The Financial Sector Conduct Authority (FSCA) in South Africa is facing serious concerns over the growing pool of unclaimed assets currently being held by financial institutions in the country.
The regulator revealed these types of assets have nearly reached ZAR 90bn (£4.5bn, $5bn, €5.1bn), with the vast majority lying in retirement funds.
As a result, it has launched a discussion paper on how best to deal with unclaimed assets in a way that doesn’t hurt or sets back customers.
The paper builds on the work being done by the watchdog and the National Treasury to find a solution that will lead to “increased disbursements to beneficial owners”, it said.
Currently, the unclaimed assets are sit in retirement funds; bank deposits, including foreign currency deposits; participatory interests in collective investment schemes; life and non-life insurance policies; and securities.
The FSCA explained that the nature and extent of the unclaimed assets problem has several layers and the responsibility does not lie with customers alone.
The most common reasons for assets not being claimed include:
- The asset owner’s failure to update their financial institutions when contact details change and inform their beneficiaries of the existence of the assets and where they are held;
- Financial institutions and intermediaries’ inadequate record keeping;
- Inconsistency in the identification and treatment of unclaimed assets;
- Employers’ failure to provide retirement funds and/or administrators with complete member details; and
- Changes in intermediaries and administrators.
Lack of understanding
FSCA commissioner Unathi Kamlana said the true value of unclaimed assets may be even bigger than the current figure since assets are held by several financial institutions not just retirement funds.
He added that some of the complexities the sector faces are a lack of common grounds on what actually constitutes a dormant or unclaimed asset and the lack of reliable data.
“We recognise that good progress has been made, but as the FSCA we remain concerned because ultimately, we have to consider whether the customers, and beneficiaries in this case, are being treated fairly,” Kamlana added.
“It is quite clear that we have to improve the outcomes for customers and that’s what this paper is trying to achieve.”
Among the 13 recommendations proposed by the regulator, some of the most significant include the creation of a single Central Unclaimed Assets Fund to collect and manage the assets on behalf of the financial services sector.
If not, the assets could be transferred directly to the National Reserve Fund for the same purpose.
Katherine Gibson, deputy commissioner at the FSCA, said the measures aim to avoid a build-up of unclaimed assets in the future. “We are approaching this from a fairness point of view on behalf of customers, most of whom are from vulnerable backgrounds. This fits in well with our wider consumer protection framework.”