The Global Regulatory Environment

 

The complexities of unclaimed property law compliance arise primarily from the fact that all 100 or so global jurisdictions have different requirements that asset holders are responsible for following. Each legal jurisdiction has the authority to dictate which property types holders are required to report, how long property can stay dormant until it is considered unclaimed, and have differing due diligence requirements, reporting requirements and enforcement.

In the United States, every one of the 50 states and 5 territories have enacted unclaimed property laws requiring all types of dormant and unclaimed financial assets be turned over and legally held by the various State treasurers or Federal Government agencies on behalf of their rightful owners. The trend in the US has put increased pressure on businesses for compliance with these escheat reporting and remittance requirements through aggressive legislation and audits. Dormancy periods for many types of assets are decreasing in several states, resulting in narrow time frames for rightful owners to claim their assets before the funds are escheated to the government. With this legislative landscape and a complex set of priority rules determining which state will receive the escheated dormant assets, it is very difficult for governments, companies and individuals to successfully locate and recover their dormant financial assets in the US.

In Canada, at the federal level, the Bank of Canada has been legally responsible for the custody of dormant bank account funds (dormancy occurs after 10 years of inactivity) since the mid-1900s, and the Office of the Superintendent of Bankruptcy has been legally responsible for the custody of undistributed bankruptcy dividends since 1985. Unclaimed property laws in Canada have only existed somewhat recently at the provincial level (Alberta in late 2008; British Columbia in 1999; Quebec in 1989). These three are the only provinces with legislation in force, while Ontario, which represents over 40% of the Canadian economy, repealed the (never enacted) Unclaimed Intangible Property Act (1990), and is currently assessing the introduction of new unclaimed property legislation in 2013. When all provincial governments in Canada realize the opportunity for increased cash flow via escheatment of unclaimed property, the impact on all people and entities operating or transacting in Canada will be significant.

Many other countries such as the United Kingdom, Australia and New Zealand also have mature unclaimed property laws that impact individuals and corporations that operate or transact in these jurisdictions. More countries are expected to follow as governments seek to control and use the significant funds available from dormant accounts as a new source of revenue in lieu of introducing new taxes or increasing fees for services. Governments are generally viewed as a preferred custodian of these funds operating in the interests of and on behalf of their citizens and taxpayers.

In the English Commonwealth countries in the Caribbean, The Bahamas has a Dormant Accounts Law, as do the British Virgin Islands and several other jurisdictions. The Cayman Islands recently enacted the Dormant Accounts Law, 2010 in July 2010 and to date has escheated in excess of US $15 million.

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