STARTING FROM THE GROUND UP

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1 Summer 2018: Volume 16, Issue 2 The unclaimed property industry s premier compliance journal, published exclusively by Keane since STARTING FROM THE GROUND UP Building an Unclaimed Property Compliance Program FEATURED ARTICLE: We provide guidance on establishing the foundation of an effective escheat compliance program from the ground up. IN THIS ISSUE: Starting from Scratch 2-5 Delaware s VDA Program & Ongoing Compliance 6-7 Is There a Trend Toward True Escheat? 8 Proposed California Voluntary Disclosure Agreement Program 8 Kentucky Latest to Enact RUUPA-Like Legislation 9 Ligitation Update Balancing Act Legislative & Regulatory Updates

2 Starting from the Ground Up: Building an Unclaimed Property Compliance Program By Joe Lichty, Director of Marketing Building an unclaimed property compliance program tends to be a responsibility that is often delayed, transitioned, or passed from department to department. In our 65+ years of business, countless individuals have reached out to us and asked, I ve just been made responsible for unclaimed property. What is it, and what am I supposed to do now? While many individuals in this situation may choose to rush into filing annual escheat reports as soon as possible, that approach often creates more problems instead of solving them. Rushing to report, in the absence of well-defined processes, can lead to incorrect reports that may raise red flags triggering an audit from multiple states and thirdparty auditors. In our experience, individuals tasked with bringing their organization into compliance for the first time are best suited by implementing a comprehensive compliance program for unclaimed property, serving as the foundation for ongoing escheat reporting and compliance efforts. This same approach is true for individuals who inherited the responsibility for an existing escheat compliance program and want to test its effectiveness. In either scenario, below are several components critical to establishing (or evaluating) an unclaimed property compliance program. Understand the significance of unclaimed property compliance. By making the decision to implement a compliance program for unclaimed property, you ve already acknowledged the significance of the issue. Despite what you may have heard, state unclaimed property laws are not optional. All companies, regardless of size and industry, must file an annual report to all applicable jurisdictions. Failure to do so may result in penalty and interest assessments for late or incorrect reports. Ultimately, states may also choose to conduct an audit using a third-party contingent fee auditor to assess your organization s level of compliance. An inadequate unclaimed property compliance program can also give rise to reputational risks, especially for companies in the banking, insurance and financial services sectors. In recent years, companies in these industries have faced additional scrutiny through increased audits and ever-changing unclaimed property requirements. 2

3 Establish the Scope of Your Unclaimed Property Compliance Program... and Address Your Potential Risks. If you haven t already done so, you ll want to ensure a solid understanding of your starting point from an unclaimed property perspective. Without knowing your potential gaps and areas of exposure, how can you be sure your newly created compliance program will address all possible risks? Are you currently reporting, and do you have a consistent history of compliance? Are you capturing all potential sources of unclaimed property exposure? Do you have copies of previous reports? If so, how far back? Are all departments and/or lines of business identifying potentially escheatable properties in the same manner and in accordance with state requirements? Conducting a Risk Assessment or Self-Audit is one of the most effective ways to answer these questions and uncover additional potential risks that need to be accounted for within your unclaimed property compliance program. If conducting a risk assessment review with internal resources is not feasible, consider engaging an experienced unclaimed property services provider with expertise in your particular industry. These firms specialize in helping organizations identify and understand their risks and potential liabilities and recommend practical measures for remediation and ongoing compliance. The risk assessment should include a thorough review of your financial books and records as well as existing systems used to track and monitor financial transactions including outstanding disbursements, unapplied cash and aged credit balances. Special attention should also be paid to any historical or recent mergers or acquisitions, as your organization may have unknowingly acquired a population of unclaimed property liabilities as a result of that corporate action. Include All Lines of Business & Stakeholders. It is extremely important to verify that the risk assessment covers all subsidiaries and lines of business across your organization that could generate potential unclaimed property exposure. If your organization is highly decentralized this is an extremely critical first step. In many cases, the tax, accounting, and finance departments tend to be the primary stakeholders tasked with unclaimed property compliance responsibilities. It is important to note, that while these departments may have the reporting responsibility associated with escheatment, the accuracy