BILL ANALYSIS �
SENATE BANKING & FINANCIAL INSTITUTIONS COMMITTEE
Senator Juan Vargas, Chair
AB 1525 (Allen) Hearing Date: June 27,
2012
As Amended: March 22, 2012
Fiscal: Yes
Urgency: No
SUMMARY Would add money transmitters to the list of persons
who are mandated reporters of elder and dependent adult
financial abuse.
DESCRIPTION
1. Would provide that a mandated reporter of suspected
financial abuse of an elder or dependent adult includes a
money transmitter, and would define a money transmitter as a
person or entity engaged in either of the following:
a. Selling or issuing payment instruments, as defined
in subdivision (q) of Section 2003 of the Financial Code
(i.e., a check, draft, money order, traveler's check, or
other instrument for the transmission or payment of money
or monetary value, whether or not it is negotiable).
b. Receiving money for transmission, as defined in
subdivision (s) of Section 2003 of the Financial Code
(i.e., receiving money or monetary value in the United
States for transmission within or outside the United
States by electronic or other means. The term does not
include sale or issuance of payment instruments and
stored value).
EXISTING LAW
1. Provides for the Elder Abuse and Dependent Adult Civil
Protection Act (Welfare and Institutions Code Sections 15600 et
seq.), which includes financial abuse of elder and dependent
adults within its provisions. Provisions of existing law
relating to financial abuse of elders and dependent adults
include the following:
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a. An "elder" for purposes of the elder and dependent
adult abuse statutes is any person residing in this state,
65 years of age or older. A "dependent adult" for purposes
of these statutes is any person between the ages of 18 and
64 years, who resides in this state, and who has physical
or mental limitations that restrict his or her ability to
carry out normal activities or to protect his or her
rights, including, but not limited to, persons who have
physical or developmental disabilities, or whose physical
or mental abilities have diminished because of age.
b. Officers and employees of financial institutions, as
defined, are required to report suspected financial abuse
of elder or dependent adults immediately, or as soon as
practically possible, to an adult protective services
agency or local law enforcement agency. Failure to report
suspected financial abuse is a violation of state law,
subject to a civil penalty up to $1,000 ($5,000 if failure
to report is willful), paid by the financial institution to
the party bringing the action. This penalty may be
recovered only in a civil action brought against the
financial institution by the Attorney General, a district
attorney, or county counsel.
c. For purposes of the elder and dependent adult
financial abuse statutes, "financial institutions" are
defined as banks, thrifts, credit unions, and so-called
"institution-affiliated parties," which are defined by
reference to federal law (12 USC 1813(u)).
d. "Suspected financial abuse of an elder or dependent
adult" is defined as a circumstance in which a person who
is required to report suspected financial abuse observes or
has knowledge of behavior or unusual circumstances or
transactions, or a pattern of behavior or unusual
circumstances or transactions, which would lead an
individual with like training or experience, based on the
same facts, to form a reasonable belief that an elder or
dependent adult is the victim of financial abuse, as
defined.
e. Persons reporting suspected financial abuse of an
elder or dependent adult, photographing evidence of a
suspected victim of elder or dependent adult financial
abuse, and persons providing access to the victim of a
known or suspected victim of elder or dependent adult
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financial abuse are shielded from civil or criminal
liability, as long as their actions are carried out in
accordance with the law, as specified.
2. Provides for the Money Transmission Act (Division 1.2 of the
Financial Code, Section 2000 et seq.), as follows:
a. Corporations and limited liability companies are
eligible for licensure, as specified. Once licensed,
these entities employ "agents." Agents are defined as
persons who provide money transmission in California on
behalf of licensees. Agents do not include officers or
employees of licensees. Licensees are liable for the
transmission of money, once that money is received by an
agent.
b. Once licensed, licensees and the agents working on
their behalf are authorized to sell or issue payment
instruments, as defined (activities that would be covered
by this bill); sell or issue stored value (not covered by
this bill); and receive money for transmission (covered by
this bill).
.
COMMENTS
1. Purpose: This bill is co-sponsored by the California
Senior Legislature and San Diego District Attorney Bonnie
Dumanis, to protect the elderly from financial abuse being
perpetrated via money transmission.
