Integrating Unclaimed Property Management into Core Business Processes
Michael R. Wood, IT & Process Improvement Specialist
January 27, 2012
January 27, 2012
Since the mid-1970s, states have continuously increased their dependency on the monies collected as Unclaimed Property (UP). Today, UP collections represent a substantial source of revenue for many states. So it should come as no surprise that states have stepped up their efforts to collect as much UP monies as they can. New types of qualifying property, shorter dormancy periods, commission-incented 3rd party auditors, and more have sent shockwaves through some industries and should serve as a wake-up call to the rest.
Yet, despite the billions of UP dollars collected each year, most organizations manage their UP oversight and reporting processes like they did in the mid-1990s or before. For many companies the process of identifying and reporting UP consists of:
- An annual request to IT for extracts of potential UP from various systems based on un-vetted or un-validated selection criteria;
- Uploading that data into a UP reporting system;
- Performing a due diligence process to find prospective owners;
- Updating the UP reporting system for the owners found;
- Reporting and remitting the remaining property to the proper state.
The problem with the above process is that there is no way to know if:
- All qualifying types of property have been properly identified;
- The rules used to identify at risk property are complete and accurate;
- The databases contain the data needed to properly identify dormant transactions and accounts;
- The data extracted hasn’t previously been reported;
- The audit trails are ever established to provide traceability of the property that was extracted.
In short, on a process maturity scale of 1 to 5, most companies score a 2. At the heart of the issue is that management and oversight have never been integrated into core business processes and underlying business systems. Since the vast majority of Enterprise Resource Planning “ERP,” banking, securities management and other business systems were developed without regard to UP requirements, the function merely does not exist within them.
Given the increased pace of UP regulatory enforcement coupled with the potential material nature of UP liabilities, it is imperative that organizations become more UP management competent. This became painfully apparent this year for life insurance companies when Florida and California conducted probes into the UP practices of Metropolitan Life Insurance Company and Nationwide Life Insurance Company. Nothing gets an industry’s attention like a nationally televised governmental probe into its practices.
The trend is clear–states want companies to expand their ability to proactively identify, track and manage potential UP liabilities across all their lines-of-business for all applicable property types. Moreover, they want companies to do this in a way that is readily auditable.
Unfortunately, this means integrating UP related business rules into core business applications that can identify potential UP from the point of owner inactivity through the entire UP lifecycle. But this is easier said than done for companies with multiple lines of business (LOB), each with multiple systems, with each system containing multiple property types. Since these systems were never designed with UP in mind or necessarily intended to share data with other systems, the complexity and cost to retrofit them can be daunting at best.
However, the graphic above explains an approach that allows companies to tackle this effort one LOB, one system at a time.
Once the repository and UP rules systems are in place, each system housing potential UP can be modified and linked into the repository. The effort can be accelerated by having the LOB systems updated in parallel once the repository and UP rules designs are complete.
In essence, by following the above (albeit simplified) approach, UP is woven into the fabric of the day-to-day business processes of the organization, no different than any other business process and supporting application. The good news is that this approach provides a streamlining of the UP process and levels out the effort needed to monitor and manage potential liabilities. The resulting process, provides a “closed loop” environment that begins with identifying and tracking inactivity events and ends with the updating of the originating transactions with its UP disposition (owner reactivation, return of property to the owner, or reporting and remittance to the proper state). In addition, this approach establishes an end-to-end audit trail. Thus, if the organization is selected for audit, the cost, time and disruption of the audit will be minimized and most likely yield little to no change.
While the above approach only affects future activity, it may identify opportunities to update historical, yet to be reported records, with UP related data.
At this point you might be asking yourself, “How do I get started with the above outlined approach?” For some, the prospect of taking on an initiative like this is overwhelming. For others, it could be an issue of garnering support and funding. In either case you might find some assistance worthwhile. The good news is that Keane is uniquely qualified to provide guidance and project acceleration services and, if need be, provide more in-depth support including:
Assessment of current processes, practices, and procedures, Project management and oversight, and Subject matter expertise related to specifying data base and application requirements and design blueprints.
Whether you go it alone or choose to outsource, it is important that you get started. This is especially true if you have been mandated to centralize the UP management process and have concerns about the quality and completeness of your organization’s compliance efforts. We at Keane are happy to provide a complementary and confidential phone consultation to discuss your company’s specific situation and needs.