Financial Institution Insights into Unclaimed Property

Laurie Andrews
April 2, 2021

Financial institutions, including banks and credit unions, are unique when it comes to unclaimed property with different property codes, dormancy periods and even different reporting deadlines. Some of the unique challenges for financial institutions when it comes to unclaimed property compliance are:

  • Special dormancy triggers for IRAs and certificates of deposit
  • Tracking returned mail and customer generated activity
  • Specific technological needs related to tracking online activity and customer account linkage
  • Unique reporting rules for certain property types such as safe deposit boxes, money orders, travelers checks and similar written instruments
  • Conflicting state laws regarding service fees and dormancy charges

Additionally, unclaimed property audits are common for this industry; banks have been selected for audit since the earliest unclaimed property laws were enacted.

Banking and Audits

There has been a recent uptick in unclaimed property audits of financial institutions. The scope of audits can vary greatly depending on which third-party firm or state is conducting the audit.  

In general, there are three different models when it comes to audits of financial institutions:   

  1. General Ledger Audits look at material entities with significant financial activity in revenue, cash/cash disbursements, accounts payable, accounts receivable and payroll.  The auditor determines an entity’s materiality using tax return information, unclaimed property filing history, general ledgers, corporate structure, and unclaimed property compliance.
  2. Customer Account Audits concentrate on demand, savings, and time deposits. Auditors focus their time on confirming owner generated activity.  Many auditors that center the review on customer accounts use audit tools such as the Death Master File and the National Change of Address databases to direct their review towards accounts with potentially deceased owners or owners no longer living at the account address.
  3. Entire Bank Audits are a combination of the general ledger audits and customer account audits.  They also include a review of safe deposit boxes and official bank checks.  The data and document requests in these types of audits are heavy and the duration of the audit can be lengthy.

Regardless of who is auditing you – a third-party auditor or a state – audits are a time and resource drain.  Staying organized, having a central point of contact for audit deliverables and communicating with the auditors when deadlines are approaching are just a few tips to make an audit less painful.

If you are lucky enough not to be under audit, be proactive by reviewing and updating your procedures.  Make sure you do not have any gaps in your processes, that you are monitoring and reporting all potential unclaimed property types, and transaction codes used to update your customers’ date of last contact or activity are related to owner generated activity only. 

Remember, the current culture is not if you will be audited, but when, so prepare to defend yourself in the event of an unclaimed property audit.

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Author

Laurie Andrews

As Principal Consulting Director, Laurie assesses clients’ unclaimed property gaps in compliance, performs risk assessments, analyzes liability and fraud, and also collaborates with clients and third-party auditors during state examinations. With over 15 years of service with the Pennsylvania Department of Treasury, Laurie has an extensive unclaimed property background, focusing on fraud prevention, claims, and research.
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