Banks now face audit over unclaimed assets

Banks, insurers and telecommunications firms could soon be required to conduct a separate audit report on unclaimed financial assets as the government moves to boost compliance.

The National Treasury has published a draft Unclaimed Financial Assets (UFA) policy which it says will raise the bar of reporting requirements with regard to abandoned assets such as bank deposits.

The move is expected to help Unclaimed Financial Assets Authority (UFAA) to collect more unclaimed assets. The agency had received Sh10 billion of the abandoned assets by last year.

Kenya Power, for instance, had failed to submit cumulative uncollected dividends and other financial assets amounting to Sh1.7 billion in the year ended June 2018.

“The UFAA shall engage relevant accounting bodies, notably Institute of Certified Public Accountants of Kenya (ICPAK), to include audit of UFA as part of statutory/compulsory audit of holding institutions, both public and private,” says Treasury in the draft policy.

Compulsory audit

ICPAK chairman Julius Mwatu said in the absence of a compulsory audit, UFAA had only instructed ICPAK members to audit specific institutions.

“There were only specific institutions like banks, Safaricom, insurance companies and pension firms, who by nature of their business will always have unclaimed financial assets,” said Mr Mwatu.

“It is not compulsory for all organisations to have a specific audit on unclaimed assets. But the new draft wants to put this in law, meaning whoever will be auditing companies them will also produce separate report on UFA.”

The draft further seeks to seal gaps in the existing law as well as strengthen the capacity of UFAA to recover financial assets. Currently, UFAA’s only office is in Nairobi with no outposts or agents elsewhere in the country.

Best practices

It further notes that many institutions holding unclaimed assets continue to operate below the envisioned regulatory standards and best industry practices that could have helped reunite such assets with their owners or next of kin.

“This justifies setting and enforcing uniform definitions, accounting and reporting requirements for unclaimed financial assets across all sectors envisaged under this policy,” says the draft policy.

New financial instruments including balances in mobile money and banking innovations as well as in the emerging area of crypto-currencies will also be covered in the proposed law.