and completeness of the data used to determine what property is reported is contingent on the information provided by accounts payable, payroll, accounts receivable, etc. If the various accounting departments provide inaccurate or incomplete information, the reports prepared for the states will be inaccurate or incomplete. As such, it is very important to confirm with each accounting department what constitutes potential unclaimed property including actions that can be taken with outstanding and voided checks and appropriate handling of unapplied cash and aged credit balances. Additionally, in many cases your unclaimed property compliance program will also require the involvement of various departments or functional areas outside of finance that are also critical to the organization s unclaimed property risk assessment. Public Corporations If you re a publicly traded company, it is important to contact your investor relations or shareholder services department to confirm the responsibilities pertaining to inactive shareholders and outstanding distributions, including those handled by third party transfer agents. Securitiesrelated property has its own unique set of requirements; and failing to follow these rules may result in the premature escheatment of investors shares. Rest assured, your shareholders will not be happy if their shares escheat pre-maturely and are subsequently liquidated by the states. Financial Institutions For banks and credit unions it is especially important to ensure that all products and services are captured within the compliance program including, but not limited to, retail operations, loans, credit cards, escrow, safe deposit boxes, and personal and corporate trust. Customers and members are the lifeblood of financial institutions. Accounts with no owner-initiated contact for three to five years are likely to be considered potentially escheatable. 3

4 As such, unclaimed property compliance programs need to ensure that all potential sources of owner-initiated contact and activity are being captured and tracked to ensure that active accounts are not improperly reported to the states. Unclaimed property programs should also include procedures to help re-establish owner contact to preserve and protect accounts from being reported to the states. Oil & Gas The Oil & Gas industry has a unique set of risks specific to mineral proceeds and royalties, suspense accounts and JIB credit balances. Oil & Gas companies also need to be aware of various state requirements regarding current pay requirements. Inclusion of the Land Administration department is very important so that Division Order Analysts can identify potential exposures in accordance with state requirements. Evaluate Your Options and Internal Capabilities. Now that you ve assessed the scope of your unclaimed property obligation the next step in implementing a compliance program is defining the responsibilities and actions. What tasks and activities will be expected of your group? Below are several key questions that must be answered. Who will be responsible for tracking all legislative or regulatory changes? State escheat laws change frequently. It is important to stay on top of the changes that could affect your industry and reporting responsibilities. There are programs and services, such as Keane s Compliance Portal, that provide monitoring of state changes and their impact on due diligence and reporting requirements. In addition to being aware of changes, you need to establish a protocol for sharing this information with others throughout the organization to ensure the consistent interpretation and application of rule changes. How will you determine which property is eligible for escheatment or past due? Companies choose to tackle this critical first step in a variety of ways. Some companies rely on Excel spreadsheets and calculate dormancy manually, reviewing each state and property type separately. Others input their data into a commercial software platform to identify dormant property. Firms with sizable IT departments (and budgets) have actually built their own unclaimed property rules engines. As you determine which property is eligible for reporting, you should also identify which items require a state mandated due diligence letter. While due diligence letters are a requirement in all 55 jurisdictions, not every item requires a letter to be sent because of minimum value thresholds and other potential exemptions. Revisit your answer to Question #1 to be sure the responsible party is keeping up to date on these thresholds. Who will be sending due diligence letters? Depending on the volume of your outbound due diligence letters required, it may be a manageable process for your internal resources. If the volume is extreme, the services of an external mail house or fulfillment vendor may be necessary. However, you choose to perform these mailings, be mindful that states are very particular about what needs to be included in the letters. In some cases, very specific language, in specific places and in specific formats must be used. Are you able to perform unclaimed property remediation activities? By remediation, we re referring to a form of outreach to owners of property that is either past-due or coming due in upcoming reporting cycles. While state mandated due diligence may be considered the bare minimum form of remediation, many firms choose to put extra effort into locating and communicating with property owners before their property is actually eligible to be reported. This can come in the form of courtesy mailings, s or phone calls to owners after an account has had no ownergenerated activity for a given period of time, or mail is returned to the holder as undeliverable from the post office (RPO). It may also include outreach to your vendors, employees or other payees where a check or other liability remains outstanding. You ll need to set a time threshold that gives the owners adequate opportunity to update their accounts well before the statutory dormancy periods end and your reporting obligation must be met. 4

