Pile up of unclaimed assets spurs calls for new law

Billions of unclaimed assets are unaccounted for as the country lacks proper regulation and systems to document the property.

Assets ranging from bank deposits to dividend cheques, retirement benefits and more recently virtual money held in mobile phones by deceased persons are going unchecked as the government drags its feet on instituting relevant legislation.

There are no official figures on the amount of unclaimed assets in the country, but according to a survey by the Retirement Benefits Authority (RBA) in conjunction with the Unclaimed Property Asset Register (UPAR), nearly Sh200 billion was found to be held by different institutions in 2008.

“Our baseline searches indicated that there was almost Sh200 billion worth of unclaimed financial assets lying with more than 500 different organisations,” said Joe Ngigi, the founder and chief executive officer of UPAR.

This amount mainly included cash deposits in banks, insurance premiums, retirement benefits, and dividends.

A large amount, 45 per cent, is held by commercial banks, 25 per cent by insurance firms, while pension funds hold about Sh40 billion.

Others include shares held at the Nairobi Stock Exchange (NSE) and utility deposits to service providers such as Kenya Power and Light Company and Nairobi Water Company.

According to a survey by Business Daily, Kenya Airways had a total of Sh120 million in unclaimed dividend at the end of 2009, up from Sh34 million in 2008.

Other listed firms including banks did not report unclaimed dividends in their published accounts.

Currently, there are no laws in place to track unclaimed assets making it difficult to know how much is out there.

This hinders Treasury from constituting a fund to mop up the assets.

In 2005, amendments were made to the Capital Markets Act to set up an investor compensation fund in which all unclaimed dividend would be deposited.

This is the only fund that addresses the issue of unclaimed assets in the country.

In November 2008, a draft Unclaimed Financial Assets Bill was developed but it has not been acted on to date.

The Bill proposes legislation of unclaimed financial assets held by various institutions — known as holders.

If the Bill is passed into law, such assets will, after seven years, revert to a trust fund.

Such a fund will be regulated by the Unclaimed Financial Assets Authority.

Under the principle of bona vacantia (all assets belong to the government), unclaimed property automatically reverts to the holder (government) if no one with a right to the asset claims them.

No regulation

Financial unclaimed assets refers to cash as other assets such as land and real estate fall under the respective ministries.

With unclaimed dividends falling under the investor compensation fund, it leaves only bank deposits as the biggest form of unclaimed assets.

Others such as pensions fall under the Office of the Public Trustee in the Attorney General’s office, while unclaimed land falls under the Lands ministry.

This is usually as a measure of last resort, when eligible beneficiaries do not come forth to claim the assets.

“We deal with many cases of unclaimed assets every year, especially pension related,” said Mary Njia, the deputy administrator general at the Office of the Public Trustee, adding that the assets are mostly invested in Treasury bills.

A statement of accounts is usually presented to beneficiaries of the assets who come forth, detailing the principle amount plus interest accumulated less administrative expenses incurred in holding the assets.

“So far, we’ve never reverted any unclaimed assets to Treasury as we don’t have regulations on how this would be done,” said Mrs Njia.

In more developed economies, the law ensures that unclaimed assets revert to the State for custody after seven years.

In the US, UK, and South Africa, institutions are required to submit unclaimed assets to the State which holds them in trust.

The government, on the other hand, is supposed to keep a register of the assets, which is open to the public.

In South Africa, the Registrar of Societies prepares a list of unclaimed dividends and publishes them every year in the official gazette notice.

Experience indicates that only about 25 to 40 per cent of the unclaimed assets are eventually reunited with owners.

New forms of branchless banking using the mobile phone have opened other avenues of accumulating unclaimed assets.

At the moment, there is no mechanism in place through which one can claim money held in an M-Pesa or Zap account incase of death.

“M-Pesa is yet again a new player in the market that’s going to be accumulating unclaimed assets,” said Mr Ngigi.

Holders of the assets periodically post them in the media, which UPAR collects and keeps in a data base.

Since 1992, about 20 financial institutions have collapsed leaving billions of shillings in unclaimed financial assets locked up in the Deposit Protection Fund, which covers bank customers’ deposits to a maximum of Sh100,000 per account.

“Billions of shillings are lost in unclaimed assets, where the same could form additional income for the government and probably invested as infrastructure bonds,” said Amoyo Andibo, a research analyst at UPAR.