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Unclaimed financial assets safe with UFAA

By John Mwangi | April 28th 2019 at 02:00:00 GMT +0300

Worldwide, as is the case in Kenya, unclaimed financial assets are held by the government until owners claim them. And there are billions of abandoned assets held by the state in form of security deposits, tax refunds, long forgotten bank accounts and pension money, among others.

A common misconception by many is that the government walks away with unclaimed assets. Others also assume the money is taken up by the financial institutions holding them once they realise their owners have “abandoned” them for long.

Financial assets traverse the entire regime of cash in a bank, shares, insurance policies, money order, court refund, assets held in a ?duciary capacity, unpaid wages, safe deposit boxes, cheques, drafts or similar instruments. They also include deposits for utility services or contributions to retirement benefit schemes.

In Kenya, there exists the Unclaimed Financial Assets Authority (UFAA) - a state organ that receives abandoned financial assets from holding institutions such as banks, insurance companies, telecommunication firms, among others, on behalf of the Government.

The history of UFAA dates to 2007 when the National Treasury convened a task force to examine the practice, nature, extent and value of unclaimed financial assets in Kenya. After a study, the task force recommended a framework based on international best practice including reviewing existing legislation and developing a new piece of legislation for unclaimed financial assets.

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One of the key observations of the task force was that there existed no legal framework to deal with unclaimed financial assets and no hope of re-unifying the assets with their rightful owners at the time. The study also estimated that the overall universe of unclaimed financial assets in the financial system, the corporate sector and other institutions, including utilities, was worth over Sh50 billion.

This led to the recommendation that an authority mandated to receive, safeguard and reunite unclaimed financial assets be created and granted legal framework to operate.

Framework

Consequently, UFAA was established pursuant to an Act of Parliament drafted to provide a framework for the reporting and dealing with unclaimed financial assets - Unclaimed Financial Assets Act, 2011. UFAA started operations in 2014.

Since its inception, the authority receives unclaimed financial assets and safeguards them in the Unclaimed Financial Assets Trust Fund. It then follows up on the rightful owners based on the information given by the holders, in a process called re-unification where claimants get back their assets after a prescribed process has been followed.

Financial assets are handed over to the authority as unclaimed assets when; the records of the asset holder do not reflect the identity of the person entitled to the assets; the holder has not delivered the assets to the person entitled to them or the last known address of the apparent owner, as shown on the records of the holder, is in a country that does not provide by law for reunification of assets.

It should be noted that the primary role of reunification rests with the holder. Only when the holder has tried, and failed, to pay or deliver the assets to the owner are such assets transferred to the custody of the authority for eventual reunification. The owner has perpetual right to reunification.

Five years since the authority began operations, there have been notable milestones. Measures have been put in place aimed at facilitating reunification of unclaimed financial assets with their rightful owners as envisioned in the enabling legislation.

The authority has also been on the forefront in ensuring compliance by the holders of unclaimed financial assets through issuance of surrender notices and instituting the necessary structures, systems and procedures to guide the process. Compliance audits are also underway.

Holders have surrendered and reported assets worth Sh13 billion in cash, 564 million units of shares and 1,454 safe deposit boxes.

Report data

So far, the authority has received claims amounting to Sh421 million and 1.3 million units of shares from 7,000 claimants. Out of these, claims amounting to Sh170 million and 910,000 units of shares have been reunited with over 2,000 claimants.

In a recent baseline survey commissioned by the authority, report data shows that the total number of possible unclaimed financial assets holders in the country is 477,000 while the total estimated unclaimed financial assets were Sh241 billion as at October 2018.

These statistics largely explain low levels of compliance by holders as well as claims lodged on the assets by owners or beneficiaries on surrendered assets.

The unclaimed financial assets surrendered to the authority are therefore expected to go high as UFAA embarks on the second cycle of its 2018-2023 Strategic Plan. The plan provides for a comprehensive road map for efficient management and safeguarding of unclaimed assets in the country. It aims to ensure that surrendered assets ultimately get re-united with their rightful owners.

The authority has entered into partnerships with regulatory agencies across all sectors of the economy to deepen holders’ compliance.

UFAA through its parent ministry, the National Treasury, is engaged in the process of developing a comprehensive national policy on unclaimed financial assets to deepen the regime in the country. Members of the public are encouraged to participate in this process to enrich governance of the unclaimed financial assets going forward.

UFAA is also embarking on a massive public campaign awareness across the country to increase brand visibility, outreach and stakeholder engagements. The campaign aims to build capacity of assets holders on compliance with the Act on one hand and reunification of assets with rightful owners on the other.

The authority has deployed a robust ICT infrastructure that enables searchable database on its website as well as a mobile USSD code to facilitate reunification.

- The writer is the Managing Director of Unclaimed Financial Assets Authority. XN Iraki’s column resumes next week.


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