Did your New Year’s resolutions include a commitment to mitigate risk in connection with your unclaimed property? If so, here are three issues that every unclaimed property stakeholder should keep top-of-mind as the New Year gets underway…
Attempts to Broaden the Base of Unclaimed Property Will Continue
Prior-year settlements by the insurance industry have provided incentives for states to continue looking for new sources to expand the definition of what constitutes unclaimed property. Expect increased expansion of scrutiny in select industries. Particularly vulnerable areas include rewards and daily deal programs. Also consider the billions of unused airline and reward program points that lie idle for years. The states are likely to increase the pressure on these targets, leveraging the track record that has been established for the insurance industry.
Multi-State Audits Will Ramp Up
Many states, such as Delaware, have now given corporations ample opportunity to come forward and voluntarily comply with their unclaimed property laws. Organizations that have not satisfied the full extent of the state requirements, even if they were previously subject to an audit, may wish to revisit current practices and voluntarily come into compliance by early 2013. It is predicted that shortly after the first quarter of 2013, the state(s) will substantially increase their audit activities beyond prior years…and they are not likely to abate interest or penalties.
The Cloud...The Cloud
Large unclaimed property settlements rarely result from the identification of actual items of property (uncashed checks, customer credits, or unredeemed gift cards). Rather, they result from the failure of a corporation to disprove a presumption of abandonment by the potential property owner (vendor, employee or customers) based on unavailable prior-years records. Migration of records to offsite cloud computing and/or enhanced system conversions may accomplish major operational and data security – but they may also result in significantly increased exposure from an unclaimed property perspective. Companies should carefully review their data technology and record retention plans, as this will help minimize the risk that any savings from an operational perspective will be offset by increased unclaimed property exposure.
At Duff & Phelps we assist companies to ensure they are “meeting, but not exceeding” their unclaimed property reporting obligations.