Benefits of Compliance
After you have exhausted efforts in looking for lost
shareholders, customers or vendors, their interests are best-served through
unclaimed property compliance. Where contact has
been lost and cannot be re-established, the missing owner is not served by his
funds being held in a dormant state at their place of origin.
Reporting dormant assets reflects a recognition that the
owner may very well be found by the state, and the asset returned. Owners, or their heirs located through state
efforts will truly appreciate your role in this joint private/public sector
initiative to reunite them with their property.
State efforts to find missing owners are significant and
frequently successful, even where previous private-sector searches were
unsuccessful. The states are uniquely positioned to
undertake broad-based outreach efforts such as statewide publications and
Internet-accessible lost owner databases.
Some states will pay a reappearing owner interest on
unclaimed funds for the period the asset was held by the state.
Minimizes Corporate Deadwood
Unclaimed property provides you with an opportunity to
clean-up any old, off-line manual records as well as remove dormant accounts
from active files on an automated database.
In effect, the state becomes successor custodian for your records. Since the state
will retain the reported information indefinitely, you are spared the burden of
maintaining the records and not forced to continually be faced with decisions
regarding the need for retention.
The states will undertake extensive and sincere efforts to
locate owners. By virtue of
publications with state-wide distribution, Internet sites, and a variety of
other outreach efforts, the states are highly successful in returning property,
particularly where they receive owner names and previous addresses. Skepticism aside,
any state will tell you that returning property to the rightful owner is what
it’s all about.
Handling inquiries concerning old, outstanding checks can be
very disruptive. Often, the research
involves manual records which are so rarely consulted, that they cannot be
readily located. The time and effort required for research can easily exceed the amount of
the open check.
The costs associated with maintaining, researching, and
reconciling old records can be greatly reduced through comprehensive unclaimed
property compliance. Why perform these
tasks when the states will assume them at no cost to your company? Unclaimed property
programs will retain a permanent record of all reported items, allowing you to
direct reappearing owners to the state.
Perhaps your company uses a third party to administer
shareholder or other accounts. Administration costs can be reduced by
identifying, and eliminating via reporting, all dormant accounts. For
unclaimed securities, consolidating numerous lost accounts into a single
state-registered position can result in very considerable savings.
Times have changed.
Unclaimed property reporting requirements are no longer a secret. Consequently, industry regulators know about
them and measure compliance. Even where your
company is not regulated, you should be concerned with internal and external
An audit exception might be the least of your worries. A state unclaimed property audit, however,
is a serious matter. You may need to
produce a considerable volume of records, explain policies and procedures, and,
where found not to be in compliance, pay over significant penalties and interest. Some states can additionally charge the
company for the cost of the audit, if past-due property is found.
All states have the ability to assess penalties and interest
for non-compliance. Many states in fact
levy these assessments against holders who are found, through state-initiated
audits, to have failed to report and deliver property.
State unclaimed property programs are only
one type of regulator who may question the failure to report unclaimed
property. To many other regulators,
unreported abandoned property is synonymous with a poor internal control
Experts agree that one of the key elements of fraud is
opportunity. And there are few better opportunities for
fraud than inactive assets.
Many of the embezzlement stories reported in the media would
have never occurred, had the employer complied with state unclaimed property
reporting requirements. Removing abandoned
accounts can mean removing a temptation.
Unclaimed asset conversion can take many forms, and result
in exposure well beyond the cost of restitution. One revered New York bank paid fines of more than $20 million for
using abandoned checks to enhance corporate revenues. The resulting bad publicity was
Obviates Embarrassing And Awkward
The courts have upheld the legitimacy of state unclaimed
property laws. This fact, coupled
with increased media attention and the reality that many leading companies now
comply, make the failure to report increasingly indefensible.
Your internal auditors may ask why reports were not
filed. In time, a state or states may
ask the same question. Missing owners
may reappear and ask you to pay interest on their dormant assets. Such inquiries can be avoided through
Ultimately, unclaimed property laws are just that: the law.
Their constitutionality has been upheld by the courts, including the
United States Supreme Court. Past rationales for
non-compliance have become largely invalid.
Each year, reporting requirements become more widely known,
and large numbers of companies report.
Non-filers are now
in the minority.
Unclaimed property compliance need not be an expensive
proposition. For those companies that
have not previously filed, or have not previously filed all property with all
states, the Compliance Program, administered by the Unclaimed
Property Clearinghouse, is available at no charge.
Once a company has achieved compliance,
compliance can be maintained at a nominal cost through utilization of an
unclaimed property service bureau, or through the purchase of reporting
Can Be Achieved Without
All states encourage the reporting of past-due
unclaimed property. Virtually all
states have offered the incentive of relief from interest and penalties to
those companies who acknowledge and address their prior failure to report. While individual
circumstances and states need to be taken into account, there has been no better
time than the present for companies to step forward and achieve compliance, with
little likelihood for substantial penalties and interest being assessed.
The Unclaimed Property Clearinghouse can assist your
company in addressing any and all complex reporting issues, as well as
undertaking the actual state filings.
We can also facilitate you obtaining, from
the states that provide them, release agreements settling any interest or
penalties that might otherwise be owing.