Companies that have chosen not to report their unclaimed property in the past often find themselves in a tricky situation when they choose to do so for the first time. Doing so involves strategic thought and planning. Companies should not just choose to suddenly come into compliance without first thoroughly evaluating the effects of doing so would have on them.

Luckily, Dunbar is here to help. We have created a guide for companies to follow when they choose to report their unclaimed property for the first time. These steps will give them the best chance of successfully achieving unclaimed property compliance.

First, when companies decide to take part in the unclaimed property reporting process for the first time, they must understand that ignorance of the rules and regulations of this process does not excuse them from being non-compliant in the past. They must be prepared to take full responsibility for their noncompliance. They also must understand that their failure to report unclaimed property, because they did not know of unclaimed property laws or understand how to do so, will not be accepted as valid excuses by the states where they must report property.

Next, before companies decide to complete the reporting process, they must perform a risk assessment. This will help them determine the risks their companies face by reporting their unclaimed property for the first time. Dunbar can help companies identify and evaluate all potential risks through its consulting practice.

Once companies have performed a thorough risk assessment, they need to conduct a liability assessment by state. This means the companies must assess how much money they are liable for repaying to each state where they should have reported unclaimed property.

After they have done so, companies need to create a strategic plan to mitigate any liability. However, they must create a plan to address their liability in each state where they will be coming into unclaimed property compliance. One plan will not work for every state due to variances in unclaimed property regulations. Dunbar can also help companies prepare strategic plans to mitigate their liability in each state. Our consultants achieve this by taking into consideration state-specific rules and requirements that pertain to companies coming into compliance for the first time.

Once mitigation has occurred, companies need to take time to reassess their liability by state, so they understand how much they will be responsible for paying once they come into compliance.

However, companies need to be cautious to refrain from engaging any of the in a conversation about compliance until they have identified their liability to them as well as performed all required due diligence.

Moving forward, companies need to put policies and procedures in place to ensure they report unclaimed property by each state’s deadline and remain compliant year after year. They should develop a system to handle uncashed checks and inactive accounts as well as ensure they have checks and balances in place to monitor the reporting process as a whole. Taking time to do so will ensure year after year that companies have a standardized process in place that will guarantee their unclaimed property is reported accurately and on time. It will also ensure each department that has the opportunity to generate unclaimed property will follow the appropriate procedures of the reporting process as well.

However, companies may be tempted to avoid coming into compliance until the states catch on and come after them. There are actually advantages for companies to come into compliance on their own rather than waiting for each state’s auditors to arrive.

When companies choose not to come into compliance on their own and take the position of “let the states come and get it,” they are negatively impacted. Companies that do so will be subjected to years of auditing and have to dedicate a substantial amount of resources and time to comply with the voluminous requests for documentation from the auditors. . Furthermore, they will likely have to engage their legal team and possibly hire an outside unclaimed property attorney to defend them during the audit. Also, companies face potentially having to pay fines and penalties levied by the states for being non-compliant.

Therefore, companies should strive to achieve unclaimed property compliance on their own before the states come after them. Luckily, performing a risk assessment and becoming compliant with the help of an advocate like Dunbar can be completed in a few months, rather than 3 to 5 years, which is how long it takes for states to perform an audit.

Furthermore, most audits today are performed on behalf of a state (or multiple states) by contingency audit firms, which are incentivized to “find something.” These auditors are also often inclined to take controversial positions that can be detrimental to the companies they are auditing. However, advocates, like Dunbar, can help lessen the detriment caused to organizations by auditors. At Dunbar, we work with the best interests of our clients in mind. In doing so, we help them return as much unclaimed property to their customers as possible, instead of turning it over to the state, helping to preserve customer relationships.

As an incentive for companies to come into compliance on their own, many states offer voluntary disclosure agreements (VDAs) for them to take advantage of when doing so. In exchange for turning the property over to the state, the state will use the VDA to waive penalties and interest a company owes that may go back years, depending on the age of the property.

Choosing to report unclaimed property and come into compliance for the first time can be a complicated process for companies. Nevertheless, striving to do so on their own before specific states come after them is the smart choice. However, companies do not have to go through this process alone. Dunbar is here to help companies come into compliance for the first time while ensuring they protect their well-being in the process. 

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.