Draft write-up to initiate action in the House of Commons to bring in legislation that will do much more to protect our vulnerable and targeted seniors from being defrauded
A petition to the House of Commons in April 2023 to protect seniors in particular from losing their lifetime savings and wealth to fraud received broad support and wide acceptance from many seniors and others who signed this petition.
They recognize seniors are being directly impacted by fraud or know someone who has been defrauded. In one instance, a younger person signed it who had lost her father to suicide, a victim of a major scam where he had to sell his home because of the crime.
Financial fraud crime is alarming and data from the Canadian Anti-Fraud Centre shows an estimated total of $530 million in fraud and cybercrime was reported in 2022, a 40% increase from 2021. As has been stated in the media this year, spam, phishing, phone scams etc., and other iterations of fraud are making it easier for thieves to separate us from our money. Seniors particularly are specifically targeted online and in their homes, and it is no wonder why many are afraid to answer the phone for fear that it may be a fraud attempt.
To gain an appreciation of just how pervasive fraud is, a survey done by TransUnion in September 2023 shows almost half of Canadians have been targets of fraud. Many fraud attempts go unreported and victims are often embarrassed to tell anyone they have been duped.
In Canada, the number of reported fraud cases has nearly doubled from 87,000 in 2011 to 168,000 in 2021. In the UK, fraud is by far their most common crime and accounts for 40% of all offences in England and Wales but these crimes receive less than 1% of their police resources.
What can Canada do?
As per the above seniors fraud petition call to action, we implore and urge all Parliamentarians to act as we see other countries have been doing, to put more stringent procedures, protocols, safeguards and enforcement resources in place to protect seniors and all citizens from financial fraud.
These crimes are scams that are happening more frequently as fraudsters use deception (e.g., identity theft of authorized financial institution agents and AI) and under the pretense of legitimacy, they convince their victims to authorize their financial institutions to enable payments to these criminals.
Many mule accounts or falsified accounts set up for the express purpose of money laundering exist throughout Canada in our financial institutions, so it is not a simple red flag to wonder why a senior is requesting an international wire. It can be done within the country from one financial institution to another and then the stolen money from a senior’s bank account is wired offshore. The proceeds of this theft can flow into all sorts of nefarious activities such as human trafficking or to support acts of terrorism.
Canada needs to develop its own comprehensive anti-fraud strategy like, for example in the UK, which has completed and is now implementing. As per its fraud strategy, among 50 measures, it places a ban on cold calls relating to financial products and ways to delay wiring money if the financial institution considers it at all suspicious and/or an unusual transaction. Their innovative approach “sets out a plan to stop frauds at source and pursue those responsible wherever they are in the world.”
Since Canada’s financial institutions are on the frontline of most of the frauds perpetrated on seniors, they need to be fully engaged and primary participants in efforts to prevent the exploitation of our seniors’ financial and emotional well-being.
The severity of financial fraud threatens our national and economic security. This compromises Canada’s reputation and integrity as having a stable financial system when money from consumer savings and investment is redirected by criminal fraud and becomes proceeds of crime and money laundering offshore.
We appreciate that our own financial institutions are taking fraud seriously but based on the increased number of frauds which are happening, they need to do a much better job to protect all Canadians and seniors especially to shift focus on prevention rather than simply reporting an increasing number of fraud crimes on same previous period comparisons.
An example of increased focus on fraud prevention, is the highly acclaimed and internationally recognized American Association of Retired Person’s (“AARP”) BankSafe program. Their website shows they have already stopped more than $200 million from being stolen from older adults. BankSafe trains banking staff to better recognize that their clients are being financially exploited when they attempt to perform transactions both online and in person at bank branches. AARP is engaging US banks in a meaningful way to take positive steps to prevent seniors from being defrauded. Additionally, AARP has set up their own fraud watch network.
At present, Canada and its Provinces have a patchwork of financial institution regulatory systems with jurisdictional inconsistencies and with often poor transparency and questionable accountability regarding how financial fraud prevention and related crimes are addressed and communicated to clients and the public. For example, should a financial institution employee be better trained to warn and assist a senior against who may have been convinced to send a significant sum of money by wire to a potential fraudster whom they may otherwise believe is legitimate?
It means our financial institutions should be taking greater measures to warn and assist their client when such circumstances indicate the potential for a modern and sophisticated fraud attempt. This should also include verification that the receiving financial institution or account is legitimate and that stringent effort to avoid identity theft has been undertaken. The UK has brought in a Confirmation of Payee program which addresses this issue head on.
If our financial institutions want to ensure they are earning the trust of seniors who are entrusting them with their money, it behooves them to be responsible and proactive with government and other related agencies such as our Financial Consumers Agency of Canada (FCAC”) to look out for their clients and members in the case of credit unions knowing full well how easy it has been for a number of them to become victims of fraud schemes. This will also include working closely and in alignment with Canada’s newly planned Canada Financial Crimes Agency.
Looking at other countries such as the UK is instructive and can be helpful for Canada in seeking direction to tackle seniors fraud prevention and to create better financial outcomes for Canadians.
