KeepUP™ Blog

4/14/16 2:50 PM

Unclaimed Property: The Right Path & The Wrong Path

by Greg VerMulm

unclaimed-property-compliance-right-way.pngTo get on the right path toward success in anything, it helps to look at the successes and failures of others. These two stories from our own compliance playbook represent functions that are some of the most important in the management of unclaimed property compliance to make compliance (almost) foolproof: knowledge of compliance, secure and accurate data management, efficient resource allocation, and collaboration.

Doing it wrong

A large financial services company hired a new person to manage its unclaimed property program in-house. The company also purchased a computer program to manage the annual compliance cycle. To save time, all staff used the same administrator user ID and password. This allowed everyone to run powerful queries and updates. Everything went fine for a while and the company confidently escheated funds to cover its recorded unclaimed property.

At first, the team was excited and motivated. As they progressed, however, a growing number of complexities and issues were uncovered. The manager they had hired didn’t fully grasp the nuances of the compliance process, and mistakes were made. The process became a burden on staff who had many other responsibilities as well.

Management decided to hire MarketSphere to find ways to streamline the process. We not only discovered confusing and unnecessary steps, we uncovered a serious problem in escheatment amounts. Someone (we don’t know who, because they all used the same ID) had inadvertently reset the status indicator on a large number of records already escheated. The same items, worth more than $1 million, had been escheated three years in a row.

The access issue could have been solved by giving all users their own IDs with appropriate permissions. However, the company’s management decided instead to outsource many of the compliance steps to MarketSphere, allowing its workers to focus on more important processes.

For a decade, this company has been using robust business processes we provided, with internal responsibilities for data gathering and reconciliation.

Doing it right

A Fortune 50 manufacturer discovered its accounting and finance departments each thought the other was managing compliance with unclaimed property and escheatment laws. Neither was! As a result, the company had never reported unclaimed property since the day it had opened its doors.

Company representatives were assigned to research the law and study best practices in its own industry and others. The research showed most large organizations outsource time-consuming compliance functions such as due diligence and reporting. For such a large company, this could be costly. However, calculations showed internal management costs also would be substantial.

Furthermore, in-house personnel had little experience with unclaimed property, and the company realized the risk of inadvertent noncompliance was high. Rather than saving money immediately by trying to manage compliance in-house, the company engaged MarketSphere to avoid potentially huge costs of noncompliance later.

MarketSphere designed a complete set of business processes from the ground up, with internal responsibilities for data gathering and reconciliation. The company was pleased to find out we could help them identify exemptions to decrease their potential liability and defray their service costs.

The company turned over the burdens of planning and implementation to MarketSphere, and were able to incorporate unclaimed property efforts into their processes with few headaches.

Analysis of the examples

In the examples above, you can see some of the most common problems caused by ineffective unclaimed property policies and procedures, as well as clues to the solutions.

  • Internal staff rarely have the expertise to manage the subtleties of unclaimed property and escheatment.
  • “Experts” in abandoned and unclaimed property are not always what they seem to be.
  • Good unclaimed property processes begin with records management.
  • Enthusiasm isn’t a good substitute for discipline.
  • Surges of required escheatment work can be difficult to incorporate into normal work cycles.

Read more analysis of these examples, plus advice for choosing the right unclaimed property management path in MarketSphere’s ebook, Gear Up for an (Almost) Foolproof Unclaimed Property Compliance Management System.



Topics: Compliance