5 Establish an Annual Reporting Timeline. Once you know which aspects of the annual reporting process are going to be performed with internal resources and which are going to be performed by vendors or partners, you can begin to frame out a timeline for all involved parties to follow. Your timeline should be year round. Activities for the Fall reporting deadlines, usually October 31 st or November 1 st, should begin in the Spring. Conversely, activities for the Spring reporting deadlines, which stretch from March through July, begin in late Fall or early Winter. For additional details on the activities to take place for the six months prior to each reporting cycle, please refer to our Unclaimed Property Reporting Calendar. Document and Communicate Often. By this point, you ve included all appropriate lines of business and the key personnel for an effective unclaimed property compliance program. You know where your problem areas are, what activities you re going to perform and when you re going to perform them. You re ready to go, right? Not quite. First, make sure everything is documented as part of your official policies and procedures. Having a documented set of escheat compliance policies and procedures is a critical step and one of the first things requested in the event of an audit. This living document should be frequently reviewed and updated as your business grows and evolves. It should serve as your reference manual, outlining what to do and how to do it. So what happens if things go awry? You ll also need to establish a Chain of Command and escalation path so that you can identify and mitigate any issues as soon as possible. This Chain of Command should also establish who within your organization has the ability to enforce your policies and procedures to ensure that all lines of business and all employees abide by the same processes. Communication protocols and primary contact points throughout the organization must be defined to ensure that the right people are being contacted. IT involvement may also be necessary to determine how internal systems will communicate with each other and feed relevant information to various members of the unclaimed property team. Conclusion Establishing an unclaimed property compliance program is not an easy undertaking. It requires the significant investment of time, resources, and talent. It is not an initiative that can be rushed, as it takes a fair amount of research, internal analysis, and collaboration to do it right. However, when done correctly, a comprehensive program for unclaimed property compliance will pay dividends in the form of reduced risk, greater assets protected, increased customer retention and improved investor satisfaction. If you ve been tasked with building an escheat compliance program from the ground up and could use assistance, we can help. Keane s National Consulting and Advisory Services Practice has helped countless firms establish comprehensive programs to ensure success going forward. Please contact us for additional information. Joe Lichty Director of Marketing 5

6 Delaware s VDA Program and Its Influence Regarding Ongoing Compliance By Ann Fulmer, National Consulting Practice Leader, and Brian McCarthy, Senior Manager Now that hundreds of companies have completed the Delaware Secretary of State s Voluntary Disclosure Agreement ( VDA ) Program, issues regarding their demonstration of ongoing compliance are creating some unique challenges. Questions regarding record retention, activities performed by third party administrators, and past due liabilities acquired via subsequent mergers and acquisitions (post VDA completion) pose unique issues that should be carefully considered. As a few companies have learned, the Delaware Department of Finance monitors reports filed by companies that have completed the VDA program to confirm ongoing compliance, and flags those that appear to continue to report material populations of past due properties. As such, it is critical to address situations that could lead to the appearance of non-compliance proactively and take steps to ensure your company continues to meet the requirements detailed in the VDA-2 to preserve the integrity of the agreement. Section 7 of the VDA-2 agreement states, in part, the following: The STATE releases the HOLDER from any further reporting requirements for the Payable Property from the beginning of time through the Abandoned and Unclaimed Property Report due to Delaware for reporting year, which Report was due March 1,. The HOLDER agrees to file and report, to the STATE, abandoned or unclaimed property annually as required by the Abandoned or Unclaimed Properly Law In the event that the HOLDER fails to adhere to the reporting requirements of the Abandoned or Unclaimed Property Law after the STATE issues a warning letter, the STATE, at its sole discretion, may void paragraph nos. 6 and 10 of this Agreement and, at the STATE s