States Crack Down on Unclaimed Property

This blog was last updated on February 23, 2021

Recently, a landmark ruling in New York shed light on a nationwide trend in the world of unclaimed property compliance. State governments across the U.S. and Canada are cracking down on businesses that fail to report their unclaimed property accurately and on time. And, as proven by the case in New York, no business, no matter how large, is safe.

Unclaimed or abandoned property is any financial obligation due to another party including customers, vendors, employees and investors. It comes in the form of uncashed checks, dormant savings accounts, escrow balances, credits and insurance benefits. State unclaimed property laws generally require businesses to transfer to the state, or “escheat,” any unclaimed financial obligations. Most laws require banks, investment companies, retailers and other holders to transfer such assets to the state in which the owner was last known to live after a specified amount of time. Billions of dollars in unclaimed property are transferred to the states each year, serving as a significant source of revenue and a big incentive for states to collect. However, states don’t make it easy to comply. And a minor error can have a major impact on your bottom line. 

Noncompliance is costly

What makes complying with unclaimed property regulations especially challenging is that each state enforces its own unique deadlines and requirements. Online reporting and payment can make things easier, but those processes come with challenges as well. And failure to comply with any one of the states your business must escheat to can be costly. In some cases, penalties and fines add up to more than two-and-a-half times the amount originally owed to the state for unclaimed property. For example, if your business has $10,000 to escheat and you are audited, you could owe the state up to $25,000. Similar to the New York case, large fines can lead to legal action, which may bring your business unwanted attention and hurt your reputation.

In order to avoid the financial penalties associated with unclaimed property compliance, it is crucial to find an unclaimed property reporting solution with:

• Automated report creation: Generate multiple state reports for multiple companies or divisions simultaneously with the click of a button.
• Automated filing: Save time and ensure accuracy by filing multiple reports to multiple states simultaneously.
• Audit defense: Maintain peace of mind with a full audit trail of “who did what and when,” as well as a library of reports, due diligence letters and coversheets you’ve generated and submitted to the state(s).
• Fraud protection: Safeguard your business by minimizing the opportunity for fraudulent activity, including employees moving unclaimed property to their personal accounts