On June 10, 2010, the State of Washington passed new legislation designed to prevent the financial exploitation of vulnerable adults. The new legislation provides financial institutions the power to refuse to conduct a transaction if the institution suspects abuse and also requires employees of investment advisers and broker dealers to undergo abuse identification training. Section 20(16) of Chapter 74.34 of the Revised Code of Washington defines “vulnerable adult” as “a person:
(a) Sixty years of age or older who has the functional, mental, or physical inability to care for himself or herself;
(b) Found incapacitated…;
(c) Who has a developmental disability…;
(d) Admitted to any facility;
(e) Receiving services from home health, hospice, or home care agencies…; or
(f) Receiving services from an individual provider.
This new legislation contains two elements designed to protect those described as “vulnerable adults.” First, the legislation gives power to financial institutions to refuse to disperse funds if the institution suspects abuse. The statute provides, “if a financial institution reasonably believes that financial exploitation of a vulnerable adult may have occurred, may have been attempted, or is being attempted, the financial institution may, but is not required to, refuse a transaction requiring disbursal of funds contained in the account:
(a) of the vulnerable adult;
(b) on which the vulnerable adult is a beneficiary, including a trust or guardianship account; or
(c) of a person suspected of perpetrating financial exploitation of a vulnerable adult.
Financial institutions may also refuse to disperse funds if they have information from any law enforcement agency demonstrating that abuse may have occurred.
While a financial institution is immune from liability if they disburse funds or refuse to disburse funds as long as they act in good faith, if the firm refuses to disburse funds, the financial institution shall “(a) make a reasonable effort to notify all parties authorized to transact business on the account orally or in writing; and (b) report the incident to the adult protective services division.”
The second effect of the new legislation is that financial institutions will be required to provide their employees with training concerning the financial exploitation of vulnerable adults. This requirement applies to all employees of investment advisers or broker dealers, who (1) are required to be registered as salespersons or investment adviser representatives, and (2) “have contact with customers and access to account information on a regular basis.” The training must include “recognition of indicators of financial exploitation of a vulnerable adult, the manner in which employees may report suspected financial exploitation…, and steps employees may take to prevent suspected financial exploitation of a vulnerable adult.”
All employees who are required to receive the training will need to have completed it by June 10, 2011 and from that date forward, any new employees will need to receive the training during their first three months of employment. Financial institutions may develop their own training procedures; otherwise they may use a standardized training program that will be developed by the State of Washington.