs: In its November 2012 report, GAO made multiple recommendations to federal agencies, and the agencies generally agreed with the recommendations.

section_title: Letter
paragraphs: Thank you for this opportunity to discuss our work on elder financial  exploitation. According to experts, the illegal or improper use of older  adults’ funds, property, or assets is reaching epidemic proportions in this  country and has far-reaching effects on its victims and society, in general.  One study estimated that financial exploitation cost older adults at least  $2.9 billion in 2010. The money older adults lose in these cases is rarely  recovered and this loss can undermine both the health of older adults and  their ability to support and care for themselves. Victims of elder abuse— including elder financial exploitation—can incur higher healthcare  expenses, further straining already overtaxed Medicare and Medicaid  resources and increasing the demand for a range of supportive services,  and older adults left without the means to live independently may have to  rely on publicly supported long-term care placements. As the U.S.  population ages, growing numbers of older adults could be at risk of  financial exploitation, so its potential impact on society is likely to  increase.
Older adults are particularly attractive targets for financial exploitation by  unscrupulous individuals. As a group, older adults tend to possess more  wealth than those who are younger because they have had a longer time  to acquire it. In addition, the incidence of Alzheimer’s disease and other  dementias that undermine judgment increases with age. Moreover,  financial capacity—the capacity to manage money and financial assets in  ways that meet one’s needs—generally declines with age, and this  decline may go unaddressed until it is too late.
State and local agencies in the social services, criminal justice, and  consumer protection systems in each state are at the forefront of efforts  to prevent, detect, and respond to elder financial exploitation. Although  combating elder financial abuse is explicitly included in the mission of  only one federal agency, the relatively new Consumer Financial  Protection Bureau’s (CFPB) Office for the Financial Protection of Older  Americans (Office for Older Americans), it is implicit in the mission of the  others that work to combat elder abuse, protect consumers or investors,  or prevent fraud. Seven federal agencies whose missions correspond to  the state and local social service, criminal justice, and consumer  protection systems are positioned to contribute to or support state and  local efforts in this area: the Administration on Aging (AoA) within the  Department of Health and Human Services (HHS), CFPB, the  Department of Justice (Justice), the Federal Trade Commission (FTC),  the Financial Crimes Enforcement Network (FinCEN), the Securities and  Exchange Commission (SEC), and the Postal Inspection Service (see fig.  1).
My testimony today describes the different forms elder financial  exploitation can take and how the federal government can help state and  local agencies combat this exploitation. It is based on findings from our  November 2012 report on this topic. To obtain this information we  interviewed state and local officials from social services, criminal justice,  and consumer protection agencies in California, Illinois, New York, and  Pennsylvania—states that vary geographically, and have large elderly  populations and a number of initiatives that aim to combat elder financial  exploitation. We also identified and assessed the activities aimed at  preventing or responding to elder financial exploitation of seven federal  agencies; conducted in-depth reviews of six prosecuted elder financial  exploitation cases that are a non-generalizable sample of these types of  cases; interviewed many experts in this subject area; and reviewed  relevant laws, regulations, documents, and published research. We  conducted this performance audit from November 2011 to November  2012 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. Our investigative activities  were conducted in accordance with standards prescribed by the Council  of the Inspectors General for Integrity and Efficiency.
subsections: section_title: Elder Financial Exploitation Can Take Many Forms
paragraphs: Older adults are being financially exploited by strangers who inundate  them with mail, telephone, or Internet scams; unscrupulous financial  services providers; and untrustworthy in-home caregivers (see table 1 for  more details). For example:
Mass marketing scams: Local law enforcement authorities in the four  states we visited indicated that investigating and prosecuting the  growing number of cases involving interstate and international mass  marketing fraud, which often targets older adults, is particularly  difficult for them. Interstate or international mass marketing scams  include “grandparent scams,” which persuade victims to wire money  to bail “grandchildren” out of jail or pay their expenses, and foreign  lottery scams that require victims to pay sizeable sums before they  can receive their winnings. In 2011, the Federal Bureau of  Investigation’s (FBI) Internet Crime Complaint Center received over  300,000 complaints from victims of all ages about online fraud alone,  with reported losses of about $485 million.
