When Janet Yu drove to Toronto from Texas in June to assist her 90-year-old mother, who was recovering from a head injury, she never thought she’d end up dealing with not one but two emergencies.

The second crisis emerged when Yu, a chartered professional accountant, sat down with her mother to review her retirement accounts after a trip to the hospital and a lengthy stay at a rehab facility. That’s when she noticed something did not add up.

Yu and her sister Donna Koh allege their mother was the victim of fraud perpetrated by her longtime financial planner at Royal Mutual Funds Inc. (RMFI), a mutual funds dealer and RBC subsidiary. They allege the fraud and an unauthorized transfer of funds resulted in a loss of more than $120,000 according to an internal investigation by RMFI. The family wonders how a financial institution affiliated with Canada’s largest bank failed to detect suspicious activity for months.

Global News has agreed to keep Yu’s mother anonymous out of concern for her psychological well-being as the family alleges her advisor has repeatedly attempted to contact her after allegedly confessing to the fraud.

Yu and Koh say Yu reported the alleged fraud and unwanted calls to the police, but their mother ultimately decided against pressing criminal charges. Toronto Police confirmed it received a phone call corresponding to the incident number provided by Yu and Koh and that no report was filed.

RMFI has compensated Yu’s mother for $60,000 the advisor allegedly stole from her accounts, plus more than $7,000 in lost investment growth for that amount. The fund dealer has also offered more than $52,000 as additional compensation to account for other lost investment growth tied to the alleged second unauthorized transaction.

“We take seriously any allegation of employee misconduct and are investigating this matter fully,” an RBC spokesperson told Global News via email. “We can confirm that full monetary compensation has been offered to the client. Beyond that, we are unable to comment further due to employee privacy and because the matter is still under investigation.”

“We understand that any time a client is affected by unauthorized transactions that it can be a difficult situation for them.”

But Yu and Koh, who have power of attorney over their mother’s property, say the handling of the case has been inadequate. Their mother’s story, they say, highlights significant shortcomings in a major financial institution’s ability to protect a vulnerable senior from fraud. It also reveals how consumers seeking compensation may struggle to navigate a system where banks and their affiliated investment dealers are separate corporate entities often with different complaint channels. Finally, they say, no one has warned their mother about the tax liability she may face on the settlement amount she’s been offered for her investment losses.

“The burden of investigation and proof have fallen solely on our shoulders through the investigation, causing members of our family stress during what’s already a very challenging time,” Koh said via email.

A financial planner allegedly admits to fraud

A Korean immigrant, Yu and Koh’s mother has been an RBC customer for some 40 years. Her retirement savings — accumulated over 25 years of working 12-hour days six days a week — were largely held in low-risk RBC mutual funds sold by RMFI, the sisters say. Her financial planner, Jeong (Abraham) Shin, had been her trusted advisor for a decade, according to the family.

“Every time when my mom had to do any banking, she would go over to the branch and sit with him,” Koh says.

When Shin learned of Yu and Koh’s mother’s injury he sent flowers, they say.

But when Yu and her mother looked at her investment balance in September she says her mother thought it was considerably lower than what she remembered. Her mother wondered whether it was because of the stock market convulsions caused by the novel coronavirus pandemic, Yu says. But the paperwork showed her mother’s investments were almost entirely in cash and fixed-income, she adds.

“You have no equity,” Yu recalls saying to her mother.

Yu thought setting up online banking would help her mom get a better picture of her financial situation, she says. But when she tried to open a digital account with her, she wasn’t able to do so, she says. That’s when Shin offered to come to the house to help, according to Yu.

Yu was working remotely in one of the bedrooms during the visit when she says her mother came over from the living room, where she’d been speaking with Shin, and said in a low voice: “You’d better come out. Something is not right.”

It was then Shin confessed to stealing $60,000 from one of her investment accounts, Yu and Koh say.

“I was in a shocking state,” Yu says, adding that Shin mentioned he’d been in financial distress and offered to repay the money.

“He was literally kneeling and walking between mom and me asking for forgiveness,” she says.

But when Yu and her mother had met with Shin at a local branch just days before, he’d kept mum about the unauthorized withdrawal, according to Yu.

Eventually, she says, she had to threaten to call security at her mother’s building to get him to leave. Shin subsequently called Yu and Koh’s mother on at least a couple of occasions, prompting the family to call the police, according to Yu and Koh.

A few days later, Yu says she also discovered Shin had moved around $330,000 worth of investments from her mother’s RBC Select Very Conservative Portfolio to the RBC Premium Money Market Fund. Both alleged unauthorized transactions had occurred on March 23, which marked the worst day for major North American stock indices so far this year. The family hypothesizes the switch transaction was an attempt to conceal the alleged theft.

Global News has been unable to speak with Shin, despite several attempts to contact him. An RBC spokesperson declined to say whether he has been let go, citing employee privacy.

How two alleged unauthorized transactions went undetected for months

But even after initiating a review of Yu and Koh’s mother’s accounts, the mutual fund dealer did not immediately pick up on the alleged illicit investment fund transfer, according to Yu and Koh.

In both instances, RMFI said the alleged unauthorized transactions went under the radar because they were processed using Yu and Koh’s mother’s client card number and an online banking password assigned to it, according to correspondence seen by Global News.

The incident raises the question of whether bank and investing clients who have not set up online banking are at greater risk of becoming victims of fraud at the hands of employees who can set up accounts for them.

