Unclaimed property compliance: Ensuring risk mitigation and sustainable success

Unclaimed property compliance is an urgent and growing challenge for financial institutions. With more than 50 U.S. jurisdictions imposing strict and evolving regulations, institutions face mounting risks: fines, audits, and reputational damage. Robust compliance is now a critical priority for organizations seeking to control costs, avoid disruption, and maintain stakeholder trust.

Here you will find actionable strategies for CFOs, General Counsels, Compliance Officers, and other executives at financial institutions to actively manage unclaimed property risks—covering governance, due diligence, reporting, audit preparedness, and the effective use of Voluntary Disclosure Agreements (VDAs). Readers will learn how to control compliance costs, minimize exposures, and reinforce trust with both regulators and customers, ensuring sustainable regulatory success.

Key Takeaways for Executives

Unclaimed property is a material risk for financial institutions: Multi-state audits and increased enforcement can result in significant financial penalties, business disruption, and reputational damage.
Invest in scalable, automated reporting solutions: Reduce manual workloads, increase reporting accuracy, and adapt more easily to expanding regulatory requirements.
Leverage Voluntary Disclosure Agreements (VDAs): Curtail potential fines, control the timing of risk remediation, and avoid business interruptions often associated with audits.
Strengthen governance proactively: Address compliance gaps, assign clear ownership, and resolve issues before they trigger regulator attention.

What is unclaimed Property?

Unclaimed property encompasses financial assets that have become inactive or abandoned by their owners for a specified period. Common examples include dormant bank accounts, securities, uncashed checks, insurance proceeds, wages, and retirement accounts. By law, holders (e.g., corporations, banks, insurers) must report and remit unclaimed property to the appropriate state after a defined dormancy period.

“Escheatment” refers to the transfer of unclaimed property to the state for safekeeping, safeguarding these assets until they can be claimed by their owners. Although all U.S. states and territories maintain unclaimed property statutes, requirements continue to differ widely despite standardization efforts such as the Revised Uniform Unclaimed Property Act (RUUPA).

As legislation continues to evolve, including changes such as shortened dormancy periods and enhanced due diligence protocols, organizations must remain agile to maintain compliance. Broadridge’s consulting services are designed to help clients stay current with regulatory changes and navigate these transitions.

The regulatory environment for unclaimed property is highly decentralized, with over 50 jurisdictions as well as the SEC with each enforcing their own escheatment laws. Key compliance elements typically include:

Monitoring inactivity and dormancy triggers
Conducting owner outreach and due diligence
Timely and accurate reporting
Proper remittance of property
Maintaining adequate documentation to demonstrate compliance

Recent trends include increased use of third-party auditors, more stringent outreach requirements, and the emergence of new rules for digital assets such as cryptocurrency in a small but growing states and frequent changes to dormancy thresholds.

Non-compliance can result in fines, audits, reputational damage, and significant administrative disruption.

Case Study: Regulatory Consequences of SEC Rule 17Ad-17 Noncompliance

While most unclaimed property enforcement is conducted by state governments, in 2023 the U.S. Securities and Exchange Commission (SEC) also increased oversight of lost security holder compliance under Rule 17Ad-17.

Background

DST Asset Manager Solutions, Inc. (DST) served as a transfer agent for mutual funds. SEC Rule 17Ad-17 requires every recordkeeping transfer agent and every broker or dealer that has customer security accounts—including accounts of lost securityholders—to exercise reasonable care in locating them when mail is returned as undeliverable. The rule specifies using database searches by taxpayer identification number (TIN) or, if a TIN search is unlikely to succeed, by name. These searches must occur at least twice: once between 3 and 12 months after the securityholder becomes lost, and again between 6 and 12 months after the first search.

Violation

The SEC found that DST violated Rule 17Ad-17 by failing to exercise reasonable care to ascertain the correct addresses of lost securityholders. DST's written policy required verifying the accuracy of a found address by matching it to the securityholder's first name, but in practice, they further filtered searches by requiring a match based on both the first and last name. This additional, stricter requirement was contrary to Rule 17Ad-17, which states that searching by name should only occur if a TIN search is not reasonably likely to locate the individual. As a consequence of this deficient policy and practice, 78 securityholders had their accounts escheated to various states, totaling approximately $651,000 in assets ^[2].