Exploitation by financial services professionals: Older adults may  consult with a variety of financial professionals, such as financial  planners, broker-dealers, and insurance agents. However, older  adults, similar to other consumers, may lack the information to make  sound decisions about choosing a financial services provider and  protecting their assets from exploitation. As a result, they may  unknowingly put themselves at risk of financial exploitation. Older  adults can be sold what they believe to be legitimate investments but  are actually fraudulent products that hold little or no value, or may be  fooled by financial professionals who use questionable tactics to  market financial products, such as “free lunch seminars” at which  financial professionals seek to sell financial products to older adults  during a free meal.
Exploitation by in-home caregivers: Local officials cited exploitation by  in-home caregivers—who range from personal care aides who  provide non-medical assistance to home health aides who may check  an older adult’s vital signs—as a type of abuse that is difficult to  prevent, in part because these older adults may rely on and trust their  caregivers. For example, a caregiver may be given access to an older  adult’s ATM or credit card to help with banking or grocery shopping,  and later be found withdrawing money or purchasing items for  themselves.
section_title: Federal Agencies Are Helping States Combat Exploitation in Various Ways
paragraphs: We identified a number of ways the federal government was supporting or  could further support state and local efforts to combat elder financial  exploitation.
Local law enforcement officials we met with indicated it is not clear how  they should obtain the federal support they need to respond to interstate  and international mass marketing fraud cases. Justice officials told us  they believe that local officials know which federal employees to contact;  however, state and local law enforcement officials told us it would be  helpful to have more specific information. Cases that local officials do not  refer to a federal agency due to a lack of correct contact information may  not be investigated or prosecuted by either federal or local authorities. In  our November 2012 report, we recommended that the Attorney General  conduct outreach to state and local law enforcement agencies to clarify  the process for contacting the federal government in these cases and the  ways in which the federal government could provide support. Justice  agreed with this recommendation, and in December 2012 held a meeting  to begin identifying points of contact both within and outside the  Department, such as FBI field offices, US Attorneys’ offices, the Internet  Crime Complaint Center, and FTC’s Consumer Sentinel database.  Justice noted that it will develop an implementation plan and timeline to  initiate outreach to the appropriate state and local agencies.
In addition to not knowing whom to contact, state and local law  enforcement officials in the four states we visited told us that they are  concerned that federal agencies do not take enough of the cases that are  referred to them. For example, a law enforcement official from California  described a case of widespread interstate check fraud, expressing  frustration with federal agencies that would not provide any support when  he requested it. Federal officials, on the other hand, told us that they  cannot take all cases referred to them by state and local law enforcement  and that they must prioritize their caseload to make the best use of their  limited resources. Justice and FTC officials said they tend to focus on  larger cases in which many victims were affected or a significant amount  of money was lost, and Justice’s U.S. Attorneys also apply regional  priorities, such as the vulnerability (including age) of the victim, when  determining which cases to take. Even if federal agencies choose not to  take a case a state or local agency refers to them, Justice officials told us  that consistent referrals of cases by state and local authorities allow them  to identify patterns or combine several complaints against the same  individual into one case.
Federal agencies have made some efforts to provide safeguards to  prevent exploitation by financial services professionals, which was cited  as a challenge by public officials in all four states we visited. When it  comes to preventing the sale to older adults of unsuitable or fraudulent  investments, SEC and CFPB have each taken steps to help older adults  avoid being exploited. SEC and CFPB have conducted research related  to investment fraud that targets older adults, and in August 2012, SEC  released a study on financial literacy among investors and stated the  agency’s desire to develop a strategy for increasing the financial literacy  of certain groups, including older adults. Further, there is a link on SEC’s  website to Financial Industry Regulatory Authority (FINRA), information  consumers can use to check a financial services provider’s qualifications  and to understand the many designations used by securities  professionals. CFPB also issued a report in 2013 addressing how  information about financial advisors and their credentials should be  provided to older adults.
