There was a time when bank tellers and branch managers were consistently among the best reporters of financial exploitation of the elderly. After all, who is more likely to notice when titles on bank accounts are changed to add new-found friends or relatives, or when suspiciously large withdrawals are made from the account of a frail senior? But with recent emphasis on confidentiality in banking, and with the widespread loss of a personal relationship between banker and customer, many more cases of exploitation have gone undiscovered.

Two years ago the California legislature tackled those problems head-on. By adoption of Senate Bill 1018, California mandated reporting of suspected financial elder abuse. The new law took the direct step of ordering any officer or agent of any bank, credit union or other financial institution to report evidence of “financial abuse of an elder or dependent adult.” Any bank employee who has a reasonable basis to believe that financial abuse has occurred is liable for a penalty of up to $5,000 for failure to report—and the penalty must be paid by the financial institution itself.

Two other important elements of California’s new law deserve mention. First, though the law was actually adopted in August of 2005, it did not become effective until the beginning of this year. That delay was intended to give banks time to train their employees to recognize the signs of abuse, and to familiarize themselves with the process.

The law also expressly waived privacy restrictions in a list of circumstances typically present in financial abuse cases—including when authorities have received a complaint of abuse and are seeking specific information about transactions from the financial institution. That provision was intended to help overcome concerns about possible violations of either state or federal privacy requirements, and to permit the banks to once again contribute to solution of a growing problem.

Has the new law made any difference? The Auburn Journal reported last week that a complaint filed on January 8, 2007, has already led to the arrest of a woman who had bilked her uncle out of $700,000 and, notably, the return of virtually all of his money.

Arizona actually has a similar law, which has been on the books for nearly two decades. Bank and other financial employees (and accountants, attorneys and other professionals) are required to report anytime they have a reasonable basis to believe that financial exploitation has occurred. Addition of the privacy waivers and the training component might well improve Arizona’s experience with mandatory reporting.

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