While the time and energy spent actively managing potential unclaimed property and filing annual compliance reports may seem high, the potential costs of non-compliance may be higher. As with any legislative or regulatory requirements, companies are best placed to comply if they have a coherent policy and set of procedures to help them to do so.

This AFP Payments Guide, underwritten by MUFG, explores best practices to help any organization comply with unclaimed property requirements and discusses the range of potential sources of unclaimed property that organizations can have. Check out some of the highlights included in the guide below.

1. Unclaimed Property

Companies almost always hold a range of property that technically belongs to someone else, and sometimes they are unable to restore a portion of this property to its rightful owner. After a predetermined period of time, any such property is defined as unclaimed and has to be turned over to a state government. Common types of unclaimed property include payroll and expense payments, supplier payments, customer payments, gift cards and customer rebates, and dividend payments and shareholder certificates.

2. The Costs of Non-compliance

Even though the supposed cost of compliance is high because companies must spend resources to identify any unclaimed property, the cost of non-compliance is higher. It would be a major error to ignore the full requirements of unclaimed property legislation and regulation, as the potential costs of non-compliance can include financial penalties, audit costs and more.

3. Unclaimed Property Compliance

To minimize the risks of financial penalties and the costs of being audited, all companies should consider adopting a consistent unclaimed property process. The process should demonstrate compliance with the applicable legislation and regulations and include a focus on record keeping, achieving compliance, preparing for further action, and seeing the bigger picture.

4. How to Comply

As with any legislative or regulatory requirements, companies are best placed to comply if they have a coherent policy and set of procedures to help them do so. Following three key best practices can help any organization to comply with unclaimed property requirements: prioritize record keeping and reconciliation, have an unclaimed property process, and recognize that things change.