1. Unclaimed Property What the Escheat is Happening?
September 13, 2018

2. Welcome
Disclaimer: This presentation and applicable material are intended for general education purposes and nothing in the presentation should be considered to be legal, accounting or tax advice. You should contact your own attorney, accountant or tax professional with any specific questions you might have related to this presentation that are of a legal, accounting or tax nature.

3. Speakers Yoshiko Anspach, AAP Ent Credit Union
Manager, Payment Services
Pam Rodriguez, AAP, CIA, CISA ePay Resources
President & CEO
Michael Ryan Georgeson LLC
SVP, Business Development

4. What is Unclaimed Property?
Intangible and sometimes tangible property that has gone dormant and/or unclaimed by its owner after a specified period of time.
Unclaimed property laws have been enacted in 56 jurisdictions (All 50 states, District of Columbia, U.S Virgin Islands, Guam, Puerto Rico, Northern Mariana Islands, and American Samoa)
Each jurisdiction has its own law
Each jurisdiction has unique requirements
Revised Uniform Unclaimed Property Act (RUUPA)
Passed in 2016

5. What is the Law?
Banks, credit unions, corporations, colleges, hospitals, and hundreds of “Holders” of property must safeguard assets and try to reunite the asset with the owner.
If the asset goes unclaimed or inactive for a period of time, the Holder must remit that asset to the state in a process called Escheatment.
Each state has unique requirements and like must compliance processes, Escheatment is complex, costly, and comes with liability exposure.

6. Why the Law? The State will say:
Protect the interests and property rights of the owner
Relieve holders from the expense and liability associated with the property
Ensure that any economic windfalls benefits the public, not an individual holder
A Holder will say:
Non-tax revenue to the state, as unclaimed property is a large source of revenue in many states

7. How is Differs from Tax? Derivative rights doctrine
Nexus does not apply
The majority of states do not provide relief for reach-back based on a statute of limitations
Where statute of limitations provisions exist, the limitation period is typically longer than that applicable in taxation
Failure to report or the filing of a fraudulent report generally eliminates reach-back relief afforded by limitation provisions
Few states provide for a traditional administrative appeals process/remedy
Record-retention requirements

8. Where to Report? Rules of Jurisdiction
State of owner’s last known address
State of holder’s incorporation, charter or domicile if address of owner is unknown
State of holder’s incorporation for foreign address property (1981 Act)
State where transaction occurred for money orders and travelers checks

9. Holder Obligations File a report Perform due diligence Remit property
Maintain copies of reports
Maintain records that identify unclaimed property and owner contact * Most states go back 10 years + dormancy * Failure to keep records could allow state to estimate liability
Protect and safeguard funds until reported to the states * Property is at risk for fraudulent activity * Reasonable inactivity fees

10. State Obligations Enforcement * Audits, including hiring audit firms
Public outreach *Safeguard assets *May not be at 100% * Could liquidate non-cash properties * Such as safe deposit box contents *Tax issues (i.e. IRA accounts)
Reunite owners with assets
Raise awareness
Holder education * Provide instruction and guidance * Facilitate the reporting process * Filing options – electronic reporting, standardization

11. Types of Unclaimed Property
Saving accounts
Checking accounts
CDs
Money orders / travelers checks
Cashier checks
Safe deposit box contents
Stock and dividends
IRAs
Payroll
General Ledger

12. Abandonment and Activity
Determining abandonment
Property is presumed abandoned if, for a specific period of time, the apparent owner has not communicated in writing or by means reflected in a contemporaneous record prepared by or on behalf of the holder, with the holder concerning the property or the account in which the property is held, and has not otherwise indicated an interest in the property.
Owner activity
The owner takes action to increase, decrease, or change the amount or type of property held within the account
The owner has communicated in writing with the holder
The owner has acted on another related account - known as linkage
The owner has accessed their account online (access must be secure via password or PIN)

13. The Audits have Started
State auditors
Joint audits
Multi-state audits
Contracted audits to third-party vendors
More punitive in nature
Significant assessments
Looking for revenue taken into income
Reputational risk
Fines and Penalties
Interest assessments (up to 18%)
Penalties
Fraudulent reporting
Failure to conduct statutory due diligence

14. Getting into Compliance
Amnesty
Statutory or administrative amnesty
Specific conditions are posted
Deadlines are provided
Generally no “pre-authorization” required
Voluntary disclosure agreements (“VDA”)
Formal vs. Informal
Conditions include reach-back and pre-authorization
Formal signoff and release from penalties and/or interest
Ability to conduct audit is generally preserved
Additional property
Including small number/amount of missed property on normal report

15. Best Practices Confirm you have written policies and procedures
And that they are accurate and up to date (have created and updated dates)
Establish a committee, set up an independent review to test procedures
In-house training
Ensure linkage of accounts are done correctly
Accelerated due-diligence
Customer retention
Expansion of service offerings
Frequent reconciliations
Consolidated reporting
Confirm accurate reporting to the appropriate jurisdiction
Get legal and upper management involved – often and keep apprised

16. Common Errors and Omissions
Tracking “inactivity”
Never filed an unclaimed property report
Not understanding when the clock starts for a CD
Not including IRAs
Using incorrect or no relationship codes
Only filed to states where the bank has branch locations
Reporting property to the state where the bank is located vs. to the state of the last known address
Mergers/acquisitions, which are large and frequent in this industry
Change in personnel
Lack of direction and infrequent testing of internal controls
Fraud
Whistle blower statutes

17. Mergers and Acquisitions – What to Ask?
When mergers and acquisitions occur you may acquire their unclaimed property liability. So when in negotiations to acquire another bank ask:
Do they report unclaimed property?
All states? All property types?
How do they track activity?
Do they have stock/shareholders?
Who is their transfer agent? Do they report stock?
Did they ever acquire another bank/credit union?
Were they ever audited?
Where are they incorporated?
FDIC takeovers are unique
Not escheatable to state
Non-responders back to FDIC

18. The Bottom Line
Ignoring unclaimed property compliance is no longer an option
Reporting only to one state no longer ensures compliance
States are looking for revenue and new property types;
IRAs
401K Accounts
Savings Bonds
Dormancy periods are getting shorter – plan for the 3-year dormancy
Nothing good ever comes from Escheatment – Stay in touch with your members and customers

19. What to ask yourselves?
Do we know and understand our Unclaimed Property requirements?
Why do we report unclaimed property
How do we stay in compliance with ever-changing UP laws/requirements?
How do we track activity?
Do we report to all states or only to our home state?
If only our home state
Do we only report those owners?
Or do we report other owners from other states to our Home State?
If we report other states, what state law(s) do we follow?
How do we locate/activate dormant and lost owners?
Do we know there are services that:
Determines the life status of owner
Identifies legal claimants/heirs/next-of-kin
Identifies current and valid addresses and contact information

20. Audit Road Map

21. Dormancy Map

22. Reporting Map

23. Resources Surf the Web Google “unclaimed property” www.uppo.org Forums
Other members
Members as mentors
Service providers
Upcoming conferences/webinars
List of states
Connect directly to their state

24. Speaker Contact Information
Yoshiko Anspach Ent Credit Union Pam Rodriguez ePay Resources Ext Michael Ryan Georgeson LLC

25. Q&A