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State lawmakers in California approved a bill Thursday that will require banks and credit unions to begin monitoring large, suspicious transfers from the accounts of older clients in real time, potentially setting a template for other U.S. states to combat fraud and theft against the elderly.

Pursuant to the “Emergency Financial Contact Program,” which passed the Senate 32-1 after unanimously passing the Assembly, banks and credit unions in California must ask clients 65 or older to name a “trusted person” to notify of suspected fraud-induced transfers or withdrawals of $5,000 or more out of their accounts, and halt such transactions for three business days.

After Gov. Gavin Newsom signs the measure into law as expected, financial institutions in California must set up the monitoring program by Jan. 1, 2026. Institutions that fail to implement such controls, which will apply only to transactions assisted by a bank employee, incur liability for fraud losses if found to have shown “reckless disregard” for the law.

The author, Sen. Bill Dodd of Napa, dropped a provision from the bill in June that would have held banks liable for their elderly customers’ fraud losses if they “knew or should have known” of the schemes being perpetrated against them. Instead, the bill now includes a safe harbor that shields banks from civil liability when they delay transactions that turn out to be legitimate.

In response, the California Bankers Association and California Credit Union League dropped their opposition to the bill and adopted a neutral stance, clearing the way for passage, a legislative source told ACAMS moneylaundering.com on condition of anonymity.

Spokespersons for the trade groups did not respond to requests for comment by press time.

“It’s a very narrow enforcement provision that only applies in certain circumstances, and the banks are more comfortable with it,” said Jacqueline Serna, deputy legislative director at Consumer Attorneys of California, which advocated for the measure. “It could set a precedent for the rest of the country.”

AARP, formerly the American Association of Retired Persons—which holds chapters in 50 states and the District of Columbia— also supported the measure, Serna said.

From June 2022 to June of last year, banks and other financial institutions in the U.S. reported 155,000 transactions worth $27 billion combined to the Financial Crimes Enforcement Network that they suspected constituted attempts to defraud or otherwise steal from customers 60 and up.

Their reports showed that fraudsters targeting the elderly most often used checks and wires to drain their accounts, according to FinCEN, which warned that older clients tend to show more susceptibility to fraud because of their financial resources, potential cognitive difficulties, and reticence to disclose any losses they suffer for fear of losing their independence.

California’s approach marks a broader shift away from holding banks responsible for fraudulently induced payments initiated and approved by their customers, with several states now considering measures like Dodd’s that instead mandate heightened scrutiny of payments out of the accounts of the elderly before losses occur.

Pennsylvania’s House Commerce Committee passed a measure in May that would direct banks to contact law enforcement or a trusted third party when they suspect financial exploitation of the elderly, and authorize them to delay the underlying transactions for seven days. The measure now awaits consideration in the state’s Senate Banking and Insurance Committee.

A law that came into force in Connecticut on July 1 authorizes, but does not require, banks to suspend transactions initiated by clients 60 or older when “reasonable suspicion of financial exploitation” of fraud or possible theft from their accounts arises, and to report their concerns to the state’s Banking Department or Social Services Department for investigation.

By notifying a trusted person, such as relatives or joint account holders, and delaying large, suspicious transfers of at least $5,000 out of character for elderly clients, the measure passed by the California State Legislature on Monday and Thursday aims to give banks sufficient time to verify the legitimacy of such transactions or more decisively link them to fraud.

Lesser scams perpetrated through instant payment platforms such as Zelle, which by nature preclude the involvement of bank employees and generally limit transactions to maximum amounts below $5,000, are not covered by the measure, nor are online transactions conducted outside of bank branches.

In 2021, San Diego-area residents William and Ave Bortz, then 76 and 77 years old, lost nearly $700,000 to scammers who tricked them into wiring the funds out of their accounts at JPMorgan Chase & Co. to stop hackers from making large, unauthorized purchases from their account with Amazon.

After realizing they had been duped, the couple sued the lender in federal court for failing to question four wires that William Bortz sent over a span of eight days in January 2021 to beneficiaries in Hong Kong.

The scammers kept him on the telephone to give him instructions while he initiated the four wire transfers in person with the aid of employees at two of Chase Bank’s branches in the area.

U.S. District Judge Todd Robinson dismissed the couple’s claim against Chase Bank under California’s Financial Elder Abuse Law in October 2021, a decision that the 11th Circuit Court of Appeals upheld in July of last year in ruling that to be held liable for the losses, the lender had to have “actual knowledge,” not merely suspect, that the transfers were fraudulently induced.

“My dad and I are excited to see SB 278 [Dodd’s measure] moving forward as we believe that it can make a huge difference in keeping my family’s tragedy from happening to other families,” Ave Williams, the couple’s daughter, told moneylaundering.com in an email.

Contact Fred Williams at fwilliams@acams.org