discretion, audit the HOLDER for any time, including but not limited to the Agreement Look-Back Period. Demonstrating Ongoing Compliance In an effort to demonstrate and document ongoing compliance, many companies voluntarily file reports to the state annually, even if they have no property due to Delaware. While Delaware does not require companies to file negative / zero reports, companies want to be on record so that the Department of Finance knows that they have not ignored their ongoing compliance requirements. Similarly, many companies elect to send a separate note to the Secretary of State s Office to notify them of their annual submission to the Department of Finance to help ensure that all interested parties at the state are aware of their ongoing compliance efforts. M&A Implications Companies who experience a high volume of merger and acquisition activity may find themselves in a situation where they inherit past due properties from predecessor 6

7 organizations on a recurring basis. Proactive communication to the Department of Finance and Secretary of State s Office to explain these situations and the reasoning for including past due properties on future reports can help prevent confusion and misinterpretation about the properties that are reflected on the reports. While the annual reports do not provide an opportunity to add explanatory language, a brief outreach to the state can save time and effort on both sides of the fence and demonstrates to the state the company s efforts to remain in compliance on a go-forward basis. Gift Cards & Unknown Populations Companies may also face challenges around the maintenance of records used to demonstrate last known name and address associated with properties that must remain open on company records for extended periods. For example, the ongoing requirement to preserve the related names and addresses can create special challenges for companies that issue gift cards and elect to take advantage of various state exemptions related to cards that do not expire. This is especially true in the event that there is a change in the third party that is servicing the gift card program. Events such as this should be reviewed with special consideration for the maintenance of the records that preserved them from escheatment. Failure to maintain these records could bring them back into consideration if they subsequently become unknowns. A careful review of populations that are tagged as potentially escheatable to Delaware should include a review for transactions created during the VDA look-back period that are considered to be unknown to determine if they had been previously considered as due to another state. If there is a material increase in the number of unknown past due properties suddenly due to Delaware, further research should be conducted to verify the source of the transactions to confirm if they are truly unknowns or if the address had been recently dropped. If dropped, efforts should be made to reassociate the names and addresses with the transactions. Conclusion Issues regarding ongoing compliance should be a constant concern for all companies, but especially for those that invested large amounts of time, energy and resources to come into compliance through the Delaware Voluntary Compliance Agreement Program. Situations that could create questions or raise concerns from the state s perspective should be addressed proactively and be well documented. Companies should also take steps to ensure that the company remains in compliance through the implementation of policies and procedures and annual review of compliance systems to verify the proper implementation of recent changes to state requirements. The benefits of the DE VDA program are significant and are contingent on your company s demonstration of compliance into the future. Ann Fulmer National Consulting Practice Leader Brian McCarthy Senior Manager 7

8 Is There a Trend Toward True Escheat? By Heather Gabell, J.D., Director of Compliance and Debbie L. Zumoff, J.D., Chief Compliance Officer Three pieces of legislation presented thus far in 2018 may be indicative of a possible trend by the states towards permanent escheat. These bills represent a marked departure from the ultimate goal of the states consumer protection laws, which is to reunite owners with their lost or abandoned property. Unclaimed property laws promote the notion that until an owner comes forward to claim his property, the state will act as the custodian for such property. However, Arizona S 1097, enacted on March 23, 2018, has a retroactive effective date of December 31, 2017 and effectively cuts off an owner s right to claim property 35 years from the date that the property was transferred to the state. Louisiana H 851, introduced on April 3, 2018, failed as the legislature adjourned on May 18, 2018; but the bill similarly limited the number of years that an owner had to file a claim to 30 years from the date the property was paid or delivered to the Administrator. Finally, Hawaii S 2921, introduced on January 23, 2018, also failed as the legislature adjourned on May 3, The provisions of that bill would have barred owner claims for property valued $250 or more that were filed more than 10 years after the funds were deposited into the state s unclaimed property fund (currently in Hawaii funds $100 or less will permanently escheat after 10 years). These bills also raise important constitutional due process concerns and whether such actions by the state constitute a taking