Understanding and Mastering Unclaimed Property Compliance

Unclaimed Property Obligations and Regulations

Every company, regardless of industry or size, has unclaimed property compliance obligations. Compliance involves identifying unclaimed property, conducting due diligence to locate rightful owners, and filing annual reports with the appropriate state authorities. Failure to adhere to these regulations can lead to audits, financial penalties, and reputational damage.

Key compliance obligations include:

1. Property Identification and Classification

• Companies must regularly review financial records to identify potential unclaimed property
• Common types of unclaimed property include payroll checks, vendor payments, customer refunds, and securities
• Property must be classified based on its nature and applicable state laws

2. Dormancy Periods and Reporting Deadlines

• The dormancy period is the length of time an asset must remain unclaimed before it is considered abandoned
• Dormancy periods vary by state and asset type; and once the dormancy period is met, businesses must report and remit unclaimed property to the appropriate state agency

3. Due Diligence Requirements

• Before remitting unclaimed property to the state, businesses must attempt to contact the rightful owner
• Due diligence efforts often include sending letters or emails to the last known address of the owner
• States have specific guidelines on the timing and content of due diligence communications

4. State-Specific Compliance Variations

• Each state has its own unclaimed property laws and enforcement mechanisms
• Many states have adopted provisions from the Revised Uniform Unclaimed Property Act (RUUPA) of 2016, but interpretations and implementations vary
• Some states impose additional documentation requirements

5. Annual Reporting and Filing

• Businesses must file annual reports with the appropriate state agencies detailing the property being escheated
• Reporting formats and deadlines differ by state, requiring companies to track multiple filing obligations
• Many states require electronic filing in a specific format

Risks of Non-Compliance

Non-compliance with unclaimed property laws can expose companies to significant risks, including:

• State Audits: States have increased enforcement efforts, often partnering with third-party auditors who work on a contingency fee basis
• Penalties and Interest: Failure to report and remit unclaimed property can result in substantial financial penalties, including interest on overdue amounts
• Reputational Damage: Regulatory scrutiny and publicized enforcement actions can harm a company’s reputation and erode consumer trust

Best Practices for Unclaimed Property Compliance

To navigate the complexities of unclaimed property compliance, financial professionals should consider implementing the following best practices:

1. Assign Responsibility for Compliance

• Designate an escheat coordinator to oversee unclaimed property compliance
• Collaborate with departments such as accounts payable, accounts receivable, payroll, and human resources

2. Develop Effective Policies and Procedures

• Establish clear policies for identifying, tracking, and reporting unclaimed property
• Define responsibilities, record retention rules, and reporting processes
• Ensure policies align with corporate accounting and compliance frameworks

3. Conduct Regular Due Diligence

• Proactively reach out to owners before escheatment deadlines
• Maintain thorough documentation of outreach efforts and responses

4. Stay Informed on Legislative Changes

• Monitor regulatory updates to remain compliant with evolving state laws
• Engage with industry groups and compliance resources for the latest guidance

5. Utilize Technology for Compliance

• Leverage software solutions to automate unclaimed property tracking, due diligence, and reporting
• Reduce manual errors and streamline multi-state compliance efforts

By implementing these best practices, companies can enhance their unclaimed property compliance efforts, thereby mitigating risks and ensuring adherence to state regulations. Proactive management of unclaimed property not only safeguards the organization from potential penalties but also upholds its reputation for corporate responsibility.

How DMA Can Help

Managing unclaimed property compliance can be a complex and time-consuming task. DMA’s unclaimed property experts simplify the compliance process by handling critical responsibilities such as due diligence, filings, and administrative work. By outsourcing these tasks to a team of experienced professionals, businesses can significantly reduce their compliance burden and mitigate risks.

DMA also offers its award-winning AUPTC unclaimed property software, which provides an automated and efficient solution for tracking, reporting, and managing unclaimed property obligations. With cutting-edge technology and expert support, DMA ensures companies stay compliant while minimizing risk and administrative effort.

By partnering with DMA, companies can confidently navigate the challenges of unclaimed property compliance, allowing them to focus on their core business while ensuring adherence to state regulations.