The RBC spokesperson has not said whether its financial planners have access to their clients’ card numbers and whether steps have been taken to prevent similar instances of alleged fraud in the future.

In general, “one of the benefits of having an online account is it allows you to check (transactions) more frequently,” says Jean-Paul Bureaud, executive director at FAIR Canada, an investors’ rights advocacy group.

Digital financial literacy is a growing problem with Canada’s aging population, says Elizabeth Mulholland, chief executive officer of Prosper Canada, a national charity.

But the burden of detecting fraudulent activity should not rest solely on financial consumers, she adds.

“Ideally there would be algorithms to flag these things,” she says.

Email services typically alert users of a login performed from an unusual device, even when it involves the correct user name and password. And credit card companies regularly request additional verification when they detect purchases that stray from a client’s typical pattern of transactions.

One would expect financial institutions to use similar technology that would detect and flag unusual activity, such as a large investment-account transfer or a trade order that does not match the investor’s risk profile on file, Mulholland says.

Yu has filed a complaint against RMFI, RBC and Shin with the Mutual Fund Dealers Association of Canada.

Is it the bank or the dealer?

That RMFI is a separate legal entity from RBC adds “a layer of complexity” for victims of financial fraud, Koh said via email.

Canada‘s big banks, which are federally regulated, offer many investment services through affiliated mutual fund and investment dealers, which answer to a different set of regulators. Normally, transactions affecting a client’s investments are the responsibility of the dealers, not the banks.

Shin’s alleged use of online banking to commit the fraud raises issues about where RMFI’s responsibility ends and RBC’s begins. In Yu and Koh’s mother’s case, a single online portal gives access to both chequing and savings accounts and investment accounts, according to Koh.

And Yu and Koh say Shin created a new RBC savings account in their mother’s name to which he transferred the $60,000 worth of liquidated investments. A letter from RMFI says RBC records indicate an RBC High Interest eSavings account was opened on March 23 through online banking.

It is unclear whether Shin is or was an employee only of RMFI or also of RBC. RMFI’s letter indicates both RMFI Compliance and RBC Corporate Investigation Services have been involved in investigating the alleged unauthorized activity.

Complicating matters further for consumers, banks and investment dealers may rely on different independent bodies to handle client complaints they cannot resolve on their own.

This is the case with RBC and RMFI. Bank customers who want to escalate their concerns are referred to the ADR Chambers Banking Ombuds Office (ADRBO). RMFI clients, on the other hand, must turn to the Ombudsman for Banking Services and Investments.

FAIR Canada has been advocating for years for streamlining the complaint handling process, Bureaud says.

“It’s very confusing to most people and part of the confusion stems from, where do you bring your complaint?” he says.

Besides, while both ADRBO and OBSI can advise financial institutions around client compensation, their recommendations are not binding.

Mind the tax

RMFI has offered additional compensation of more than $52,000 for the lost investment growth tied to the $330,000 Shin allegedly transferred without authorization. The offer, however, is contingent on Yu and Koh’s mother signing a release document, according to the RMFI letter.

But Yu and Koh say they are concerned the money could be subject to tax, among other issues.

“There are potential tax implications for any settlement,” says Bureaud at FAIR Canada. “It really depends on how (the Canada Revenue Agency) characterizes the settlement.”

Bureaud recommends consumers seek the advice of an accountant or tax lawyer before accepting compensation.

Financial abuse a growing worry as Canada’s population ages

Fraud and financial abuse of seniors are an increasingly urgent concern, says Mulholland of Prosper Canada. But the issue remains a tricky one, she says.

On the one hand, there is the concern of protecting aging Canadians from monetary losses.

“For seniors, it’s a particularly devastating situation because they don’t have a lot of time to make up that lost money,” Bureaud says.

One way for older Canadians to help guard against fraud and abuse is to rely on a trusted family member or friend to help review and manage their financial affairs along with financial planners or investment advisors, Mulholland says.

“Having checks and balances can be a good way to make sure that everybody feels like they’re under scrutiny,” she says.

On the other hand, preserving seniors’ right to make their own decisions must also be a priority, Mulholland says. While some seniors may need help, they don’t necessarily want to or need to sign off their decision-making power, she adds.

To that end, Canada is considering following the example of the U.S., where regulators have introduced the concept of “trusted contact person.” A TCP is someone designated by a client who financial advisors can contact in limited circumstances, for example, if they suspect financial abuse or believe their account has been subjected to fraud. But unlike a power of attorney, naming an individual a TCP does not confer them the ability to act on your behalf.

In March, the Canadian Securities Administrators, working with the Investment Industry Regulatory Organization of Canada (IIROC) and the MFDA, presented a series of regulator amendments aimed at enhancing protections against financial exploitation for vulnerable people. The measures include requirements for financial firms to take reasonable steps to obtain the contact information of a TCP from their clients.

Yu and Koh, for their part, say they have serious concerns about signing any of the release document provided by RMFI, which has a deadline of Nov. 20. Beyond the possible tax liabilities, they also worry about other unauthorized transactions that may not have been uncovered.

“We were fortunate that Janet was with my mom when the embezzlement was discovered, and that she is a CPA who was able to conduct a thorough review of my mom’s finances without the help of the bank,” Koh said via email.

“But consider other elderly people who have to deal with this on their own with no one to help or advocate for them … consider how devastating it would be to have $60,000 stolen from your account when you rely on a limited income, and how desperate and helpless an older person would feel when the bank is not forthcoming with information and rushes them to close the case.”

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