Protecting Your Senior Clients’ Money from Theft
During my time with a local credit union as a fraud educator in my post-policing career, I became involved in a case of suspected financial abuse against one of the credit union’s member.
The teller was approached by a woman in her 80s accompanied by her son, who did all the talking. The young man had demanded the withdrawal of thousands of dollars from the mother’s savings account waving his Power of Attorney designation in the teller’s face as proof he was entitled to handle his mother’s financial transactions.
The teller, who knew the senior well, suspected undue influence on the part of the younger man toward his mother, and had approached her supervisor prior to handing over the cash.
“He won’t let Agnes say a word and answers all the questions I asked her. She seems scared of him. That’s not the Agnes I know well,” the teller whispered to her supervisor while eyeing the pair at her wicket a short distance away.
During the debriefing, I had asked the branch manager to tell me what had taken place. He advised that the teller had approached her supervisor with her concerns. The supervisor then went to him with the same concerns. He looked at the matter, felt that there was nothing they could do since the son held POA, and simply reported the transaction to FINTRAC, the federal government agency responsible for tracking all financial dealings over the amount of $10,000.00 as directed by law.
From what he had told me, I felt that the he had not done enough to determine whether or not the senior member had been taken advantage of financially. This uneasy feeling was based on court decisions made by the Canadian Supreme Court in cases involving such incidents. In essence he had placed the credit union at risk of being financially liable for any losses incurred by this member due to the branch manager not doing his due diligence.
Canadian courts have tackled the issue of what the responsibility of those involved in handling the finances of others should be. The authority to assist in the granting of a Power of Attorney designation to an attorney from the grantor extends to many businesses all dealing with some aspect of a customer’s personal finance. As such, these businesses are all cogs in the wheel of this responsibility. Though the cases described below refer to the banking industry, they have general applications for all businesses who deal with the public, and specifically older adults.
In 1975, a decision by the BC Court of Appel in the case of Groves-Raffin Construction Ltd. et al v. Bank of Nova Scotia et al, the following summary was written.
Groves-Raffin Construction Ltd. v. Bank Of Nova Scotia (1975) 64 D.L.R. (3d) 78 (BCCA)
“A banker’s duty to his customers involves not only the primary and axiomatic obligation to carry out its function as a banker to honour and pay its cheques when funds are on credit, but to exercise such care as a reasonable banker would consider requisite to ensure that what is suspicious or questionable is queried. So the duty of care may involve in circumstances, a duty to make inquiry. The test is an objective one, that of a reasonable banker.
What the BC Court of Appeal is saying is that not only is a bank responsible to carry out its day to day business as a bank, but it is also tasked with making inquiries where circumstances indicate a reasonable banker should do so. Those involved in the issuance of a Power of Attorney, or of any other financial transactions whether they be the transfer of land, stocks and bonds, Wills, or guardianship applications would do well to be mindful of protecting themselves against any future accusations of not performing their duties to make inquiry as the courts have stated above.
In Selanger United Rubber Estates v. Craddock et al, the judge, Ungoed-Thomas, J., after reviewing the leading cases, reiterated the proper principle at pg. 1117 as follows:
Selanger United Rubber Estates v. Craddock et al
“The implied duty of care in the banker-customer relationship encompasses within it a duty of inquiry where circumstances are such that the suspicions of a reasonable banker would be raised.
So it seems to me that the standard of care is that which bankers might reasonably be expected to take according to the ordinary practice of bankers. The test thus seems clearly to be an objective test of reasonableness. What intervention is appropriate in that exercise of reasonable care and skill again, depends on circumstances. Where it is to enquire, then failure to make enquiry is not excused by the conviction that the enquiry would be futile, or that the answer would be false.”
Imperial Bank (1936)
“A bank permitting withdrawals on a general power of attorney under circumstances of knowledge and suspicion by the bank that the holder of power of attorney was committing a breach of trust, for the purposes of enabling the latter to use the funds to pay a debt he owed to the bank, constitutes a misappropriation of the depositor’s money sufficient to make the bank accountable for them to the aggrieved depositor.”
Though these cases pertain to the banking industry, they are applicable to any industry that involves dealing with legal documents such as a Power of Attorney agreement. Those involved with the public must become aware of how their interactions and decisions can impact not only their clients and customers, but also their businesses.
Your clients come to you with the belief that you will provide them with the proper advice concerning their finances. The instructions you provide can leave you open to legal action should you fail to do your fiduciary responsibility, that which is to protect your client to the best of your ability from financial loss due to fraud or theft, or poor financial decisions.
FINTRAC regulations direct that any transaction over $10,000 must be reported to them. They in turn review such the transactions looking for the possibility of illegal money laundering. FINTRAC’s main area of focus is on organized crime, and the illegal drug trade.
