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KeepUP™ Blog

8/30/19 7:56 AM

Cryptocurrency & Digital Assets: Unclaimed Property Challenges and Implications

Over the last several years the use of block-chain technologies and their associated cryptocurrencies have grown tremendously. As with many new areas of commerce, growth is usually followed by an onslaught of challenges brought on as governments and regulatory agencies try to decide how to adapt to or fit this new square peg into the round hole of already established laws and regulations.

In the world of unclaimed property, cryptocurrency is just now being recognized in various new statutes and proposed legislation.  Many states, including IL, KY, NV, TN and UT, have adopted some form of the 2016 Revised Uniform Unclaimed Property Act, which includes “virtual currency” in the legislative definition of “property”.  In addition, NY has recently introduced legislation calling for unclaimed cryptocurrency to be escheated to the state upon abandonment.

Whether you are a company that has emerged as a part of the support system to the cryptocurrency world (e.g., coin exchanges) or simply a company that has begun to accept Bitcoin or other similar cryptocurrencies as payment, it will be important that you are prepared for these challenges and are proactively addressing potential issues that can emerge. One often overlooked area for consideration, is the impact of the various states’ unclaimed property laws and regulations.

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Topics: Compliance, Reporting, Best Practices, U.P. Law

8/7/19 9:24 AM

Is Your Company In Danger of Forfeiting Unclaimed Funds?

Unclaimed property compliance is a year-round activity.  But so is unclaimed property recovery. 

Amounts owed to you (unclaimed property) can go unclaimed for a myriad of reasons.  A company could have moved locations.  They may have changed their process or contact point for payment receipt.  A check could literally be lost in the mail.  Once those items are lost and go unreconciled, they turn into unclaimed property. Unclaimed property can be funds held by a state/jurisdiction resulting from statutory escheat requirements or they can be outstanding balances held by a government entity (that may never be escheated) until you or your organization come forward. 

State unclaimed property departments are holding billions of dollars, some of which can be found by going to state websites.  Other government entities, from municipalities to federal agencies, are also holding significant amounts owed to companies. However, this information is often not made available via public websites and can be difficult to obtain.

Deadlines Could Be Imposed for Recovery
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Topics: Best Practices, Corporate Asset Recovery

7/25/19 9:09 AM

Delaware Correspondence - Am I Under Audit or Not?

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 (SOS) that it may enter into the DE VDA program.  The VDA program allows a company to come into compliance by utilizing the DE VDA guidelines to conduct a self-audit of their books and records.

Since the latter part of 2018, Delaware’s SOS has been consistently mailing VDA invitations, and our information is that Delaware will continue this practice on an on-going basis. The SOS correspondence notes that recipient companies must respond to these notices within 60 days or they will be referred to the Delaware Department of Finance (DOF), which would then have the option to commence an unclaimed property audit.  

What Should A Company Do If It Receives Correspondence From Delaware?

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Topics: Delaware, Audit, Voluntary Disclosure Agreements

6/20/19 9:14 AM

Are You Over-Escheating Your Unclaimed Property?

State enforcement of unclaimed property compliance continues to rise.  States are auditing more companies than ever in order to validate that unclaimed property is being reported accurately and completely.  To prevent an audit, many holders over-report property, escheating items that are not actually unclaimed property, or may not be reportable to the states. However, this practice could cause red flags.

The two most common transaction types that are not considered to be unclaimed property are accounting errors and exclusions/exemptions.

Accounting Errors

Accounting errors are not unclaimed property.  Unfortunately, errors in accounting systems do occur that cause items to appear to be outstanding or unresolved, when in fact they are not. This leads to the potential for over-reporting.  Examples of accounting errors include:

  • duplicate payments
  • voids that were never processed
  • misapplied payments.

Prior to reporting, research should be performed to identify and correct accounting errors and avoid over-reporting.   

Exclusions/Exemptions

Many state statutes include provisions that exclude certain transactions from the definition of unclaimed property, or specifically exempt the property from reporting.  An example of a state exclusion appears in the Kansas unclaimed property law, whereby:

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Topics: Compliance, California, Reporting, Recordkeeping, Best Practices

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