2. Background and Discussion:
Wire Transfer Fraud: According to background information
provided by the author using statistics from the National
White Collar Crime Center, 1,259 California seniors, aged 60
or older, lost a total of over $7.1 million during 2011, via
scams that involved wire transfers. From January to March
15, 2012, 212 California seniors lost a total of just under
$2 million to scams involving wire transfers.
The Federal Trade Commission (FTC) reports that wire transfers
are the number one form of consumer scam. In 2010 alone,
43,866 complaints involving wire transfer scams were made to
the FTC. These scams involved people posing as family
members, friends, legitimate businesses, sweepstake
contests, and government entities. The author observes that
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seniors are particularly vulnerable to these scams, and are
thus easy targets.
Regulation of Money Transmitters in California:
California's Money Transmission Act licenses businesses,
which then hire agents to perform authorized services. For
example, Western Union is a licensee, which hires several
thousand agents across California, including grocery stores,
convenience markets, and other storefronts, to offer Western
Union's money transmission services. This bill would
require every agent of a licensed money transmitter to
report suspected cases of elder and dependent adult
financial abuse. In practice, this reporting requirement
will fall on the employees of establishments that act as
agents (i.e., grocery store and convenience store clerks,
and persons in similar capacities who work for other
agents).
What Protections Currently Exist Under The Money
Transmission Act? The Money Transmission Act does not cap
the amount of money that may be transmitted by any
individual. However, the federal Bank Secrecy Act requires
money services businesses, including money transmitters, to
register with the Financial Crimes Enforcement Network
(FinCEN). Each entity that is registered with FinCEN is
required to file a cash transaction report for any deposit,
withdrawal, exchange of currency, or other payment or
transfer that exceeds $10,000. The reporting entity is
required to verify and record the name and address of the
individual presenting the transaction, as well as the
identity, account number, and social security number or tax
identification number of any person or entity on whose
behalf the transaction is made. Multiple currency
transactions by or on behalf of the same person or entity
during a business day, including transactions conducted at
multiple locations of the same entity, must be aggregated.
Money services businesses are also required to file
suspicious activity reports with FinCEN when a transaction
conducted by, at, or through that business is both
suspicious and in an amount of $2,000 or more. A
transaction is suspicious, if the money services business
knows, suspects, or has reason to suspect that the
transaction involves funds derived from illegal acts, is
intended or conducted to hide or disguise funds derived from
illegal activity, is designed to evade the requirements of
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the Bank Secrecy Act, or serves no business or apparent
lawful purpose, and for which there is no reasonable
explanation after examining all available facts.
The filing of a cash transaction report or a suspicious
activity report by a money transmitter does not invalidate
the money transfer that gave rise to those reports.
Instead, the Department of Financial Institutions uses
information that its licensees have filed with FinCEN during
its periodic examinations of those licensees.
3. Summary of Arguments in Support:
a. This bill is co-sponsored by the California Senior
Legislature and San Diego County District Attorney Bonnie
Dumanis to protect the elderly from abuse and fully
prosecute those who prey upon them. District Attorney
Dumanis observes, "The passage of AB 1525 will afford our
office an opportunity to speak directly with personnel
who are involved in money transmission. We will offer
training along similar lines to training that we
conducted with the local financial institutions after
their employees became mandated reporters of suspected
financial elder abuse...It is particularly important to
protect our elderly, who are sometimes easy prey to
financial predators. Our office has seen a rise in these
types of cases....This bill will hopefully cause 'money
transmitters' to think twice about whether a senior might
be a potential victim of financial abuse before
completing the money transfer from the account. AB 1525
also provides equity among financial institutions and
money transmitters with regard to their legal
responsibility to protect our seniors."
b. The Alzheimer's Association, AARP, and several other
senior advocacy groups are also in support. The
Alzheimer's Association writes that because of the
debilitating nature of Alzheimer's, individuals living
with the disease lack the ability to make sound judgments
and are especially vulnerable to financial abuse by their
caregivers. This bill will help ensure that elderly and
dependent adults are not victimized. AARP observes that
elder financial abuse is a growing issue that is
impacting more and more people as our population ages.
Additional tools and strategies are needed to combat
abuse of this vulnerable segment of our population.
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Including businesses engaged in money transmission as
mandated reporters of suspected financial abuse will help
protect vulnerable seniors.
c. The California Police Chiefs Association, Crime
Victims Alliance, County of San Diego, and Los Angeles
County District Attorneys Office are also supportive, for
reasons similar to those expressed by District Attorney
Dumanis. These entities are aware of many cases of elder
financial abuse perpetrated through wire transfer, and
would like to see more protections available for seniors
and others who fall prey to these scams.