In the US, bipartisan bill called the Seniors Fraud Prevention Act was signed into law by President Biden in March 2022. It is intended to enhance fraud monitoring, increase consumer education and strengthen the complaint tracking system at the Federal Trade Commision to help prevent seniors from being robbed of their hard-earned savings through threatening and manipulative scams by attempting to stop scams before they start.
The Fraud and Scam Reduction Act also establishes a Senior Scams Prevention Advisory Group to help prevent scams targeting seniors. The US also has The Older Americans Act which provides federal funding for numerous services and programs designed to help protect older Americans from abuse and financial exploitation.
And how can you not refer to fraud prevention and efforts to bring in reform to stop scams in the US without mentioning 75-year old Senator Elizabeth Warren who was instrumental during the Obama administration to conceive and bring in the US Government Consumer Financial Protection Bureau in 2011.
At the State level, there is 68-year-old California Senator Bill Dodd who is leading the way in California to bring in Bill SB-278 which tackles elder abuse in their financial institutions by creating an emergency trusted contact person program coupled with a 3-day delay in sending what may be detected as a suspicious transaction request for any senior over 65-years old. Other US states like Minnesota are already active on this front to protect seniors through legislation and programs they have set up.
Australia has its own Australia Financial Complaints Authority (AFCA). It is an independent and external dispute resolution service. It also has the Australian Prudential Regulation Authority and the Australian Securites and Investments Commission as key national regulatory bodies that oversee the financial industry and work to ensure its financial institution operate fairly and transparently. It is worth noting Australia is currently reforming its Payment Systems Regulation Act including new emphasis on preventing consumer financial scams and related damages.
The UK has brought in new Consumer Duty standards which place greater onus and responsibility on financial institutions to create good outcomes for financial consumers and to be cognizant of the unique characteristics and needs of their clients, including seniors who are more vulnerable to being financially exploited.
Another key development in the UK is the independent Payment Systems Regulator (PSR), a sister federal oversight body to the UK’s Financial Conduct Authority, which has new powers under the Consumer Duty standards to enforce and obligate payment service providers to compensate consumers for fraud losses based on Authorized Push Payment (APP) scams. This means all payment firms starting in 2024, will usually be required to reimburse victims of these types of wire frauds. Many leading UK banks have already been reimbursing victims since 2019. They just released an APP scams performance report update for 2023 on the PSR’s website.
Through their regulatory powers UK financial institutions will be expected to treat their fraud victims fairly and with compassion.
The former UK Prime Minister’s Office did appoint an anti-fraud champion, MP Anthony Browne, who was previously CEO of the British Bankers’ Association and Chair of the UK’s Government Regulatory Policy Committee. On November 30, 2023, Mr. Brown along with then UK Home Secretary James Cleverly unveiled a UK Online Fraud Charter. On his Facebook page, he says, “This is a world first and will help to put the fraudsters that target vulnerable people out of business.”
The new UK Labour Government under Prime Minister Keir Starmer is expected to continue vigilance on enforcing UK financial institution accountability with respect to APP scams and fraud in general. They are looking to widen accountability beyond banks to tech companies since so much fraud is happening online.
In Europe, several countries have been cited for being effective in possessing strong regulatory frameworks and consumer protection measures aimed at reducing fraud and ensuring that citizens, including seniors, are safeguarded from financial exploitation. The UK, Germany, Netherlands, Sweden and France are all mentioned in this regard. Strong consumer protection laws are often cited with stringent rules and regulations applying to financial institutions.
Two newer initiatives in Canada are worth noting here. In 2019, the Canadian Bankers’ Association introduced a Code of Conduct for the Delivery of Banking Services to Seniors, defined as persons over 60 years of age who are transacting for non-business purposes. The Financial Consumer Agency of Canada (see above) is responsible for monitoring compliance with the Code. Besides establishing and implementing appropriate policies, procedures, and processes to support the code, they require all banks to designate a seniors champion to provide leadership in the implementation of the code.
More recently, in Canada’s investment advisory industry, the Mutual Fund Dealers Association introduced and implemented what is called a trusted contact person form where a senior for example that may be the target of financial exploitation has a person they trust noted on their investment so the investment firm will immediately contact their trusted person to make sure this individual is fully aware of their intentions and what they are doing before proceeding to accept their instructions.
Information asymmetry, or hurdles in comprehending complexities in laws, regulations, and rules has been described and experienced by many seniors when confronted with issues like financial fraud they experience through their financial institutions, regulations and codes; see OECD: Financial Consumer Protection and Ageing Populations. In Canada, there is a major gulf in its seniors’ abilities and knowledge to understand and navigate the banking system when they seek recourse and justice for fraud they have experienced.
Being we have a two-tiered financial ecosystem in our country, it is time for Canada’s federal and provincial governments to learn from other progressive nations and more seriously address financial fraud affecting its seniors, to prevent these crimes and help victims.
Preserving and protecting our senior’s wealth for their lifetime and future generations is worth fighting for.
