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10/2/15 8:55 AM

Finding Owners: Balancing Unclaimed Property Due Diligence Notification with Protection

by Greg VerMulm

balancing-due-diligence-and-protectionAbandoned and unclaimed property due diligence can be tricky in a number of ways. Of course, it's important to carefully follow laws in each state to which property must be reported, which can be a challenge. Due diligence efforts must be timed just right so the process is complete before reporting is required. Fraud also is a concern. Is there anything your company can do to protect potential unclaimed property owners during due diligence actions?

First and most importantly, holders must keep good owner address records, with both complete and accurate contact information and outstanding balances. The primary reason for this is to make it as easy as possible to reach owners, resolve outstanding balances and take these accounts off of the unclaimed property list in the first place.

From a protection standpoint, resolving outstanding balances is powerful. If you find owners before due diligence is required, you will not have to:

  • send letters that could be intercepted by the wrong people
  • publish newspaper articles attempting to find owners (for those states that require it)
  • add to customer exposure in California, the only state that completes its own due diligence actions after the holder does – they may release information that increases the risk of fraud in some cases

In addition, if and when you do need to commence due diligence communications, and people pretending to be owners respond to the letters or phone calls, complete and accurate records can help you identify fraud.

Providing credibility without giving too much away

Most state laws regarding due diligence do not require giving away sensitive information that could be used for identity theft. MarketSphere suggests refraining from sharing information that is not required. This usually means providing only the outstanding amount, the date of the outstanding amount, the account type (accounts payable, payroll, etc.), and the name of the company owing the owner a balance. With this minimal information, if a letter is received by someone other than the intended recipient or it is intercepted, it would be difficult for anyone to pose as the owner.

The problem is that some owners misunderstand due diligence efforts. If accounts with outstanding balances have existed for a long time without contact, owners might not remember them. Occasionally, owners believe holders or due diligence service providers are trying to get more money from them, instead of trying to return property.

It doesn't help that many alerts are issued by states to make people aware of scams relating to unclaimed property. The scams are initiated by people who harvest identity information while helping owners find money they are owed.

Consumers say they receive calls or letters from people claiming they are state officials. These fraudulent officials tell the recipient they have money due to them. They ask for identifying information, such as Social Security numbers, to verify identity. This is exactly what gives away the scam – legitimate holders already should have this information. Scammers also might ask for a processing fee before releasing funds to the owner.

These scams make people question the legitimacy of proper unclaimed property due diligence letters sent on behalf of holders. Some recipients do reach out to confirm the legitimacy of due diligence letters and calls. Others simply wad up the letters and throw them away, immediately thinking it is a scam.

When an owner is unsure, it's tempting for the holder to provide additional information or attempt to draw out more information from the customer to help them understand. It is these conversations, going beyond basic information, that open your customers, employees and vendors to fraud if someone is posing as them.

Another situation increasing the complexity of due diligence efforts is when an owner has made a name change, such as through marriage or divorce. When due diligence letters are sent to old addresses, recipients sometimes pose as owners, requesting a name change. This allows them to cash the check when it is received, if the company doesn't detect the fraud.

Protecting your unclaimed property owners

Once you understand the types of things that could go wrong, it's easy to solve these unclaimed property due diligence problems. Simply keep the best owner and account records you can, share only the minimal information needed to identify an owner's account, clear up as many outstanding accounts as possible, and create a policy prohibiting the changing of any owner information in your records without proof.

Topics: Due Diligence, Recordkeeping, Best Practices