4. Summary of Arguments in Opposition:
a. The Money Services Roundtable (MSR), a trade group
of money transmitters, opposes the bill on several
grounds. First, the trade group observes that the money
transmitter business model differs significantly from the
depository institution model. A depository primarily
deals with customers with whom it has an account
relationship. Money transmitters do not maintain
account-based customer relationships. Instead, money
transmitters interact with their customers through their
agents on a one-off basis, and, depending on the type of
money transmission transaction, may not know the sending
customer's name, let alone his or her age or other
factors that could assist the agent in accurately
identifying the customer as an elder or dependent adult.
Second, depository institutions employ full-time tellers
and others who engage in a wide range of financial
services transactions with their account holders. In
contrast, employees of transmitter agents, including
convenience stores, grocery stores, pharmacies, and other
retailers, spend the majority of their time selling goods
and services unrelated to financial services
transactions. Employees in typical agent locations also
turn over quite often. Thus, while it may be realistic
to train and expect a bank employee to recognize
financial abuse based on experience and a recurring,
account-based customer relationship, it is not realistic
to expect a part-time employee of an agent to perform in
a similar manner.
Finally, the MSR expresses concern with the liability this
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bill would impose on money transmitter licensees, for the
actions of its agents. "Recognizing the unique position
of agents and their employees in the money transmitter
business model, a licensee should not be liable for an
agent's failure to report financial abuse as set forth in
AB 1525. Not only are there inherent limitations on an
agent's ability to comply with the reporting requirement
under AB 1525, but licensees operate through networks of
thousands of individual agents, and it is impossible and
inequitable to impose vicarious liability on licensees
that have no way of insuring that agents are identifying
or reporting suspected elder or dependent adult abuse."
b. The California Retailers Association and California
Grocers Associations oppose AB 1525, on the basis that
many of their members are agents of money transmitters.
They believe that it would be impractical to impose
mandated reporting requirements on retail clerks. They
are also concerned that the bill could impose significant
enforcement costs on their members. The groups
appreciate the author's intent, but do not believe that
AB 1525 is the right way to achieve the goal of
preventing elder and dependent adult financial abuse.
c. The California Land Title Association and California
Escrow Association are opposed to the bill, unless it is
amended to add language (see Amendments section below) to
ensure that title and escrow companies are not
inadvertently covered by the bill's provisions.
5. Amendments:
a. The author has agreed to the following amendments,
to address concerns raised by the California Land Title
Association and California Escrow Association:
Page 2, after line 28, insert: (C) For purposes of this
section, "money transmitter" does not mean a person or
entity providing escrow, sub-escrow, or other settlement
services pursuant to the mutual instructions of the
principals in a transaction for which the person or
entity is providing settlement services".
6. Prior and Related Legislation:
a. AB 2105 (DeSaulnier), 2007-08 Legislative Session:
AB 1525 (Allen), Page 8
Would have added employees of California Finance Lenders
Law and California Residential Mortgage Lending Act
licensees to the list of mandated reporters of elder and
dependent adult financial abuse, and would have added an
elective course on "signs of financial elder and
dependent adult abuse" to the list of continuing
education courses under the Real Estate Law. Vetoed by
Governor Schwarzenegger.
b. AB 2789, Committee on Banking and Finance, Chapter
612, Statutes of 2010: Consolidated three previously
separate laws (the Transmission of Money Abroad Law,
Travelers Checks Act, and the Payment Instruments Law)
into a single law, called the Money Transmission Act.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
California Senior Legislature (co-sponsor)
San Diego County District Attorney (co-sponsor)
AARP
Alzheimer's Association
American Federation of State, County and Municipal Employees,
AFL-CIO
Area Agency on Aging for San Luis Obispo and Santa Barbara
Counties
California Advocates for Nursing Home Reform
California Police Chiefs Association
City and County of San Francisco
County of San Diego
Crime Victims Action Alliance
Los Angeles County District Attorney's Office
Older Women's League
San Francisco Advisory Council to Aging and Adult Services
Opposition
California Escrow Association
California Grocers Association
California Land Title Association
California Retailers Association
Money Services Roundtable
Consultant: Eileen Newhall (916) 651-4102
AB 1525 (Allen), Page 9