KeepUP™ Blog

1/22/15 3:09 PM

Get Better U.P. Results with Compliance Innovation

by Greg VerMulm

innovationMany companies, within their corporate websites, talk about innovative solutions for unclaimed property compliance and system design. Discussions of innovation on the websites rarely include details and can leave holders wondering what exactly is done to be innovative. After all, unclaimed property management seems fairly cut and dried.

Another question that comes to mind is whether it’s a good idea to be innovative in a process that is so strictly governed by various state laws and so closely monitored by state administrators and third-party auditors. You may find yourself wondering if innovation leads to noncompliance.

Balance and efficiency are keys in unclaimed property compliance innovation

Innovation in unclaimed property compliance is not about deviating from the rules or pushing the boundaries. It’s about efficiency, clarity, responsiveness and leveraging advantages allowed within the law.

Most certainly, you don’t want to go too far and under-escheat, thereby drawing attention to your company or inviting penalties. However, as with taxes, unclaimed property can be over reported, and it is to the holder’s advantage to understand and manage unclaimed property well enough to avoid escheating too much.

Many innovations in the industry are related to striking this balance between over-escheatment and under-escheatment. For example:

  • Automated exemption analysis helps identify exemptions that might be missed manually, thereby reducing the amount of legally-required escheatment
  • Tools and processes that cleverly identify buried unclaimed property within a company, including inadvertently-produced unclaimed property, help companies avoid miscalculating and opening themselves to audits and penalties
  • Steps can be taken to help companies prevent the production of abandon property in the first place, which reduces escheatment requirements 

The more quickly, clearly and thoroughly unclaimed-property-related records can be processed and managed, the more certain a company can be it is following unclaimed property rules properly. Therefore, many innovations within holder companies involve records management.

Well-managed records assist not only in efficiently and quickly processing unclaimed property, but also in reducing liabilities arising from unclaimed property audits. If unclaimed property can be confidently and responsibly reported and documented for an auditor, it is less likely the auditor will find it necessary to dig within a company’s records and question the reported properties. This also helps expedite the audit, which further reduces the risk of inflated assessments.

Records-related efficiency innovations for unclaimed property include:

  • Using a professional service provider or technology to automatically update internal knowledge of state statute changes and reporting requirements, with corresponding changes in records management
  • Storing records in formats predesigned to match potential future needs, such as documentation for audits
  • Building a separate repository to which all unclaimed property records throughout one holder company are either automatically or manually pushed; this assures unclaimed property records are all in one place, so staff can be responsive to any inquiries or needs for processing

Future innovation in unclaimed property

As the years have gone by and more holders have become aware of the potential pitfalls of processing unclaimed property, many companies, providers and even states are thinking hard about ways to make the entire process less painful for everyone. We expect to see increasing innovations, not only in technology, but in the fundamental ways unclaimed property is processed.

One example is an industry development in which MarketSphere has been a pioneer: digging deeper into holder processes to solve problems at a basic policy and process level, rather than simply achieving successful compliance reporting. It is the same type of problem a farmer has when his cattle are escaping a pasture through a broken gate. He can round up the cattle every day and drive them back into the pasture, or he can fix the gate latch and keep them from getting out in the first place. A holder can struggle with compliance repeatedly through every reporting cycle or fix fundamental problems that make reporting more efficient, more accurate and less likely to cause problems during an audit.

Another example: As the national Uniform Law Commission (ULC) continues efforts to standardize unclaimed property due diligence and reporting requirements, we expect to see related changes that help streamline unclaimed property functions within holder companies.

As these changes come about, we will report on them here and in other ways. Stay tuned! In the meantime, remember innovation and unclaimed property does not come only from those who enforce it. It doesn’t come only from professional advisory providers. Holders like you can make innovation in unclaimed property processing a priority within their own companies, continually looking for ways to streamline processes and leverage advantages.


Topics: Compliance