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Dead Kenyans leave Sh2 billion in their mobile money accounts

BUSINESS
By Frankline Sunday | May 8th 2022 | 5 min read
By Frankline Sunday | May 8th 2022
BUSINESS

 

A motorist pays for fuel using his mobile. [Elvis Ogina, Standard]

 

Deceased Kenyans have left behind Sh2 billion in mobile money wallets as the government struggles to find and reunify beneficiaries of billions in unclaimed financial assets.   

This is according to the latest financial report from the Unclaimed Assets Trust Fund (UAFT), further indicating that commercial banks, listed firms and telcos surrendered billions of shillings to the fund last year.   

"With regard to receipts of unclaimed assets, Sh3.6 billion was the additional cash to the unclaimed assets denominated in cash, against a target of Sh4.8 billion," said the management of the Unclaimed Assets Trust Fund (UAFT) in a gazette notice.

According to the report, receipts from telecommunication companies in 2021 hit Sh2 billion, 36 per cent higher than previous year, while value of unclaimed shares at Nairobi Securities Exchange, stood at Sh20.1 billion.

"Overall, however, the total fund value stands at Sh39.5 billion consisting of Sh19.5 billion in cash assets, Sh20 billion in shares and Sh4.4 billion being retained reserves from income," said UATF.

Safaricom, KCB Group, East African Breweries and Co-operative Bank account for 75 per cent of the value of unclaimed shares reported from 45 listed companies.

According to UATF, asset holders had surrendered Sh5.5 billion, Sh3.9 billion, Sh2.7 billion and Sh1.7 billion worth of shares from the four blue chip stocks respectively as at June last year.   

The report comes on the back of mounting concern that compliance by asset holders, which include commercial banks, Saccos, pension schemes, utility firms and telecommunication firms remains low.

The Unclaimed Financial Assets Act, 2011 lists a broad range of assets that should be forfeited in the event of the owners' death. These include deposits for utility services, court awards, unpaid cheques, insurance policies or annuity contracts and unpaid wages.

As at June 2021, commercial banks led in the overall value of assets, with Sh13.6 billion worth surrendered to the authority, an increase from Sh10.9 billion the previous year.

Listed companies, insurance firms, Saccos and pension funds had surrendered Sh3.2 billion, Sh1.2 billion, Sh44 million and Sh29.3 million in unclaimed assets to the UATF as at last year.

The Unclaimed Financial Assets Authority (UFAA) has in recent months faced criticism that the speed of processing claims and making payments was long and cumbersome, leading to low levels of reunification.

Earlier this year, the UFAA launched service booths at Huduma Centres across the country where Kenyans can initiate claims for their kin's unclaimed assets.     

In 2021, some 3,314 claims worth Sh307.7 million were settled, a 34 per cent increase from Sh228.7 million that was paid out in previous year. 

"While the current levels of reunification have grown from a low of Sh34 million, the rate is still low," said UFTF in the notice.

"Management has therefore put in place mechanisms to ensure the level of reunification grows."

The slow rate of reunification has also been attributed to many Kenyans dying without revealing to their relatives all the assets that they own.

As at last year, the UFAA had received reports of 2,648 safety deposit boxes held by 17 commercial banks that remain unopened, an increase of 56 per cent from 2020.

The bulk of them - 77 per cent - are in Absa Bank (995), Bank of Baroda (576) and Standard Chartered Bank Kenya (477).

The UFTF is mandated to invest all the money in the fund in Treasury bills and last year the regulator earned Sh1.5 billion in investment income.

A recent case filed by AIG Insurance Company challenging some clauses in the Unclaimed Financial Assets Act, 2021 could, however, bar the UFAA from laying claim on some asset classes.

AIG moved to court last year challenging a move by the UFAA to demand Sh138 million from it in unclaimed assets and Sh3.9 million in audit fees.

The firm also wants the court to quash an audit report commissioned by UFAA that found the insurer held Sh138 million in unclaimed assets and owed the authority Sh312 million in penalties and interest.

The insurer also wants the court to declare that credit balances on accounts receivable and credit balances in paid claims register are not applicable under the Unclaimed Financial Assets Act. 

The case will have far-reaching consequences on UFAA's mandate to collect unclaimed assets from insurance firms and could lead to a cascade of similar legal challenges from other asset holders.

Last year, the court ruled that Treasury, the Attorney General and the National Assembly Clerk be joined in the case as interested parties.

"The orders sought are therefore likely to affect persons who are not parties to this case, and who will not have an opportunity to be heard," said judge Pauline Nyamweya in her ruling.

"It is also notable in this respect that three necessary parties who will be directly affected by the orders sought by the ex parte applicant, namely the Cabinet secretary for Treasury, the Attorney General and the National Assembly, being the public offices in charge of public finance and legislation, have not been joined as parties herein." 

In the 2022 Finance Bill, Treasury has proposed waivers on penalties, fines and audit fees and that penalties and interest should be capped to avoid exceeding the value of the asset.

"The authority may, with the approval of the Cabinet Secretary, waive payment of any of the penalties and fines under section 33 whether in part or in full," reads the proposed amendments to the Unclaimed Financial Assets Act, 2011.

Treasury says the penalty waivers are meant to stimulate asset holders to disclose and deliver undisclosed assets to UFAA.    

This will be done through a voluntary unclaimed financial asset disclosure programme that will run for a year starting June 2022.

"A holder of unclaimed assets may disclose, report and deliver the assets to the authority for the purpose of being granted relief on penalties and interest on such assets," the amendment reads.

"A holder who discloses, reports and delivers the unclaimed financial assets within 12 months from the date of commencement of this section shall not be liable to the penalties or interest payable."

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