To prevent exploitation by in-home caregivers—also identified as a  challenge by officials in the four states we visited— the Patient Protection  and Affordable Care Act of 2010 required the Centers for Medicare and  Medicaid Services to implement the National Background Check  Program, which encourages but does not require states to adopt  safeguards to protect clients of in-home caregivers. This program  provides grants to states to conduct background checks for employees of  long-term care facilities and providers, such as home health agencies and  personal care service providers. As of November 2012, 19 states were  participating. According to the National Conference of State Legislatures,  many states require agencies to conduct background checks before  employing in-home caregivers who are paid by Medicaid or with other  state funds. These laws, however, vary greatly in their breadth and scope  and in the amount of flexibility afforded the agencies when they use the  checks to make hiring decisions. For example, Napa County, California,  has initiated an innovative paid in-home caregiver screening initiative.  Before in-home caregivers can work in that county, they must submit to a  background check and obtain a permit annually.
Other federal efforts are broader in scope rather than focusing on a  particular type of elder financial exploitation, such as those covering  public awareness, banks, collaboration among agencies, and data  collection.
State and local officials told us that older adults need more information  about what constitutes elder financial exploitation in order to know how to  avoid it. At the state level, the Pennsylvania Attorney General’s Office has  published a guide on how seniors can avoid scams and fraud, and in  Cook County, Illinois, the Senior Law Enforcement Academy within the  Sheriff’s Department instructs older adults in how to prevent elder  financial exploitation. At the federal level, each of the seven federal  agencies we reviewed independently produces educational materials that  could help prevent elder financial exploitation. However, these seven  agencies do not conduct their activities as part of a broader coordinated  approach. In previous work, we found that agencies can use limited  funding more efficiently by coordinating their activities and can strengthen  their collaboration by establishing joint strategies. The need to increase  coordination of efforts to promote public awareness in this area was  discussed in 2012 at a high-level multi-agency meeting on elder justice.  One participant observed that federal efforts to promote awareness are  unorganized and uncoordinated, and one expert noted that there is a  clear need for a strategic, multifaceted public awareness campaign. In our  November 2012 report, we recommended that the federal government  take a more strategic approach to its efforts to increase public awareness  of elder financial exploitation. HHS has begun to act on this  recommendation, as described below.
In our November 2012 report, we could identify no federal requirements  for banks to train employees to recognize or report elder financial  exploitation, even though they are well-positioned to identify and report it  because they are able to observe it firsthand. For example, a bank teller  who sees an older adult regularly is likely to notice if that individual is  accompanied by someone new and seems pressured to withdraw money  or if the older adult suddenly begins to wire large sums of money  internationally. However, many social services and law enforcement  officials we spoke with indicated banks do not always recognize or report  exploitation or provide the evidence needed to investigate it. AoA is  considering collaborating with one large national bank on a project to  develop bank training on elder financial exploitation. In addition, financial  institutions are required to file Suspicious Activity Reports (SARs) of  potentially illegal bank transactions that involve, individually or in the  aggregate, at least $5,000 with FinCEN, which has issued an advisory  to banks that describes elder financial exploitation and its potential  indicators. Our November 2012 report recommended that CFPB develop  a plan to educate bank staff on elder financial exploitation. CFPB  concurred with our recommendation and has begun to share information  on currently available training programs with banks and industry  associations.