under the Fifth Amendment to the United States Constitution. Keane will continue to monitor the introduction and activity of similar bills across all jurisdictions for any signals that this trend continues to take shape. Proposed California Voluntary Disclosure Agreement Program By Heather Gabell, J.D., Director of Compliance and Barbara Rice, State Compliance Liaison New legislation was introduced in California on March 16, 2018 that would have directed the Controller to establish a voluntary disclosure agreement ( VDA ) program. Though CA AB 2773 ultimately died in committee on April 23, 2018, holders remain hopeful that the work of industry groups such as the Unclaimed Property Professionals Organization, the Securities Transfer Association and the Shareholder Services Association, will lead to reintroduction of the bill during the next legislative session. The provisions of CA A 2773 were consistent with most other state VDA programs: The holder was required to: Execute a participation agreement with the Controller. Accurately review its books and records, and report all unclaimed property due for the past 10 years, going back from the date that the holder s intent to enter the VDA program was accepted by the Controller. Make payment of the property in full, or enter into a payment plan, within 12 months from the date that the holder s intent to enter into the VDA program was accepted by the Controller. Holders under audit by California at the time of enrollment were ineligible to participate in the program Voluntary disclosures submitted in good faith would receive full waiver of interest and penalties Barring fraud or willful misrepresentation, the Controller was prohibited from auditing the periods covered by a VDA Per Assemblyman Dante Acosta, the bill s sponsor, quoted in The Northern California Record on April 30, 2018: I m a big believer in crafting legislation that is done right, not just done quickly, so we will continue working on this issue and I look forward to putting a bill forward in the coming year that helps businesses across the state come into compliance without unnecessary and punitive penalties. California has not offered any type of voluntary compliance initiative in almost twenty years. Therefore, holders with past due property who want to come into compliance do so at a price. Under current law, past due property is assessed interest at 12% per annum, which, as many holders know can add up to extremely significant amounts. The Controller s office estimates that approximately 900,000 filers in the state are currently out of compliance and that some $12 billion in monies and assets should have been escheated to California in prior years. A VDA program would foster increased reporting by eliminating the current disincentive to voluntary compliance. We will let you know when the bill is reintroduced and will keep you updated as to its progress. 8

9 Kentucky Latest to Enact RUUPA-Like Legislation By Heather Gabell, J.D., Director of Compliance With the passage of KY H 394 on April 13, 2018, effective on July 13, 2018, Kentucky becomes the latest state to pass a new unclaimed property law based on the 2016 Revised Uniform Unclaimed Property Act ( RUUPA ). While dormancy periods remain the same for most property types (dormancy for safe deposit boxes, however, increases to 5 years), dormancy triggers are updated to conform to a RUUPA like standard and new property types from RUUPA, including health savings accounts and custodial accounts, are also introduced. Excluded from the definition of property and thus from escheatment are: 529 ABLE accounts, game-related digital content, loyalty cards, in-store credits for returned merchandise, and gift cards. The Act also exempts wholly foreign transactions, money, funds and other intangible property held or owing to a 501(c)(3) non-profit, mineral interests, wages or salaries under $50 not claimed within 1 year, and funds held in an IOLTA trust account. As seen in the new RUUPA-inspired Utah, Tennessee and Illinois laws, holders who communicate with account owners via electronic mail are required to perform additional outreach prior to performing due diligence for retirement accounts, custodial accounts and securities. Holders are required to send the due diligence notice to owners who have consented to electronic communication via regular mail and electronic mail. Notice must be sent 60 to 180 days before the reporting due date for property valued at over $50. Holders other than insurance companies will continue to file reports prior to November 1, but insurance companies will file reports prior to May 1 for the immediately preceding calendar year. Other carryovers from RUUPA seen in the new Kentucky law include: an indication of interest in the property now includes a deposit into or withdrawal from an account at a financial organization, including an automatic deposit or withdrawal previously authorized by the owner other than an automatic reinvestment of dividends or interest. Kentucky also adds a 10-year transitional provision and a 10-year record retention period. Further, the new law includes a prohibition on the commencement of an action or proceeding to enforce the Act more than 5 years after the filing of a non-fraudulent report; and a prohibition on the commencement of an action, proceeding, or examination with respect to a duty of a holder more than 10 years after the duty arose. The Administrator may not sell or otherwise liquidate a security until 3 years