Is your AML program addressing elder financial exploitation (EFE)?
By Mandy Bain
One topic we review and assess during independent reviews is EFE, also referred to as financial exploitation of specified adults. While reviewing transaction monitoring systems and red flags, we look for controls around activities that could indicate EFE. We also recommend including elder financial exploitation in your SIU/SAR investigation and decision-making process.
FINRA’s Regulatory Notice 22-05 Regulatory-Notice-22-05.pdf (finra.org) drives home the importance of including in your AML compliance program that you appropriately monitor, detect, escalate, and report suspicious activity that may be related to EFE. The Notice amends Rule 2165 (Financial Exploitation of Specified Adults). Rule 2165 permits member firms to place holds on disbursements of funds or securities that may indicate financial exploitation of specified adults. The amendment extends this hold to other transactions. The amendment also extends the temporary hold on a disbursement or transaction for an additional 30 business days. The 30-day extension is beyond the current maximum of 25 business days if the firm has reported the suspicious activity to a regulator. For specific details on transaction holds and extended time limits, we would be happy to discuss them with you, or you may find the following FAQs helpful: Frequently Asked Questions Regarding FINRA Rules Relating to Financial Exploitation of Senior Investors | FINRA.org.
Extending temporary holds to transactions and allowing the additional 30 days indicates that regulators are focused on EFE. We have seen that most of our clients are as well, though they may not have taken the step of using AML tools such as SARs to report it. We always recommend that this step be taken as soon as possible.
We also recommend that you review your AML compliance program, including transaction monitoring, red flag criteria, escalation processes, and suspicious activity reporting to ensure your program is appropriately addressing EFE.
