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10/6/20 7:42 AM

New York Sends Invitations to Participate in Unclaimed Property Voluntary Compliance Program

New York is increasing its focus on unclaimed property compliance. The New York State Comptroller’s Office of Unclaimed Funds (OUF) recently sent letters to companies regarding participation in the state’s Voluntary Compliance Program (VCP).

 

The correspondence states: 

We are contacting you because your company has conducted business in New York State, but has not filed reports with the New York State Comptroller’s Office of Unclaimed Funds (OUF) pursuant to the Abandoned Property Law (APL). The law can be found on the New York State Legislature’s website at http://public.leginfo.state.ny.us/lawssrch.cgi?NVLWO.

We encourage you to review your records for any unclaimed funds that may be subject to reporting. Unclaimed funds include uncashed checks issued to employees or vendors, outstanding accounts receivable credits and credit balances, and unredeemed gift cards/certificates, among others.

The first step of coming into compliance with the law is completing our Self-Audit Checklist. This online survey will help you to identify if your company is holding any unclaimed funds. Find it online at https://surveymonkey.rNYSVCU and use reference number XXXXXX. Complete the survey even if you find that you have nothing to report.

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Topics: Compliance, Audit, Best Practices, Voluntary Disclosure Agreements, New York

9/24/20 9:06 AM

The Role of Death and Dormancy for Unclaimed Property Holders

Organizations (holders) are not always made aware of the death of the people they do business with. While death plays an important role in the escheatment process, holders of banking and securities property types are not required to proactively search for and confirm death. Similarly, in the securities industry, SEC 17Ad-17 searches for lost shareowners are not required if the holder has received documentation that a shareowner is deceased

Death, however, is a factor in triggering escheatment. For example, death serves as the dormancy trigger for Roth IRA accounts in most states, as a possible trigger date for individual retirement accounts, and in states like Illinois and Maine, decreases the dormancy period for “other tax deferred” accounts.  In states that have adopted certain provisions of the 2016 Revised Uniform Unclaimed Property Act (RUUPA) as they relate to retirement accounts and securities, holders are not required to confirm death unless and until they receive a notice or indication of death (with death to be confirmed within 90 days).

Often, a holder becomes aware of the death of an owner when the next of kin contacts the holder. In other cases, notice of death comes from an SEC 17Ad-17 search of an account that is RPO (Returned by Post Office). There are no statutory requirements that force holders of banking or securities property to proactively determine if owners are deceased. Auditors, however, have been taking a more aggressive approach and assert that holders must proactively bump their records against the death master file (“DMF”) database. If an account owner is found to be deceased and there has been no contact with a beneficiary, the account is considered lost, which triggers escheatment and the property becomes fair game for the auditor. The National Change of Address (NCOA) database is similarly utilized by auditors as an attempt to locate accounts with updated addresses. According to auditors, these updates serve as proof that the holder does not know the location of the account owner, which triggers escheatment for some property types, including securities.

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Topics: Compliance, Reporting, Audit, Best Practices

8/24/20 9:20 AM

August 2020 - Delaware Sends Unclaimed Property VDA Invitations

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 continues this practice on an on-going basis. 

Based on correspondence that MarketSphere received from the office of Delaware’s Secretary of State, the latest round of VDA invitations were mailed on August 21, 2020 to a number of Delaware incorporated companies identified as “likely being out of compliance” with Delaware’s unclaimed property law. 

The correspondence states: 

Today, August 21, 2020, the Delaware Secretary of State’s Office will be mailing about 200 letters to various companies (individually referred to as “Holder”) that have been identified as likely being out of compliance with Delaware law, 12 Del. C. ch. 11, as it relates to reporting dormant, abandoned, or unclaimed property.  Pursuant to our state laws, Delaware cannot initiate new abandoned or unclaimed property examinations (audits) unless a company has first been notified in writing by the Secretary of State that it may enter into the SOS VDA Program.  The letter serves as such a notice to the Holder and strongly encourages participation in the SOS VDA Program, as an audit notice will be issued by the Delaware Department of Finance 60 days after the date of the mailing. 