As a diligent professional concerned with the financial wellbeing of your client, you report such transactions to FINTRAC as is your regulatory obligation. Most people at this point assume that they have fulfilled their legal requirements, and should anything untoward show up in the FINTRAC investigation regarding the $10,000 transaction your client had made, FINTRAC would then notify the local police authority to have the matter investigated further with an eye toward criminal charges.
In the 27 years I policed, and specifically the 5 years I spent investigating Power of Attorney fraud as a Fraud detective sergeant in our Economic Crime Unit, I never once saw a FINTRAC report. FINTRAC is not concerned with a senior losing $10,000 or even a million dollars. If it doesn’t involve organized crime and/or illegal drugs, it is duly noted and filed. Yes, you must report it, but that’s as far as it goes.
You’ve reported the $10,000 transaction to FINTRAC. You’ve covered your bases, and are now safe at home to use a baseball euphemism. Or are you? While no one can accuse you of not doing what was legally required of you by the federal government, e.g.: reporting the transaction to FINTRAC, what about the other part of your obligations to your client’s, the one where you promised to protect them from financial pitfalls should you recognize that something may be amiss? It’s called fulfilling your fiduciary responsibility.
I lecture financial planners across this country on these matters from Vancouver to Muskoka, Ottawa, Toronto, Fredericton, Trail, BC, and Swift Current, Saskatchewan. Emphasis is placed on the Fiduciary Responsibility area of the equation rather than on the Regulatory Obligation. Why? Simply because not properly reporting huge financial transactions may get you a stern warning from FINTRAC, however not doing your due diligence in protecting your senior client’s money could cost you your career, and a whole lot more through the civil courts. I’ve run into such a scenario in my time investigating POA abuse.
Mom gives her son POA through a lawyer. All seems on the up and up until one day the care facility that mom is living in, notifies the family that her bills are not being paid, and haven’t for several months. The family contacts her son and demands to know what’s up with his mom’s finances. They want to see copies of his mom’s monthly bank statements. “Where has her money has been going?”
As is his legal right, the son tells everyone to take a hike. He doesn’t have to show anyone anything. He was granted the authority to act as though he was the grantor in matters concerning finances, and as such, he is in fact, his mother. As such, he has no legal obligation to tell anyone anything without the proper legal vehicle such as a search warrant.
In comes the lawyers; letters are fired across the bow of each ship in an effort to scare the other into submitting however, when it becomes clear that neither party is willing to concede, one of two things happen . . . either the police are called in to investigate the possibility of theft or fraud on the part of the POA, or/and the POA is sued in civil court for loses by either the grantor or the grantor’s family.
The lawyer responsible for drawing up the POA may also be called to task to explain how he/she determined Capacity at the time of the signing. The bank will definitely be involved in the law suit as a party to the offence as will any other businesses or professionals who became involved in the matters before the courts. It will be up to these groups to prove that they did their due diligence in preventing the financial abuse.
Now here’s the crux of the matter…how do you defend yourself in court when notes made by some occupations, such as the legal and medical professions are regarded as client privileged? You cannot reveal what was said to you in private by your client, and to further complicate the matter, what happens if your client has Alzheimer’s, and has lost Capacity?
To protect yourself and your business from accusations that you did not perform your due diligence in protecting your client from financial abuse, you will need to take into consideration the steps required to not only perform your regulatory obligations, but also those that will address the fiduciary responsibility you have bestowed upon you by our courts to investigate any matters that may crop up surrounding the financial safety of your clients.
Ask questions of your client. Be certain you and your client understand the answers as well as the implications of their actions. If you feel that a crime has been committed, will be committed, or is about to be committed against your client you not only have the duty, but I would also suggest the moral obligation to report the matter to the police.
The argument I hear most often concerning engaging the police in matters concerning their client is that according to the Privacy Act, you cannot disclose to anyone anything that was discussed between you and your client without a the proper legal vehicle. This is blatantly false, and here’s why… you are not governed by the Privacy Act. The Privacy Act only concerns those who are employees of the federal government such as Postal Workers, Service Canada, RCMP, and the Canadian Armed Forces. Forget you’ve ever heard of the words The Privacy Act. It’s doesn’t pertain to you.
PIPEDA (Personal Information Protection of Electronic Documents Act)
The vast majority of Canadians are covered under PIPEDA, and there is a section within PIPEDA that addresses when you can reveal classified or personal information to the police. Section 7(2)(A) of PIPEDA states that you can disclose private information, without consent, on reasonable and probable grounds that the information may prevent, or may be related to an act that contravenes the law.
This disclosure is purely voluntary. There is no criminal recourse should you decide not to disclose however…and this is a huge however…failure to disclose information that may have prevented your client from losing massive amounts of money to a POA gone rogue could set you up as a defendant in civil court trying to explain why you didn’t do your due diligence and report to the mater to the police even though you knew something criminal was going to happen to your client.
My best advice to you is that if you are faced with such a dilemma, seek legal counsel from your lawyer prior to acting to ensure that you are on solid legal grounds when you decide to report or not report to the police.