Due Diligence Scams – How to Identify & Minimize Risk

July 6, 2017

Data integrity and security are major concerns for every company.  One area where unclaimed property holders may have added risk is the due diligence process. While criminals and fraudsters may experience difficulty in penetrating holders’ systems, they can conduct scams through the due diligence process with relative ease. 

The most common type of due diligence fraud, and perhaps the easiest to commit, is the stealing or assuming of an owner’s identity. In this instance, an impostor will become aware of property owed to a rightful owner, usually via mail or publication, and attempt to recover that property by contacting the holder and claiming to be the person owed the funds.

When assessing if a due diligence response is fraudulent, look for the following indicators: 

  • Assumed Owner Requests Change to Owner/Payee Name
    • In the most common instance of this, an “owner” will return the due diligence letter indicating that payment is in fact owed, but will request that the name of the payee be changed from the original owner on the due diligence letter. This is generally an unlikely occurrence, especially where the account owner is an individual.
    • There are valid exceptions which require supporting documentation. In cases in which the original owner is deceased, an heir or successor party may request that the owner name be changed so that they can accept the payment. If this happens, it is recommended to ask for additional documentation to corroborate the requested change. If it is a company that is requesting a name change, holders should request documentation to prove that it is legitimate, or at the very least, perform a quick internet search to verify the new status of 
    • the company.
  • Assumed Owner Requests Change to Address
    • A request for a change of address does not immediately indicate that the claim is fraudulent. In fact, it’s quite common to receive due diligence responses with this request. It’s likely that the original payment did not make it to the owner in the first place because they may have moved, so it would not be unexpected to receive a request to update the address. Red flags should arise if the new address is a PO Box or other address not tied to a specific location. Holders should also be suspicious of multiple properties owed to different owners all being requested to be updated to the same address.
  • Assumed Owner Contact Information is Suspicious or Missing
    • Sometimes an individual claiming to represent an owner company will provide dubious contact information that will either make it difficult for the holder to follow up on the claim, or will on its face, prove that the individual does not have a connection with the actual company. A clear sign of this is when the individual claiming to be an employee or officer of a company has an email address through Gmail, Yahoo, or another public domain. Another sign of a fraudulent claim is when the alleged owner omits necessary information to either validate the claim or allow the holder to contact them for further details.
  • Many Claims Arrive at Same Time with Similar Details
    • This can happen more often for properties published by states prior to escheatment. Because all of the owner information is available to the public, assumed owners will submit claims for many properties owed to a variety of different owners. The contact information they will provide will be the same, and the address to which they are requesting payments be mailed is normally the same address in a different state. In these cases, holder advocates can help identify common actors, as they will see responses over multiple clients.
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:

  1. When you suspect a fraudulent claim, 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 and previous addresses. 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.
  2. 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.
  3. 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.

Corporate Asset Recovery: If you are a holder and have been notified that there are unclaimed funds available for recovery on behalf of your company, Contact Us to learn more about your options to reclaim funds.

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