We recently published a blog about four main types of unclaimed property fraud. Understanding where fraud happens is the first step in beating it.
Now, we are going to provide ideas for preventing fraud, identifying and resolving it.
Prevention: Dampening the temptation of unclaimed property
The fact that owners don't know about unclaimed property tempts some people to believe they might be able to detour a check or other property to their own possession or an accomplice's. The key to preventing fraud is to dampen this temptation.
Most importantly, keep property from becoming unclaimed in the first place. Monitor property regularly and make customer contact frequently. Initiate advanced owner searches before properties become reportable.
Identification: Could that be fraud?
We've learned from our experiences with hundreds of clients, fraudulent claims tend to follow detectable patterns. Below are some of the biggest red flags.
External fraud red flags:
- Apparent owner requests a complete change to owner/payee name—unlikely from real owners
- Apparent owner requests mailing of check to address outside of state where claim is made
- Several seemingly unrelated claims include same information, especially the same address
- Owner's business email address includes Gmail, yahoo or other public domain (most business emails include proprietary domain)
- Phone number or email is not provided in the hope holders will gloss over missing information and send check by mail
- Due diligence letters returned with new information in attempt to divert property
- Large number of claims comes from California, where two-step due diligence allows fraudsters to make claims after publication and before properties are reported
- Claim is worth lots of money (often targeted by criminals)
- Claimant resists providing information to verify claim
- Contact information in claim is illegible (claimant hopes you'll assume correct information has been provided)
Internal fraud red flags:
- Only one person has access to records, and it's easy to divert funds without detection (especially when another employee is filling in during leave)
- No protocol in place to document who is accessing records
- No policies in place to professionally manage unclaimed property and make it clear property is monitored
- Employee suddenly finds many missing owners (he or she might be funneling money to outside accomplice)
- Long-time dormant property suddenly shows activity, indicating someone with access could be manipulating it
Resolution: What can be done to minimize and resolve fraud?
When fraud is suspected, your professional advisor can help you determine what actions to take and when. In general, you will go through three stages:
- When you suspect a fraudulent claim, first continue digging for information to prove ownership. Avoid asking for driver's licenses and items often used in identity theft. A real owner should be able to share unusual information, such as account open date, previous addresses, and amounts and approximate dates of large deposits. Ask for utility bills or invoices showing name and address. Ask for business requests on company letterhead, signed by an officer. If claim is made by a professional agent, insist on a formal letter documenting permission to act on owner's behalf.
- If you still cannot prove ownership, you can turn over the property to the state and ask the would-be owner to work with the state to prove ownership. A fraudulent owner might give up, believing the claim is likely to be identified as fraud.
- If it becomes clear the claim is fraud, you can report it to the state and provide all related correspondence. On rare occasions, you might decide to report fraud attempts to law enforcement. Post what you've learned on unclaimed property forums. Choose a response to fraud that follows the law, as well as your company's policies and best interests.