Outcome

The SEC entered a consent order with DST in August 2023 ^[1]. Without admitting or denying the SEC's findings, DST agreed to a censure and a $500,000 civil money penalty ^[1]. Additionally, DST committed to undertake certain actions, including requesting its mutual fund clients to periodically inform shareholders about escheatment risks and encourage them to keep their contact information updated, and certifying annually for five years that their written policies and procedures comply with Rule 17Ad-17 ^[1].

Key Takeaways

This case highlights the importance of financial institutions having robust unclaimed property programs and meticulously following the requirements of Rule 17Ad-17 to protect investor assets and avoid regulatory scrutiny.

The SEC’s enforcement highlighted the need for stronger internal controls, thorough recordkeeping, and ongoing staff training. For financial institutions, robust compliance with unclaimed property obligations is essential—not only to avoid penalties, but to protect investor trust and organizational integrity.

Policy and Governance

A well-defined governance structure is the foundation of effective compliance. Many organizations struggle with fragmented processes and unclear roles, increasing their exposure to risk.

Manual processes and unclear policy ownership commonly cause missed regulatory deadlines and inaccurate filings—the top triggers for state audits. Based on our experience, we have seen first-hand the significance and far-reaching consequences that can arise from inaccurate unclaimed property filings due to insufficient governance controls. For financial institutions, these include:

Regulatory penalties and fines
Increased audit risks
Loss of investor or customer confidence
Legal liability
Operational disruption

Proactive investment in compliance not only mitigates regulatory and legal risks but also protects firm’s reputations and the trust of those they serve.

Identifying Unclaimed Property

Timely identification of property that may be subject to reporting requirements is crucial for unclaimed property compliance. Organizations frequently face challenges such as fragmented data and varied application of dormancy triggers—for example, when mail is returned as undeliverable (RPO) or when checks remain uncashed for an extended period.

Centralized monitoring, well-defined dormancy triggers, and distinguishing between true account activity and automated postings are vital to timely property identification.

Routine assessments reduce false positives and improve early detection.

Due Diligence Procedures

States generally require holders to make reasonable efforts to contact owners before unclaimed property is escheated, often by sending due diligence letters 60–180 days prior to remitting the property. These requirements can vary significantly across jurisdictions. Failure to follow due diligence procedures may result in penalties, interest, increased audit risk, or even damage to reputation for the organization.

To highlight the intricacies of due diligence procedures across states, the following are a subset of requirements firms are expected to follow:

As of July 1, 2025, Washington will require holders to mail due diligence notices to owners for all unclaimed property valued over $50 (reduced from the previous $75 threshold). This change aims to expand outreach to more property owners before escheatment occurs (Wash. Substitute H.B. 5316, 2025).^[5]
Beginning October 2025, Maryland will allow holders to use email as an alternative to first-class mail for due diligence on unclaimed property, but first-class mail remains required if the email fails or the owner does not reply within 30 days (Md. H.B. 761, 2025). This modernizes the due diligence process by incorporating electronic communication while maintaining a fallback to traditional methods for unresponsive owners.^[3]
Effective October 2025, Montana allows holders to use email for due diligence notifications on unclaimed property, provided the owner has consented. If email is not an option, first-class mail must be used instead (Mont. S.B. 240, 2025). This provides flexibility but prioritizes owner consent for electronic communication.^[4]

Due diligence for unclaimed property is not a one-size-fits-all process. Each state’s laws introduce unique requirements regarding timing, thresholds, notice content, delivery method, documentation, and exemptions. Staying compliant requires careful tracking of these differences and regularly updating internal procedures as state laws evolve.

Reporting and Remittance

Each jurisdiction has unique reporting formats, deadlines, and remittance processes. Manual management of these varying requirements increases the risk of errors.

Adhering to state-specific requirements, proper reporting formats, and well-designed remittance controls ensures accurate compliance.

Independent process assessments reduce errors, increase reporting efficiency, and improve audit preparation.

Unclaimed property audits can encompass periods extending up to 15 years. If an organization lacks adequate documentation for this period—including records of reportable property, owner communications, and all relevant transactions—it faces significant risks. Incomplete or missing records can lead to costly penalties, estimated liability assessments, and increased scrutiny from auditors.

Additionally, modern compliance demands efficient processes and the ability to adapt to ongoing regulatory changes. Integrating unclaimed property identification, tracking, and reporting with broader financial operations ensures organizations are prepared to address both current compliance requirements and future regulatory developments.