after receipt and notice to the owner. In a departure from RUUPA, the new Kentucky law states that if a security is sold prior to the expiration of the 3-year period (6 years under RUUPA), an owner filing a valid claim before the end of the 3-year period is entitled to the proceeds of the sale or the market value of the security at the time the claim is filed, plus dividends, interest, and other increments on the security up to the time the claim is paid, less deductions of any expenses of the sale. If a person files a valid claim after the expiration of the 3-year period (6 years under RUUPA), he is entitled to receive the security, if it is in the custody of the Administrator, or the net proceeds received from the sale, and is not entitled to any appreciation in value occurring after delivery to the Administrator. Heather Gabell, J.D. Director of Compliance Debbie L. Zumoff, J.D. Chief Compliance Officer Barbara Rice State Compliance Liaison 9

10 Balancing Act: How Financial Institutions Can Turn a Compliance Obligation into a Revenue Opportunity By Joe Lichty, Director of Marketing This article will detail best practices and proactive measures banks and credit unions may take to ensure compliance and reduce risk - but also improve customer retention and more easily grow business. It s a challenging time for financial institutions such as banks and credit unions. With increased competition from both traditional banks and new online deposit options paired with decreasing customer loyalty, financial institutions are hard-pressed to develop effective ways to make the most of their investment to attract new customers and ultimately grow assets under management. The average cost to acquire a new banking customer ranges anywhere from $350 to $2,000, depending on the acquisition channel and size of the financial institution. Contrasted against those acquisition costs, some reports indicate that the typical banking customer only generates $150 in revenue for a bank each year 8 - indicating a breakeven point of more than two years. Further compounding the issue is that customers aren t afraid to switch banks to one that provides greater benefits, service or convenience. Gone are the days of free toasters and kitchen appliances in exchange for opening a new savings or checking account at the local branch. Today s tech-savvy customers demand more and more features, the highest level of customer support, and are no longer limited to the brick and mortar branch down the street. Banks Can t Afford to Jeopardize Accounts Due to Careless Mistakes With such a competitive marketplace, ensuring customer satisfaction is critical to retention. A recent J.D. Power study 9 indicated that overall satisfaction among customers drops by 10% among those customers who experienced a single problem with their account(s). This includes the assessment of incorrect or unwarranted fees, unauthorized access or transactional errors. Further, a similar study 10 indicates that only 20% of banking customers would continue to use a bank that made a mistake that could not be easily resolved. It also indicated that the overall satisfaction score for the bank dropped by 33%. 12

11 If simply assessing an incorrect fee to a customer can reduce client satisfaction by 30% and cause client loyalty to plummet imagine what would happen if you mistakenly escheat your client s entire account? Some banks and credit unions utilize the practice of assessing inactivity or dormant account fees on account owners where no deposits or debits have taken place after a given period of time, normally six months or more. While the use of these fees is intended to incent account owners to access their account more frequently and thus minimize the risk of escheatment the fees themselves do not constitute owner-generated activity and do not restart the statutory dormancy period. Further, some financial institutions assess service fees or charges when accounts are eligible to be escheated. These fees are included as part of some state unclaimed property laws and are normally capped at a certain percentage of the account value or a maximum flat fee. These fees usually cover the operational costs of remitting the account to the state and corresponding activities such as due diligence mailings. Escheatment: The Silent Threat to Customer Retention & Growth Financial institutions wouldn t allow themselves to lose customers to another bank yet banks of all sizes allow millions of dollars to walk out the door each and every year because their unclaimed property compliance programs fail to protect these at risk accounts. Banking assets such as checking and savings accounts, certificates of deposit, and safe deposit box contents are among the most frequently escheated bank properties to state governments. In the Fall 2017 cycle alone, Keane escheated more than 33,000 deposit accounts totaling $26 Million in value. As demonstrated by the figures above, escheatment is inevitable in many instances. Customers will move and leave no forwarding address, or account owners will pass away and their heirs or beneficiaries are unaware of the account. In those scenarios simply abiding by state statutes won t resolve these errors and your only option is escheatment. However, by thinking outside of the box and going beyond your compliance obligations you have the opportunity to protect a greater population of these accounts and valuable customer relationships. A Material Opportunity to Grow Business Typically viewed as a