As the correspondence notes, if a recipient company fails to respond to the notice within 60 days, the Delaware Department of Finance will issue an unclaimed property audit notice upon the expiration of the 60-day notice period.

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Topics: Delaware, Audit, Voluntary Disclosure Agreements

6/23/20 10:32 AM

June 2020 Update: Delaware Unclaimed Property VDA Invitation Extension

MarketSphere recently received correspondence from the office of Delaware’s Secretary of State (SOS), regarding the latest round of VDA invitations mailed to companies in February 2020.  As a consequence of the COVID 19 pandemic, the SOS is extending the regular 60-day response deadline. Invited companies will now have until July 18, 2020 to respond to the SOS. The correspondence also provides details regarding how best to communicate with the SOS during the current state of emergency.

 The correspondence states:  

HOLDERS: For any holder who received a February 2020 invitation from the Delaware Secretary of State to join the Voluntary Disclosure Agreement Program ("SOS VDA Program"), due to the current state of emergency declared by Governor John Carney, as well as many other declarations made across the country and the world, the Office of Unclaimed Property, Department of Finance, and the State Escheator recognize that many holders have not had full access to their mail or the proper time to route the invitation to the appropriate individual(s). As a result, holders who received an invitation to join the SOS VDA Program during February 2020 will be able to join the SOS VDA Program through July 18, 2020.

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Topics: Delaware, Compliance, Audit, Voluntary Disclosure Agreements

4/3/20 6:09 PM

Delaware Issues Update Regarding Unclaimed Property VDA Notices

MarketSphere received correspondence on April 3, 2020 from the office of Delaware’s Secretary of State (SOS), regarding the latest round of VDA invitations mailed to companies in February 2020.  As a consequence of the COVID 19 pandemic, the SOS is extending the regular 60-day response deadline by 30 days.  Invited companies will now have until May 22, 2020 to respond to the SOS.  The correspondence also provides details regarding how best to communicate with the SOS during the current state of emergency.  

The correspondence states: 

Important update on the February 2020 invitations: The Secretary of State (“SOS”) ​is encouraging companies who know they want to enroll in the VDA Program to send in a completed VDA-1 within the prescribed 60-day timeframe.  Due to the current state of emergency declared by Governor John Carney as well as many other declarations made across the country and the world, the SOS, in consultation with the Department of Finance and the State Escheator, realizes that many companies have not had full access to their mail or the proper time to route the invitation to the appropriate individual(s).  As a result, holders who received an invitation from the SOS to join the VDA Program during February 2020 will be allowed to join the SOS VDA Program through May 22, 2020. After May 22, 2020, all companies that do not enroll in the SOS VDA will be referred to the State Escheator for examination.  Holders should be mindful that, under Delaware law, they may not join the VDA Program after a Notice of Examination has been mailed by the State Escheator.

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Topics: Delaware, Compliance, Reporting, Audit, Voluntary Disclosure Agreements

2/20/20 7:13 AM

Notices Being Sent 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 continues this practice on an on-going basis. 

Based on correspondence that MarketSphere received from the office of Delaware’s Secretary of State, the latest round of VDA invitations will be mailed on February 20, 2020 to a number of Delaware incorporated companies.   

The correspondence states: 

On February 20, 2020, the Delaware Secretary of State’s Office will be mailing over 100 letters to various companies (individually referred to as “Holder”) that have been identified as likely being out of compliance with Delaware law, 12 Del. C. ch. 11, as it relates to reporting dormant, abandoned, or unclaimed property.  Pursuant to our state laws, Delaware cannot initiate new abandoned or unclaimed property examinations (audits) unless a company has first been notified in writing by the Secretary of State that it may enter into the SOS VDA Program.  The letter serves as such a notice to the Holder and strongly encourages participation in the SOS VDA Program, as an audit notice will be issued by the Delaware Department of Finance 60 days after the date of the mailing

As the correspondence notes, recipient companies must respond to these notices within 60 days or they will be referred to the Delaware Department of Finance, which would then have the option to commence an unclaimed property audit.

