Deputizing Financial Institutions to Fight Elder Abuse

The paper addresses a critical policy question: can financial professionals—when granted permissive legal authority—play a meaningful role in preventing elder financial abuse? Elder financial exploitation is a pervasive and underreported problem; older adults often face cognitive decline and hold significant assets, making them prime targets for abuse by trusted individuals or scammers. In 2016, the North American Securities Administrators Association introduced the Model Act to Protect Vulnerable Adults from Financial Exploitation, empowering financial institutions to delay suspicious transactions and contact a trusted party—even without mandatory enforcement mechanisms. The authors seek to evaluate whether this permissive approach—granting legal “cover” rather than imposing obligations—effectively curbs elder financial abuse.

The study exploits the staggered adoption across U.S. states of the 2016 Model Act provisions. The researchers analyze two primary outcome measures: reports filed by financial professionals to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), and state-level financial crime data affecting the elderly from the FBI’s National Incident-Based Reporting System (NIBRS). Using a quasi-experimental difference-in-differences approach, they compare states that enacted these permissive laws with those that did not, focusing on before-and-after trends from 2014 to 2020. They also examine geographic variation—for example, counties where older adults are more socially isolated—to pinpoint where effects may be strongest.

The findings are compelling. States adopting the Model Act saw a significant decline in reports of elder abuse by financial professionals to FinCEN and a decrease in broader financial crimes against the elderly as recorded by the FBI. The effect was especially pronounced in counties where older individuals were more socially isolated—those with fewer social connections or community institutions—who are most vulnerable and benefit most from institutional vigilance. Notably, there was no evidence that this permissive authority was misused: customer complaint rates and regulatory enforcement actions did not increase in adopting states.

What makes this finding noteworthy is the demonstration that granting permission, without imposing mandates or penalties, can spur meaningful protective action. Financial professionals served as early-warning systems, intercepting potential elder financial abuse before it escalated. The possibility that their actions, or even just the awareness of their capacity to act, served as a deterrent (“chilling effect”) on would-be exploiters is an important insight. The authors highlight how permissive policies may strike a powerful yet balanced approach—empowering professionals where needed while avoiding overregulation or burdensome mandates.

The study concludes that permissive governance strategies—like those embodied in the Model Act—can be highly effective in protecting vulnerable populations. They enable financial institutions to act without fear of liability and can significantly reduce elder financial exploitation. The success of this approach suggests broader policy implications: similar frameworks might be applied in other domains where vulnerable individuals rely on professionals (e.g., healthcare, legal services, social work), leveraging empowerment rather than coercion to improve protection and outcomes.

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