Unclaimed property reporting is an essential yet complex aspect of business operations. The intricacies of state-specific regulations, administrative burdens, and evolving compliance requirements can present significant challenges for businesses striving to achieve compliance. Thus, companies must be aware of the most common unclaimed property reporting challenges and the strategies for resolving them to ensure they remain compliant for years.
Here are the top 9 unclaimed property reporting challenges for businesses and their solutions:
- Navigating Multi-State Compliance:
Challenge: Each state has an unclaimed property law, including varying dormancy periods, reporting requirements, and due diligence mandates. Keeping track of these differing regulations can be daunting for businesses operating across multiple states.
Solution: Implementing a centralized tracking system that consolidates state-specific requirements and deadlines is crucial. Many businesses also benefit from specialized software that automates compliance tasks and updates state regulations in real time. Additionally, engaging with unclaimed property experts with deep knowledge of multi-state compliance can significantly ease this burden.
- Accurate Record-Keeping and Data Management:
Challenge: Maintaining accurate and comprehensive records is fundamental to unclaimed property reporting. Inaccurate data, incomplete records, system changes or outdated information can lead to non-compliance and potential penalties.
Solution: Invest in robust data management systems that ensure accurate tracking and updating of property records. Regular audits and data reconciliation processes can help identify discrepancies early. Training staff on proper data entry and management practices is also essential to maintain the integrity of records.
- Conducting Due Diligence:
Challenge: Due diligence involves reasonably contacting property owners before escheating their property to the state. Each state has specific requirements for due diligence notifications, including the timing and method of contact.
Solution: Develop a standardized due diligence process that complies with the highest standards across all states. Automate the sending of due diligence letters and track responses to ensure compliance. Documenting all efforts made to contact property owners is crucial for audit purposes.
- Handling Complex Property Types:
Challenge: Some types of unclaimed property, such as securities, retirement accounts, and insurance policies, come with unique challenges and regulatory nuances.
Solution: Thoroughly understand your business’s specific requirements for each property type. Working closely with legal and financial advisors can ensure compliance with the intricate rules governing these assets. Using property-specific tracking and management tools can also help streamline the process.
- Managing Internal Resources:
Challenge: The unclaimed property reporting process can be resource-intensive, requiring significant time and effort from internal teams. This can strain resources and divert attention from core business activities.
Solution: Designate a dedicated team or individual responsible for unclaimed property compliance to ensure focused and consistent management. Maintaining updated policies and procedures for unclaimed property compliance can provide a roadmap to the resources involved and shorten the learning curve for new resources. Outsourcing certain process aspects to third-party providers or consultants can alleviate internal resource burdens and provide specialized expertise.
- Staying Up to Date with Regulatory Changes:
Challenge: Unclaimed property laws and regulations are subject to frequent changes, making it challenging for businesses to stay updated with compliance requirements.
Solution: Subscribe to regulatory update services and read blogs from industry professionals providing timely legislative change information. Regular training sessions and updates for compliance teams can ensure everyone stays informed about the latest developments. Leveraging software that updates automatically with regulatory changes can also be a significant advantage.
- Responding to Audits:
Challenge: Unclaimed property audits can be triggered by various factors, including discrepancies in reporting or industry-specific targeting. Preparing for and responding to audits can be a complex and time-consuming process and can drain resouces from various departments including the legal and compliance departments.
Solution: Maintain meticulous records and documentation to support your compliance efforts. Record retention for unclaimed property exceeds the standard 7-year requirement, as unclaimed property audits generally have lookback periods of 10 to 15 years. Regular internal audits can help identify and correct issues before they become audit triggers. A clear audit response plan, including roles and responsibilities, can streamline the process and reduce stress during an actual audit.
- Balancing Customer Relations:
Challenge: Contacting customers about unclaimed property can be sensitive and may impact customer relations. Customers may be skeptical or confused about the legitimacy of such communications.
Solution: Develop transparent and customer-friendly communication strategies for due diligence notices. Ensure all communications are professional and transparent and include contact information for customer inquiries. Training customer service teams to handle questions related to unclaimed property can also help maintain positive customer relationships.
- Cost Management:
Challenge: Compliance costs, including software, staffing, and potential penalties for non-compliance, can be significant.
Solution: Budgeting for compliance costs and investing in efficient, automated solutions can help manage expenses. Conducting cost-benefit analyses of various compliance strategies can identify the most cost-effective approaches. Outsourcing to specialized service providers, such as Dunbar, may also offer cost savings by improving efficiency.
Unclaimed property reporting presents various business challenges, from navigating multi-state compliance to managing complex property types and responding to audits. Businesses can effectively manage these challenges and ensure compliance by implementing robust systems, leveraging technology, and seeking expert guidance. Staying proactive and informed is critical to minimizing risks and maintaining compliance, ultimately protecting businesses from penalties while preserving consumer trust.
Dunbar is a reputable provider of unclaimed property compliance services, offering a comprehensive suite of solutions to help organizations remain compliant with all applicable laws. With a professional team with decades of experience, Dunbar is the ideal choice for businesses seeking a reliable and knowledgeable provider for their unclaimed property compliance needs.