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Topics: Delaware, Compliance, Audit, Voluntary Disclosure Agreements

1/20/20 4:13 PM

Four Companies Challenge Delaware Unclaimed Property Program's Use of Contingent-Fee Auditors

In December of 2019, four companies (AT&T Capital Services, Inc., Eaton Corporation, Fruit of the Loom, Inc. and Siemens USA Holdings, Inc.) filed suit in federal district court challenging Delaware’s unclaimed property program. As part of their suits, each company submitted complaints alleging that the use of contingent-fee auditors violates procedural due process because companies are required to submit disputes to a self-interested party.[1]

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Topics: Delaware, Compliance, Audit

1/7/20 7:48 AM

Drinker Biddle & Reath at the Forefront of Multi-State Voluntary Review Programs

In a recent communication from Drinker Biddle & Reath (“DBR”), one of the state agents for the Delaware Secretary of State’s Unclaimed Property Voluntary Disclosure Agreement Program, we were informed that the states of Missouri and North Dakota have now engaged DBR to serve in a similar capacity as they currently serve for Delaware.

Agreements for the Missouri Voluntary Examination and North Dakota Contractor Assisted Self-Audit were provided by DBR for holder consideration. Similar to the Delaware Voluntary Disclosure Program, these agreements include the following holder requirements:

  • File a final report within two years of agreement execution
  • Disclose the entities reviewed
  • Perform due diligence prior to reporting
  • Assert as to the completeness of records
  • Report past due property for the last 10 report years
  • File annual reports prospectively
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Topics: Compliance, Audit, Voluntary Disclosure Agreements

12/18/19 8:29 AM

AT&T Sues Delaware Stating Unclaimed Property Audit Is Unconstitutional

On December 6, 2019, AT&T sued the state of Delaware alleging that Delaware’s Department of Finance is violating several clauses of the U.S. Constitution as part of an unclaimed property audit. 

The audit commenced in 2012 and was assigned to Kelmar Associates LLC.  In 2017, Delaware made significant changes to its unclaimed property statute, including the creation of an expedited audit process for existing audits.  AT&T entered the expedited audit process, hoping to finish the audit within the program’s two-year window.

However, just short of the two-year mark, Delaware terminated AT&T's participation in the expedited audit and issued a subpoena to request documents due last week.

In its suit, (AT&T Capital Services Inc. et al v. Richard Geisenberger et al, case number 1:19-cv-02238, in the U.S. District Court for the District of Delaware), AT&T claimed that Delaware has contravened the Fourth, Fifth and Fourteenth Amendments.

According to AT&T, the state has demanded AT&T provide records related to “approximately 60 million transactions reflecting almost $100 billion of spend”, and claims the overall audit process violates its rights against unreasonable searches and seizures as well as its due process rights.

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Topics: Delaware, Audit, Voluntary Disclosure Agreements, U.P. Law

10/8/19 8:23 AM

Unclaimed Property Audit - Are You At Risk?

This blog was originally created at the request of the Association for Financial Professionals (AFP) organization and posted to their website in August 2019 in a series dedicated to the education of its’ members and attendees of the 2019 AFP Annual Conference in Boston, Oct, 20-23.

The likelihood of an unclaimed property audit has increased in recent years due to several factors, including the proliferation of third-party auditors, realization by states that significant amounts are involved, and the escalation of unclaimed property litigation. Escheat compliance is no longer optional and being audited is not a matter of if, but when.

Situations and events that may bring an auditor to your door include:

  • Failure to file or filing late
  • Filing negative reports year after year
  • Filing incomplete reports or reports that don’t match remittance
  • Not filing in the state’s required format
  • Not reporting property types that are standard for your industry
  • Reporting much less than similar organizations
  • Filing to the incorrect state
  • Mergers and acquisitions
  • Claiming property without being compliant
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Topics: Compliance, Reporting, Audit, Best Practices