Due diligence is the stage of unclaimed property during which an unclaimed property holder is required to make an effort to find property owners before escheatment. Not only does this help fulfill the mission of unclaimed property laws (to unite owners with their property), but it can also be good for holder organizations. Reuniting property and owners creates goodwill by improving customer relationships, and it also reduces the amount of money that must be escheated to applicable unclaimed property jurisdictions.
Due diligence processes are outlined in state laws — some are more detailed (and demanding) than others. Depending on a company’s volume of unclaimed property, this process can be quite a burden on staff.
The first challenge is keeping track of statutes in every jurisdiction to which a company must report. Laws can vary significantly from state to state. Statutes also change frequently. In some jurisdictions (California is the famous one) due diligence requirements can be extremely detailed and numerous.
The second major challenge of unclaimed property due diligence is figuring out how to fit this work into the already full schedules of unclaimed property staff. Most unclaimed property staff spend the vast majority of their time each year working in other areas of their business. The work of unclaimed property aligns with reporting cycles several times a year. During these times, staff must allocate generous amounts of time to performance of unclaimed property functions. Because the management of unclaimed property processes can be intense, this irregular schedule can cause problems with workload management.
The third major unclaimed property challenge related to due diligence is a matter of expertise. Companies with large unclaimed property work units can afford to hire personnel trained in and solely dedicated to unclaimed property. But this is rare. Most companies don’t have enough unclaimed property work to justify full-time, year-round staff. As a result, personnel handling unclaimed property due diligence likely have primary expertise in other areas. The complexity of unclaimed property, from laws to records management to reporting processes, presents a large learning curve that often is not worth the time employees spend.
The Unclaimed Property Due Diligence Skill Set
Let’s break down the responsibilities of the due diligence staffer, for a closer look at what it takes to meet this challenge.
- Statute analysis and comparison with company policies and procedures
- Dormancy calculation and documentation
- Records maintenance, research and remediation
- Due diligence response call and correspondence management
- Fraud identification and management
- Escheatment reporting
What does this mean for unclaimed property staff? In the beginning, if unclaimed property is an unfamiliar area for staff, there will be basic training. Ongoing due diligence activities include study of statutes and monitoring of legislative changes. Records management for unclaimed property will be easier in organizations that can offer robust technology and accounting systems. Handling due diligence requires customer service skills to manage difficult callers, because owners are often skeptical and angry. Personnel must have an understanding of fraud triggers and know how to manage fraudulent inquiries. Reporting is probably the easiest of all the processes, but even this requires meticulous attention to detail with potentially serious consequences if mistakes are made.
Sounds daunting, doesn’t it? In most cases, unclaimed property due diligence is stressful for staff and filled with potential missteps. These are the exact reasons companies like MarketSphere exist. We take on these burdens for many companies at the same time, investing the time and money you don’t have to monitor statutes, maintain records, manage calls and letters, deal with fraud, and submit professional escheatment reports. All your staff has to do is work with us to create a system that identifies dormant properties, update records after due diligence is complete, supply funds for escheatment, and sign off on reports.
Due diligence is handled by many companies in house, but the expertise, singular focus and proven processes of a due diligence provider can be invaluable. Not only does professional due diligence service save time and money, it can help reduce liability — and potentially even reduce the chances of being audited. If you ask your staff, the greatest advantage may be a lower level of stress and the freedom to focus on the important things they were hired for.