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Insights from the NAST Symposium, Part 1

Posted By Contribution by Christa DeOliveira and Michael Unger, Wednesday, July 3, 2019
Updated: Tuesday, June 25, 2019

The National Association of State Treasurers’ (NAST) Annual Treasury Management Training Symposium held during May 2019 in Providence, Rhode Island, was engaging and enlightening. The National Association of Unclaimed Property Administrators (NAUPA) is affiliated with NAST and led the well-attended unclaimed property track of educational workshops and sessions. This blog post is part one in a series about the topics discussed in the symposium sessions.

 

NAUPA 3

Still under development, the NAUPA 3 format will use Extensible Markup Language (XML) to offer previously unavailable flexibility for the evolution of data fields/information reported and to accommodate state-specific requirements. NAUPA will create a standard suggested XML Schema Definition, with the understanding that states have different statutory, regulatory and administrative data reporting requirements. Therefore, states will modify the schema to fit specific reporting needs. While there will continue to be differences across states, having the state-specific schema will greatly assist transfer agents and other holders to appropriately program their systems and determine which data needs to incorporate into the report file. The schema will also provide a means for upfront data validation tools to be built. 

 

Although progress has slowed, the NAUPA 3 initiative has been both thoughtful and comprehensive. Originally anticipated for completion by the end of 2018, NAUPA 3’s introduction has been pushed back to the end of 2019. The format will likely be sent to NAUPA members for feedback on approximately August 1. Shortly thereafter, it will be shared with unclaimed property reporting software developers and the larger holder community. This will provide an opportunity for additional input and commentary. It remains to be seen how quickly state and holder systems can be programmed once the final format is determined.

 

After the new format is completed and presented to the holder community and software providers for feedback, there will be more necessary and time-consuming steps. Specific details on transitioning to NAUPA 3 on a state-by-state level, as well as the timeframe when old and new formats will be concurrently accepted, remain unknown. NAUPA anticipates encouraging states to accept both formats for about a year.

 

Strategic Plan

NAUPA’s 2018-22 strategic plan remains in effect. The association continues to make resolutions and policy position papers a goal. Previously, NAUPA determined a need for policy positions, and it plans to adopt official policy statements. On the short list is a paper backing the position that NAUPA does not support pure escheat where an owner’s rights are terminated. 

 

Combatting Fraud

States continue to share knowledge and best practices about processing claims and combatting fraud. Fraud detection and prevention methods include using identity verification and risk scoring tools to look for red flags. Such efforts may focus on specific email addresses, track IP addresses where claims originate and examine browser versions being used. 

 

Rapid completion of forms and use of all capital letters may raise red flags, as most claimants do not fill out forms quickly or use all caps. Analysis of online user habits continues to get smarter, but offenders are also getting more sophisticated. It is important that risk profiles and risk scoring continue to evolve.

 

What is an acceptable amount of fraud? Inserting enough friction in the unclaimed property claims process to stop all fraud could result in the costs outweighing the benefits. A tiered approach is advisable, such as under $50 and high dollar claims requiring different levels of scrutiny. With a layered approach, there is not a single solution. 

 

In practice, confirming the validity of uploaded documents is difficult. Sometimes employees lack sophistication on complex claims procedures, checklists and knowing when to ask for help. Claims processors can look for anything misplaced or unusual. Does the document exactly match itself? Are the fonts the same? Is it a copy of a website? Relying on more than one document provides more data points for substantiation and analysis. 

 

There can also be fraud in holder reporting. States rely on holders to report properly and to prevent fraud before property gets reported to states. For example, a holder paid with a fraudulent credit card and subsequently tried to file claims the next day. Such fraud can be prevented by waiting 10 days and ensuring full receipt of the payment remittance before making property available for claims via the state’s website.

 

To reduce the possibility of internal fraud, states can build processes, including segregation of duties, dual sign off, co-duties and steps to look for collusion. Rotating job functions, having clearly defined roles and verifying employees are performing only authorized duties also reduce risk.

 

Other Trends

Most states reported consistent year-over-year increase in property returned to claimants. 

 

More states are planning to transition to KAPS as their software system in part for online reporting features it offers for states and holders. Also, the KAPS system aids states in claims support, and some data validation tools assist streamlining.

 

Individual State Highlights

Highlights from the State of the States sessions included:

  • Wyoming raised awareness of its program to allow owners of property to donate property to charity instead of claiming property to have it returned.
  • Delaware reported that approximately 50% of holders invited to participate in the secretary of state’s VDA program have opted in.
  • The New Brunswick unclaimed property program establishment push is reportedly losing momentum. 
  • Kentucky announced it will be cleaning up RUUPA soon.
  • In addition to Washington assessing penalties, it will also be starting a self-audit program.
  • Illinois reports it is focusing on preneed funeral contracts.

 

The NAST Symposium unclaimed property track included important insights on priorities, trends and highlighted educational topics. While the topics covered may not directly or indirectly impact all property type holders, it is worthwhile to remain aware of NAUPA developments. It is also important to be informed of opportunities to work together with states, where our expertise and needs are aligned, and we can share our respective unique expertise and insights, and related unclaimed property challenges or issues. 

 

More information on this symposium will be available in future blog posts.

 

Christa DeOliveira is chief compliance officer with Linking Assets Inc. Michael Unger is a senior manager with Crowe LLP’s unclaimed property practice. 

Tags:  fraud  NAST  NAUPA  NAUPA 3  unclaimed property 

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