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November 20, 2018

Why billions will continue to lie unclaimed in banks

Finance Minister Njeru Githae. Photo/ Jack Owuor
Finance Minister Njeru Githae. Photo/ Jack Owuor

The Unclaimed Financial Assets Authority board is yet to be appointed eight and a half months after the law was signed by the president on the 16th of December 2011. The minister for finance was expected to appoint the team of five ahead of the first unclaimed assets reporting deadline on the 1st of November 2012.

The team will have the mandate of managing the assets as a trust fund, defined by law as property that remains unclaimed after a period of between two to seven years depending on the type of asset. They will act as trustees to the Unclaimed Assets Trust Fund. Its the terms of reference cover valuation of unclaimed financial assets, conduct inventories and give recommendations for an appropriate legal, regulatory and institutional framework to govern these assets.

The volume of unclaimed assets in Kenya are variously valued at between about Sh9.2 billion by accountants and Sh200 billion by actuaries. Actuaries are mathematicians who translate numbers into understandable statements.

Commercial banks are holding an estimated Sh7.4 billion; listed companies have on Sh1.4 billion of unclaimed dividends, the NSSF Sh243 million in unclaimed contributions and insurance companies about Sh200 million in unclaimed life policies.

Barclays bank, Kenya Commercial bank and CFC Stanbic bank are among the institutions which have already prepared their lists of unclaimed assets ready for submission.

According to the actuaries, some of the assets may never be claimed while others may never be traced by the rightful next of kin because even the holders’ advice that access to such information must be kept secret at all times. While death leads in the list of the most common reason that assets remain unclaimed, several other reasons abound.

These include funds left hanging in money transfer channels, like mobile money where pin numbers are supposed to kept away even from spouses. The money remains in the telephone lines. Other assets are stuck with a third party when a business is dissolved like it happened with East Africa Airways or when the property owner leaves a jurisdiction without leaving any contact information.

“In a country where most of the heads of households do not write wills, one may want to find out whether when their kins died long time ago or yesterday they left something undeclared to the rightful heir,” said Joe Ngigi Chief Executive of Unclaimed Property Assets Register company.

The Unclaimed Financial Assets Authority was created to track down owners of the massive amounts of unclaimed assets. It is expected that they would re-unite assets and accrued interest with owners, some of who may be too poor to follow up, and others who are unaware of the existence of the assets. It could be cash in a bank, shares, insurance, National Social Security Fund contributions or even pieces of land. Curiously, all Kenyans who have gone through school never claim caution money after completing their studies, and that also counts as unclaimed assets.

“The problem is Kenyans do not keep records, some of which could help a lot, if there is no written will to form a basis for next of kin to initiate a claim process,” said Ngigi, the CEO of the Unclaimed Property Assets Register, a private consulting company.

Although the law requires the holder of the assets to make a reasonable attempt to trace the original owners through the last known address, the assets are handed over to the authority if the owner is not found. If you believe your next of kin may have left some assets with an institution or company it is time to start dusting documents that you previously considered useless old records.

For instance some old love letter sent to you through a post office box that the company had in its records as the contact address for the deceased. Even if the postal address no longer exists, it may just be the prove to the assets holder that the deceased was your spouse. This is of course if other supporting documents are unavailable.

That may be a vital document as the holders try to make it hard for you to claim an asset on basis that no will or notes were left by the original owner stating that you are the rightful beneficiary.

After all some of the companies would want to shield some of the assets from owners because they are profitable to keep as along as no one can claim them easily. Reasons may vary from getting an income from interest on cash assets, trading with the assets or strengthening their asset book.

“For example a school that has been in existence since 1960’s and never reimbursed caution money to its former students for all those years may be hesitant to declare the unclaimed assets for fear of collapse if the owners claim them with accrued interest. Assets that belong to widows, spouses and would be beneficiaries of deceased persons have been lying all over in the hands of third parties”. Ngigi said. “How about people who might want to claim electricity or water deposits left to the utility companies when they either shift houses or offices?”

Equally, if someone bought a few shares of a company at ten shillings in the 1970’s and forgot all about them, they would be worth millions today.

“We do not value small amounts of money or assets unless the value appreciates dramatically to jolt us into attention. Imagine someone who had a piece of land in Ngong or Kitengela in 1980’s when a full acre would not fetch Sh500 and compare with today. If that person died without leaving proper records the current owner would be making millions” said Ngigi.

It is estimated that one third of insurance policies are not paid because family members were not aware of the policy or the insurance company was not notified. In most cases family members are unaware of their entitlement to collect or make a claim on behalf of a deceased relative. Unreported change of address, name change after marriage, divorce, illegal records, emigration, and tax evaders registering under several names to cover their tracks as well as secret offshore accounts, laundered assets or assets for a large part of unclaimed assets.

“The new form of unclaimed assets phenomenon is a consumer driven issue and therefore the policies and strategies must focus on them. That is why we must insist on keeping of records because there is no asset too small to be recorded,” said Ngigi.

The unclaimed register firm has positioned itself to take the challenges of compiling data and consultancy services from institutions that avoid the costly affair of looking for relatives of the deceased or rightful heirs of the assets. In the US, unclaimed property is handled at the state level. Each state maintains its own unclaimed property office, where it is possible for the owners to search.

The new law is still inadequate because it is not aligned with the Succession Act, the Banking Act, the Companies Act and the Public Trustee Act and many Kenyan habits of hiding.

“Unclaimed assets will always be there, but we can not legislate against people to force them into writing wills or keeping records, so we are left with the option of looking at ways of having institutions to take the responsibility together with the government which the overall trustee of its people’s wealth. There is need for this kind of financial literacy among the individual phenomena,” Ngigi said.

Ngigi suggests that the trust fund be administered through investment policy in government paper like bills and treasury bonds for public good, as a cheaper source of funds for the government domestic borrowing because it is non tax revenue.

He said it would be difficult to channel into charity like it is done in other countries because in Kenya it might be misused or become an object of unhealthy competition for which charity it should go. “The largest portion of the blame for a huge accumulation of unclaimed assets is the heads of households, who do not leave records or write wills” Ngigi concluded.

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