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6/4/19 9:50 AM

Unclaimed Property Effective Due Diligence

Annual unclaimed property reporting has many distinct steps.  These include, maintaining up-to-date compliance rules, compilation of potentially reportable transactions, identification of exemptions and deductions, mailing of due diligence notification letters, and reporting and remitting funds to the various jurisdictions.     

Once a holder has analyzed its’ data to determine potentially reportable items, the next step is the performance of due diligence, which includes determining which accounts require a statutory due diligence mailing, when the states require the mailing of the letters and the content of the letter.

States generally require a notice to be sent to the last known address of the owner of the funds as indicated in the holder’s records before the property can be escheated to the states. This gives the owner one last opportunity to claim their funds before they are turned over to the state. Over the years, states have placed greater emphasis on due diligence and various components of the process, including:

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Topics: Compliance, Due Diligence, Best Practices

5/22/19 8:44 AM

Notices Continue for Delaware Unclaimed Property Voluntary Disclosure Agreement Program

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations, and our information is that Delaware will continue this practice on an on-going basis. 

Based on correspondence that MarketSphere has received on May 20, 2019 from the office of Delaware’s Secretary of State, the latest round of VDA invitations will be mailed to a number of Delaware incorporated companies in the very near future.    

The correspondence notes: 

Pursuant to 12 Del. C. §1173(b), the Delaware Secretary of State (SOS) soon will distribute letters inviting companies to enter the Voluntary Disclosure Agreement (VDA) Program. Any company that receives a letter is encouraged to enroll in the SOS VDA Program to facilitate compliance with Delaware’s Abandoned or Unclaimed Property Law.

Invitees have 60 days from the date of the invitation to enroll in the SOS VDA Program by completing, executing and submitting Form VDA-1 Disclosure and Notice of Intent to Voluntarily Comply to the Secretary of State.  If an invitee does not enroll in the SOS VDA Program within 60 days of the invitation mailing, the company will be referred to the State Escheator for examination.

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Topics: Delaware, Compliance, Audit

5/14/19 9:29 AM

Unclaimed Property Fall Reporting Checklist

Even though it seems like a long way away, Fall unclaimed property reports will be due before you know it.  With Fall states reports generally having deadlines of November 1, now is the time to create a checklist to ensure you meet the deadlines.  The following, while not in-depth, contains the most important tasks for you to perform.

1. Understand State Requirements

Before starting the process, it is imperative that holders understand existing state statutes and regulations, and determine whether there have been any changes from the previous year that may impact the current year’s filings.  If you use software, you should ensure that you are using the most current update provided by the software vendor. Unclaimed property law is a dynamic environment. Over the last few years, some states have made minor changes to their unclaimed property laws and administrative rules while other states have significantly overhauled their unclaimed property laws.  With all of these changes and more changes likely on the horizon, it is more vital than ever to keep current with the statutory environment.

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Topics: Compliance, Due Diligence, Reporting, Audit, Recordkeeping, Best Practices

4/30/19 9:43 AM

Colorado Adopts The Revised Uniform Unclaimed Property Act of 2016 (RUUPA)

On April 16, 2019 Colorado joined the growing group of states that has adopted RUUPA, when the governor signed S.B. 19-088, the Revised Uniform Unclaimed Property Act (“Act”) into law.  The Act is effective July 1, 2020 and while it contains many of RUUPA’s provisions it also includes certain provisions that are not contained in RUUPA. 

The legislation makes many changes to the existing statute, the highlights of which include repealing the existing reporting deduction, stipulating record retention requirements, allowing use of estimation methods for the failure to retain records, imposing interest and penalties for failure to act in a timely manner and providing a transitional provision.

Reporting deduction eliminated

Colorado’s current unclaimed property statute provides that “A holder may voluntarily, prior to payment or delivery of said abandoned property, deduct and retain [2%] of the value of the property or [$25] whichever is more per item…”. The Act does not include a similar provision.

Retention of records

The Act provides that “a holder required to file a[n unclaimed property] report … shall retain records for ten years after the later of the date the report was filed or the last date a timely report was due to be filed, unless a shorter period is provided by rule of the administrator”.

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Topics: Compliance, Reporting, U.P. Law

4/26/19 7:24 AM

Update: Delaware Unclaimed Property Voluntary Disclosure Agreement Program

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  Since the latter part of 2018, Delaware’s Secretary of State has been consistently mailing VDA invitations, and our information is that Delaware intends to continue this practice on an on-going basis.

The latest round of VDA invitations were mailed to a significant number of Delaware incorporated companies on February 15, 2019. Recipient companies had to respond to these notices within 60 days (i.e., by April 15), or they would be referred to the Delaware Department of Finance, which would then have the option to commence an unclaimed property audit.

As the deadline has now passed, notified companies that failed to respond can no longer enter the VDA program. Based on recent history, we would now expect all companies that did not enter the VDA program to receive an audit notice in the very near future.