Case Study: Streamlining Unclaimed Property Management at a Broker-Dealer

A mid-sized broker-dealer faced rising volumes of unclaimed property, such as uncashed checks and returned statements, as its client base grew. Legacy record keeping and inconsistent follow-up led to missed deadlines and audit risks, further exacerbated by the complexities of the unclaimed property regulatory landscape.^[6]

To address this, the firm implemented an integrated software platform. This system automated the flagging of problematic accounts, centralized compliance tracking across various jurisdictions, and streamlined client outreach, including automated communications and standardized escalation protocols. According to the Unclaimed Property Professionals Organization, technology solutions can significantly aid in developing best practices for unclaimed property management.^[7]

The results:

Passed a state audit with no penalties due to complete records, demonstrating strong compliance adherence.
Reduced manual workload and improved client response rates due to streamlined processes and automated outreach.
Handled growing unclaimed property volumes without extra staff, highlighting the scalability and efficiency of the solution.
Enhanced client trust by proactively reuniting customers with assets, aligning with FINRA's emphasis on maintaining client contact to prevent accounts from becoming lost or abandoned.^[8]

Investing in scalable, technology-enabled record keeping solutions is essential for organizations seeking to manage unclaimed property effectively. Such solutions not only support compliance and risk management but also enable growth and improved customer service in an increasingly complex regulatory environment.^[8]

States are intensifying audit activity. Preparation is critical, as common unclaimed property audit triggers include inconsistent filings or a lack of historic submissions, mergers and acquisitions, ignoring state communications, and issues with property type reporting.

Actively assembling documentation, preparing teams, and developing effective communication strategies can significantly reduce audit risk. Companies that proactively strengthen audit readiness not only respond more effectively to inquiries but also position themselves to take advantage of voluntary compliance options.

Importantly, states are rapidly moving beyond traditional third-party audits by requiring organizations to conduct formal unclaimed property self-assessments. These requests are far from routine—they serve as deep examinations of a company’s historical practices and can expose overlooked liabilities, data gaps, and policy deficiencies. Increasingly, states are using self-audits as a screening tool—any gaps or inconsistencies may escalate into a costly and time-consuming process. What might seem like simple due diligence may instead trigger full-scale regulatory audits, severe penalties, or even investigations affecting multiple jurisdictions.

In many cases, organizations only become aware of hidden risks after undertaking these self-assessments. A superficial or incomplete review can escalate your case, resulting in heightened scrutiny and amplified risk—not just from one state, but potentially from others as well, including the SEC. In this new climate, strong compliance practices are not just prudent—they are essential for protecting your organization’s reputation and financial security.

Many states offer Voluntary Disclosure Agreement (VDA) programs that allow organizations to voluntarily report and remit previously unreported unclaimed property. By participating in a VDA, a company may be eligible for reduced penalties and, in some cases, a waiver of interest or protection from certain audit risks. VDAs are particularly useful for businesses that have discovered gaps in their historical reporting or have not previously complied in specific jurisdictions.

A VDA provides a formal opportunity for both parties to resolve past noncompliance and bring the holder into full compliance with state law.

Key Benefits of VDAs:

Most VDA programs provide significant relief from penalties and interest that would otherwise accrue if non-compliance were discovered through an audit.
Completing a VDA often shields the organization from future audits for the periods and property types disclosed, providing greater certainty and closure.
Participating in a VDA signals to regulators a commitment to compliance, which can help build trust and reduce scrutiny.
VDAs allow organizations to manage the review and remediation process internally, rather than under the constraints of a third-party audit.

Conclusion

Achieving and sustaining unclaimed property compliance requires a proactive approach: strong governance, regular independent process evaluations, and investment in scalable, automated compliance solutions. As regulatory scrutiny grows and audit windows lengthen, organizations must keep pace with complex and evolving requirements across jurisdictions.

By recognizing triggers for unclaimed property, conducting diligent outreach, maintaining robust records, and leveraging tools like Voluntary Disclosure Agreements, executives can reduce compliance costs and risks, minimize audit exposure, and build trust with regulators and customers alike. Ultimately, prioritizing these best practices enables companies to manage financial and reputational risks while positioning themselves for operational efficiency and long-term regulatory success.

Broadridge brings deep industry expertise, practical solutions, and ongoing support to help organizations navigate every aspect of unclaimed property compliance. Learn more about how Broadridge can help your organization mitigate risk and strengthen compliance practices. Contact us today to schedule an independent assessment or discuss a tailored compliance program for your organization.