Federal agencies have taken some steps to promote and inform  collaboration between the social services and criminal justice systems in  states, which officials in three of the four states we contacted for our  November 2012 report identified as a challenge. These two systems do  not respond to exploitation or carry out their work in the same way. The  social services system protects and supports victims and the criminal  justice system investigates and prosecutes crimes. As a result, there can  be difficulties communicating across disciplines and different views  regarding limits on information-sharing. Yet due to the nature of elder  financial exploitation, collaboration can be an effective means to facilitate  case investigation and prosecution. We identified a number of local  initiatives to help bridge the gap between social services and criminal  justice agencies. For example, in some Pennsylvania and New York  counties, multidisciplinary groups meet to discuss and help resolve all  types of elder abuse cases. The Philadelphia Financial Exploitation Task  Force and financial abuse specialist teams in some California counties,  on the other hand, concentrate only on elder financial exploitation cases.  At the federal level, a few grants from AoA and Justice to combat elder  abuse or other crimes have required or encouraged collaboration, such  as the use of multi-disciplinary teams, in states. In our November 2012  report, we recommended that the federal government take steps to help  state and local agencies collaborate. HHS has begun to act on this  recommendation, as described below.
FTC’s Consumer Sentinel Network is an online database that houses millions of  consumer complaints available to law enforcement. Sentinel’s roster of 28 current data  contributors includes 12 state attorneys general, the FBI’s Internet Crime Complaint  Center, and the Council of Better Business Bureaus. More than 2,600 users from over  2,000 law enforcement agencies worldwide use the system to share information,  prosecute cases, and pursue leads.
FTC (2012) Consumer Sentinel Network Data Book for January - December 2011. decrease the numbers of people who submit complaints. It additionally  said that it may be possible to determine if a complaint involves elder  fraud using other information in the complaint. We maintain the  importance of our recommendation to FTC.
Elder financial exploitation is a complex, nationwide problem, and  combating it effectively requires a concerted, ongoing effort on the part of  states and localities. It also requires support and leadership at the federal  level. Each of the seven federal agencies we reviewed is working to  address this problem in ways that are consistent with its mission.  However, preventing and responding to elder financial exploitation also  calls for a more cohesive and deliberate national strategy. This is an  opportune time for the federal government to be looking at elder financial  exploitation, because the Elder Justice Act of 2009 has established the  Elder Justice Coordinating Council (EJCC)—a group of federal agency  heads charged with setting priorities, coordinating federal efforts, and  recommending actions to ensure elder justice nationwide—which has  recently begun to examine these issues. The EJCC can be the vehicle  for defining and implementing such a national strategy. To this end, in our  November 2012 report we recommended that the EJCC develop a written  national strategy for combating elder financial exploitation. Among other  things, this strategy should ensure coordination of public awareness  activities across federal agencies; promote agency collaboration; and  promote investigation and prosecution of elder financial exploitation. The  EJCC held an official meeting on May 13, 2013. Its working group  presented a number of recommendations, including ones that focused on  enhancing interagency collaboration, strategically promoting public  awareness, and combating financial exploitation. Next steps will include  receiving public comments and drafting a federal agenda for elder justice  activities for EJCC consideration.
Chairman Terry, Ranking Member Schakowsky, and Members of the  Subcommittee, this concludes my statement. I would be happy to answer  any questions you might have.
section_title: Contacts and Acknowledgments
paragraphs: For questions about this testimony, please contact Kay Brown at (202)  512-7215 or brownke@gao.gov. Contacts from our Office of  Congressional Relations and Office of Public Affairs are on the last page  of this statement. Individuals who made key contributions to this  testimony include Clarita Mrena, Eve Weisberg, Monika Gomez, Brittni  Milam, and James Bennett. Contributing to our November 2012 report  were Andrea Dawson, Gary Bianchi, Jessica Botsford, Jason Bromberg,  Alicia Cackley, Paul Desaulniers, Holly Dye, Eileen Larence, Jean  McSween, Chris Morehouse, Claudine Pauselli, Almeta Spencer, Kate  Van Gelder, and Craig Winslow.
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