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Topics: Delaware, Audit, Voluntary Disclosure Agreements

4/18/19 9:12 AM

Unclaimed Property Fraud Affects Holders and States

On-line fraud is becoming more prevalent when it comes to unclaimed property claims. 

In a recent case of fraud, the State of Arkansas was found to have paid more than $40,000 to at least one person who used stolen identities to make fraudulent claims through the State’s online claims tool.

Auditor of State Andrea Lea indicated that the fraud used stolen identities to allow the fraudsters to pose as owners of unclaimed property held by the Auditor's office and claim the property for themselves.

A spokesman for the Auditor's office, said that whoever submitted the fraudulent claims had access to the type of documents, such as a passport or driver's license, that the office required as proof of identity for people filling out online claims, and that "this person was an expert criminal". 

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Topics: Due Diligence, Best Practices, Fraud

3/13/19 8:12 AM

Unclaimed Property Regulations - What You Don't Know Can Hurt You

Many people are aware that all states and jurisdictions have abandoned property statutes.  These statutes are the basis for how holders report, what they report and various related matters.  A knowledge of these statutes can make the often-complex filing process a little easier to understand.

However, many unclaimed property statutes also include language permitting the state to make complimentary regulations that further define and explain issues that may not be specifically addressed in the statute.  States regularly update their regulations and these updates may not receive significant exposure. This lack of exposure may create problems for holders because an understanding of both statute and regulations is necessary for a holder to be confident that they are in compliance with a state’s unclaimed property requirements.

One recent example of a regulation occurred in December 2018, when Tennessee proposed a regulation that clarifies the obligations of both the Unclaimed Property Division and holders of unclaimed property. It rewrites pre-existing unclaimed property rules with updated provisions.  The purpose of these proposed rules is to bring the Unclaimed Property Division's rules into compliance with new statutory changes to the Tennessee Code Annotated since the Uniform Unclaimed Property Act was passed in 2017.  The document detailing the proposed regulations states: 

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Topics: Reporting, Best Practices

2/28/19 8:07 AM

Unclaimed Property Risk Associated with Third-Party Administrators

Companies are generally familiar with the unclaimed property that they generate and the process for reporting and remitting that property to the various states.  Having good policies and procedures that help you identify, evaluate, mitigate and ultimately report unclaimed property housed on your books and records allow for companies to comply with state statutes.

But what happens when any unresolved liabilities are not recorded on your books and records?

This situation occurs when a company uses the services of a third-party administrator (TPA).  Companies use TPA’s for a variety of property types, including stocks and bonds, payroll, rebates, gift cards and benefit programs.

In these cases, the TPA’s maintain the records and the company may have limited to no visibility about any unresolved liabilities.  Why is this a problem?  Unless the contract between a company and a TPA includes specific language transferring the escheat responsibility to the TPA, states will consider the company the holder of any related unclaimed property and expect the company to report that unclaimed property.  Obviously, this is a problem if the TPA has all the relevant books and records. 

What should a company that employs TPA’s do to ensure it remains compliant with the unclaimed property statutes?

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Topics: Compliance, Recordkeeping, Best Practices

2/14/19 8:41 AM

Unclaimed Property Holder Due Diligence v. Asset Recovery Letters

Each year in the United States, billions of dollars are escheated to the states. Nationwide, the total value of escheated properties in state custody may well exceed $40- $50 billion. However, even more unclaimed property sits dormant at government agencies, counties, municipalities, courts and other local agencies that will never be reported to the states as unclaimed property. 

Before an item is reported to the states as unclaimed property, outreach in the form of statutorily mandated due diligence letters must be mailed to the last known address of the owner.  However, property held by counties, municipalities, or courts may not be subject to state unclaimed property laws. In these instances, no communication to the owner is required. However, companies may receive letters indicating they are the owners of funds being held by these entities (an “Asset Recovery” letter.) Asset Recovery letters are typically sent by third party firms attempting to help your organization recover monies you did not know you were owed.   

So how does an organization distinguish between a statutorily required due diligence letter and an asset recovery letter?

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Topics: Due Diligence, Best Practices, Corporate Asset Recovery

1/31/19 10:02 AM

Delaware Sends Out New Round of Unclaimed Property Audit Notices

MarketSphere Unclaimed Property Specialists has learned that the State of Delaware began sending out a significant number of unclaimed property audit notices in early January 2019.

Pursuant to 12 Del. C. § 1172(a), the State of Delaware cannot initiate a new abandoned or unclaimed property examination unless the company has first been notified in writing by the Secretary of State that it may enter the Delaware VDA program. 

As we advised in our December blog entitled “Delaware Unclaimed Property Notice Letter”, Delaware had been busy filling companies’ mailboxes with Voluntary Disclosure Agreement (“VDA”) program invitations. Companies had 60 days to respond to the invitation or be referred to the Department of Finance for audit.  Following up on these invitations, the State has now begun mailing unclaimed property audit notices to companies that did not respond timely to these invitations. 

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Topics: Delaware, Reporting, Audit, Voluntary Disclosure Agreements