Last year there was an introductory article in our Insights about financial abuse. This month, we discuss a particular species of financial abuse, that of elder financial abuse.
Take the following situation. An elderly woman, or her son who holds an Enduring Power of Attorney (which may well have been entered into at the suggestion of a financial adviser as part of a financial planning strategy), instructs the bank to withdraw $500,000 from his mother’s bank balance of $700,000. The purpose of the withdrawal is so that the mother can gift money to her son and his wife so they can purchase a house and build a granny flat for the older person to live in. Two years later, the bank forecloses, the house is sold and the older person is evicted (the granny flat is of course on the same title as the house).
In some instances, children holding enduring power of attorney seek assistance from their parents to sign guarantees to borrow money for various ventures. These can subsequently fail, leaving the elderly person destitute – including losing their pension.
Elder (as also known as ‘older persons’ or ‘seniors’) financial abuse is, sadly, becoming more prevalent, both in Australia and in other Western societies. Elder abuse can take many forms. It is generally defined as “an act or lack of action occurring within any relationship where there is an expectation of trust which causes harm or distress to an older person” (World Health Organization). Financial abuse accounts for up to 40% of all elder abuse. The United Nations Principles of Human Rights for seniors includes “to be free from exploitation”.
According to a 2016 Australian Institute of Family Studies research report, it is likely that between 2% and 10% of older Australians experience elder abuse in any given year and that financial abuse appears to be the most common form of abuse experienced by older people.
There is little understanding of what (elder) financial abuse is and where, when and how it occurs. This can be further exacerbated by cultural barriers including language and cultural practices.
Its prevalence has led the Australian Government to instruct the Australian Law Reform Commission (ALRC) to look into elder abuse and to frame a national legal response. The ALRC’s report, issued in June 2017, recognised that any national plan should take into account the different experiences and needs of older persons including cultural and linguistic diversity.
The ALRC report also recommended there be a Banking Code of Practice which applied to all financial institutions in relation to training of staff and reporting abuse to appropriate authorities.
Further, the report recommended the Code of Banking Practice be amended to require banks to take “reasonable steps” to identify and prevent the financial abuse of vulnerable customers. These reasonable steps could include training staff in how to respond appropriately to elder abuse, and setting up systems to detect unusual transactions and other avenues for abuse.
As another layer of protection, the ALRC report recommended that a Public Advocate be created as an independent body to investigate elder abuse.
The Commonwealth Attorney General announced on the final day of the 5th National Elder Abuse Conference on 20 February 2018 the establishment of a National Plan to address elder abuse in accordance with the recommendations of the ALRC. The Commonwealth will be working with relevant ministers, the community, business and financial sectors across the country to develop the plan. This presents an opportunity for the financial services industry to consider the potential for elder abuse and elder abuse protections in its own industry and to make an important and valuable contribution to the development of the National Plan and to address their specific sectors.
To better support customers who may be experiencing financial abuse, and to prevent what can often be a silent crime, the Australian Banking Association has developed a suite of materials to promote good practice for banks. These will help customers who may want to plan and manage their financial affairs, especially as they get older.
Many financial institutions are working on their own measures for supporting customers vulnerable to financial abuse, including elderly people. Financial exploitation of vulnerable people is a deeply challenging issue. But as more people learn to recognise the issue, hopefully better protections will be put in place.