compliance obligation, a proactive approach to unclaimed property represents a material opportunity to make growing your business easier. Generally speaking, compliance is not the problem that most financial institutions have. Rather, in many cases, these entities tend to be over-compliant meaning they report far more accounts as unclaimed property than they are required to by law. This primarily happens because they may be unclear on the specific requirements of each state, or they do not have the correct internal processes in place to best apply the allowances within the laws such as tracking activity on linked accounts or banking products, such as certificates of deposit. While mailing due diligence letters based on the statutory thresholds may keep you in compliance, it doesn t address the root cause of your unclaimed property challenges or minimize the generation of dormant accounts. In fact, sending a letter to the owner s last known address prior to escheatment is somewhat of a limited last-ditch effort. Considering that due diligence letters are typically sent between days prior to the reporting deadline, it may not provide account owners with enough time to respond to the letters and update their account in order to prevent escheatment. The effectiveness of simply mailing due diligence letters is further diluted when considering the accuracy of the last known addresses and that it often takes multiple outreach efforts through various channels (phone, , mail) to be truly effective. Financial institutions should look to go above and beyond state mandated due diligence to keep dormant accounts to a minimum, and also to maintain an active dialogue or communication with customers or members. Taking a Proactive Approach to Unclaimed Property There is no requirement that banks wait until the due diligence process to reach out to dormant account owners. Ideally, you should conduct analysis long before the due diligence process kicks in. For instance, it is best to monitor which accounts have been inactive for six months, 12 months, 18 months, etc. and note the relationship with that customer. 13

12 Once this is done, you can filter the results based on the dormancy period in each owner s state to see how much time remains before escheatment. Armed with this data, you can prioritize outreach efforts. Start with accounts in states with three-year dormancy periods, followed by accounts in states with five-year dormancy periods. Allowing sufficient time for communication will improve your success in retaining these customers. One of the easiest way to get started with this initiative is with simple courtesy mailings or outbound phone calls at these pre-defined intervals. The use of enterprise service providers and auto-dialers may help you tackle large populations of dormant accounts without unnecessary added strain on your internal staff. The tone of your message may vary depending on how long the account has remained inactive or dormant. For example, an account that has been dormant for 12 months may invite the customer or member to visit a branch, access your online banking app, or use an ATM, whereas an account that is closer to the end of the dormancy period would certainly warrant stronger language and reinforce the risk of escheatment. Collectively, these efforts can have a major impact on the number of dormant accounts and your overall escheatable population. Regularly communicating with customers to keep accounts up to date not only mitigates the risk of unnecessary escheatment, but also provides avenues to cross-sell additional banking products, grow fee-based revenue, and improve overall customer satisfaction. 8 New Customer Retention: A Fundamental in Retail Financial Services ( 9 J.D. Power 2017 National Bank Satisfaction Survey ( national-bank-satisfaction-study) 10 J.D. Power 2017 U.S. Retail Banking Satisfaction Study ( Keane s Dormant Account Remediation Programs Keane supports dozens of financial institutions through its advanced customer location and communication programs. In our almost 70 years of experience, we have learned that locating owners and reconnecting them with their accounts is a blend of art and science. Through a combination of proprietary data analysis and in-depth manual research, Keane is able to locate new addresses for dormant account owners and communicate with owners to protect as many accounts as possible. In addition, Keane s advanced owner location programs seek to identify the heirs or beneficiaries of deceased account owners a risk population that is often overlooked during statutory due diligence. Keane has demonstrated outstanding levels of success in assisting banks and credit unions reduce their populations of dormant accounts. In one such instance, Keane was able to help a bank reconnect with 65% of account owners whose accounts were at risk of escheatment and protect 86% of the overall escheatable asset population all within seven months of the escheat reporting deadline. While protecting more than $10 Million in customer assets was a tremendous success on its own, the program was viewed as an example of world class customer service adding further value to the bank s reputation and ultimately allowing for greater customer retention and revenue growth. For additional information on how Keane can assist your bank or credit union reduce its population of dormant accounts and protect your customers and members, please contact us at or Questions@KeaneUP.com Joe Lichty Director of Marketing 14