A state law that went into effect July 2 allows financial institutions to put transactions on pause for 30 business days if financial exploitation of an elderly or disabled person is suspected.

With billions in losses reported each year nationally, “financial scamming is an enormous industry. Scammers literally go to work every single day to separate people from their money,” said Sabrina Sells, senior vice president and Wilmington market president for North State Bank.

Retirees are some of the most common victims, according to the U.S. Treasury’s Financial Crimes Enforcement Network.

“Scammers have found vulnerability in the elderly because of isolation, decreased acuity or loneliness,” Sells said.
 

RULES & RED FLAGS

Ordinarily, transactions can’t be held up.

“Financial institutions must comply with applicable laws, regulations, consumer agreements and deadlines in following a consumer’s order to transfer money,” said Sarah Thompson, chief risk officer for the State Employees’ Credit Union.

But Thompson said credit unions and banks constantly strive to stop fraud and, thus, welcome the new tool.

Red flags can appear anywhere, local banking experts said. A banker might spot something is off with a customer, for example.

“One of the biggest indicators is a change in behavior,” said Amy Seintourens, senior vice president and director of fraud management for TowneBank. “Sometimes a member doesn’t present the way we’re accustomed to seeing them, or we notice a change in their demeanor, accompanied by someone who appears to be coaching them on what to say or do.

“In other instances, a family member or friend might provide a heads-up about a suspected fraudster, or the bank’s computing system might signal an unusual trend.”

Hillary Kestler, senior vice president and director of communications and marketing for the N.C. Bankers Association, said, “Frontline employees are generally and should be trained to recognize behavioral and transaction red flags. Community banks are a first line of defense because of the close relationship they have with their customers.”

She added, “The adoption of amazing new technologies that help monitor and scan has come a long way as well.”

With the new law, the 30-business-day delay on transactions can be extended for an additional 30 business days if internal reviews or those of state protective agencies continue to support the belief that financial exploitation is occurring or will be attempted, the law states.
 

THE TRUSTED & UNTRUSTWORTHY

Sells said maintaining contacts for trusted individuals in vulnerable customers’ lives has always been a good rule of thumb.

State officials agreed.

“The new law carves out protections specific to adults 65 years and older by encouraging financial institutions to maintain ‘trusted contact person’ information for older customers, authorizing law enforcement and investigators to more effectively obtain financial records when exploitation is suspected, and providing a statutory definition of ‘financial exploitation’ as the illegal or improper use of an older adult’s financial resources for another person’s benefit,” Sells said.

But even trusted people can sometimes be the problem.

“Adult children were the most common perpetrators of elder financial crimes,” Sells said, citing a 2024 Financial Crimes Enforcement Network report. “Other family members, caregivers, neighbors and trusted acquaintances also appeared frequently in the reporting.”

Sells said that suspicious activity reports, or SARs, are filled out by financial institutions whenever things look off.

“Most often, a change in the ‘predictable’ activity is what prompts the SAR,” she said.

The law now better protects bankers by providing legal immunity to those who take the good-faith next steps to act on the SARs.

The legislative language further states “the financial institution and its officers, employees, and agents cannot be compelled in any action to identify the existence of or the contents of a suspicious activity report related to suspected financial abuse activity that may have been filed with the U.S. Department of the Treasury.”
 

THE LAW’S LIMITATIONS

Even with the new law, not every scam will be thwarted.

“The speed at which money moves today can make the job of detecting and preventing fraud more challenging, limiting the ability to detect, prevent or recover scam-related losses,” Thompson said.

The N.C. Bankers Association worked with legislators to draft the language for the law.

“As frauds and scams are incredibly pervasive,” Kestler said, “we will continue to look for ways to improve the law over time.”