An International Perspective on Using Dormant Assets to Fund Social Programs

One of the distinctive aspects of the BC Unclaimed Property Society (BCUPS) is its philanthropic business model, in which a portion of outstanding unclaimed funds are transferred to charity each year to support various community and social programs.

Over the past two decades, a handful of countries have also put dormant funds to work to address social issues, notably the UK, Ireland, and most recently Japan.

Japan launched its first unclaimed property program this year following the passage of the Dormant Deposit Utilization Act in December 2016.  The program utilizes funds from dormant bank accounts that have been inactive for ten years or more to finance social welfare activities supporting children and young adults, people facing severe financial constraints, and to champion the revitalization of local communities. The Japanese government estimates there is approximately 70 billion yen in dormant assets in the country and anticipates allocating 3 billion yen to address social issues this year through the newly created Japan Network for Public Interest Activities (JANPIA) (www.janpia.or.jp/en/)

Last spring, the Japanese government hosted the International Symposium on Utilizing Dormant Accounts for Social Issues. The event brought together unclaimed property representatives from Canada, Ireland, and the UK to discuss best practices on using dormant assets to fund social causes, as well as a delegate from the United Nations. Alena Levitz, Executive Director of BCUPS, and Kevin McCort, President and CEO of Vancouver Foundation, participated in the symposium.

The symposium explored the benefits of using private funds to address social problems as an alternative to relying exclusively on government funding.  Participants discussed their respective dormant account business models, best practices, approach to philanthropy, and how using dormant assets for social causes meets the UN’s sustainable development goals.

The United Kingdom

The UK introduced its unclaimed property program in 2008 with the passage of the Dormant Bank and Building Society Accounts Act. Under this program, unclaimed balances held by banks and building societies that have not been touched for 15 years were deemed dormant if their owners could not be traced. Dormant funds are transferred to Reclaim Fund Ltd. (https://www.reclaimfund.co.uk/) under the auspices of government, the British Bankers’ Association (now UK Finance), and the Building Societies Association,  which in turn distributes funds to The National Lottery Community Fund (previously known as Big Lottery Fund) and then onwards to good causes across the UK.

In 2018, the UK government expanded its dormant program to include a wider range of financial assets, covering insurance and pensions, investment and wealth management, and securities sectors. To administer the program, the government established the Dormant Assets Financial Inclusion Organisation – now called Fair4All Finance (https://fair4allfinance.org.uk/) – responsible for deploying £55 million of funding from dormant accounts

One of the unique aspects of the UK program is that it’s strictly voluntary. Industry champions in the banking, securities, pensions, insurance, wealth management, and investment sectors are appointed by government to raise awareness about remitting dormant accounts and encourage participation in the program.

Since the UK launched its program, more than £1.2 billion from dormant accounts has been collected with over £660 million allocated to address the complex challenges facing the most vulnerable in society.  For example, Big Society Capital, a social investment bank funded through the program, buys properties, which are refurbished and then leased to St. Mungo’s Housing Association. The Association then makes these properties available to families living in temporary accommodation. Through this initiative, nearly 1,000 homes have been provided to help families rebuild their lives.

Ireland

Ireland introduced legislation governing dormant accounts in 2001 covering funds held by all financial institutions, including post office savings accounts, bank deposit accounts, savings bonds and certificates, installment savings and certain life assurance policies. Under the legislation, a dormant account is defined as an account that has not had any activity for 15 years.  If the rightful owner cannot be contacted, funds are transferred to the Dormant Accounts Disbursement Board, and eventually to the Social Innovation Fund Ireland (SIF), which administers the money used to support various social causes. Since the fund was established, approximately €1 billion has been recovered from dormant accounts.  Of that, approximately €300 million have been reclaimed by account holders.

The Social Innovation Fund (www.socialinnovation.ie) supports non-profits, charities, and social enterprises and promotes social innovation. Every Euro raised by the fund is matched by a Euro from Government through the Department of Rural and Community Development via the Dormant Accounts Fund. Since the program’s inception, the Government and SIF have provided grants and business support to 86 social innovations in Ireland addressing social issues such as technological social innovation, community resilience, social enterprise development, education, health, mental health and more. One project involved funding the development of FoodCloud’s smartphone app for supermarkets with food nearing its expiration date. The app allows food retailers and charities to communicate about the availability of surplus food, so delivery and collection could be arranged, thereby reducing food waste. 

Canada

In Canada, only three provinces have unclaimed property programs in place (Alberta, British Columbia, and Quebec) covering provincially-regulated companies and financial institutions. Banks fall under federal jurisdiction and are required to report unclaimed bank balances to the Bank of Canada.  Unclaimed property legislation was introduced in New Brunswick in November 2019 and could be implement by 2020.

Canada’s first unclaimed property was introduced in BC in 1999 with the passage of the BC Unclaimed Property Act. The province’s program is managed by the BC Unclaimed Property Society (http://unclaimedpropertybc.ca), which was established in 2003.

In BC, unclaimed funds are held by either mandatory or voluntary holders. Mandatory holders, which include municipal and provincial courts, credit unions, and real estate agents, debt collection agencies, and companies in liquidation, are required by law to report and remit dormant accounts to BCUPS.  Voluntary holders, which include trust funds, property insurance, and closed pension plans, are not mandated by law to report and remit but strongly ‘encouraged’ to do so. The dormancy period for unclaimed funds ranges from one to 10 years depending on the holder and type of funds held. There is also no statute of limitations to claim dormant funds in BC.

Every year, BCUPS transfers a portion of outstanding unclaimed funds to Vancouver Foundation (https://www.vancouverfoundation.ca/), Canada’s largest community foundation, for philanthropic purposes. The amount varies each year and is based on an actuarial model that ensures funds are available to meet future claims.  Since BCUPS’ inception, more than $40 million has been transferred to Vancouver Foundation to address social issues.  The Foundation directs these funds to high-priority projects that have the most social impact, such as combatting the opioid crisis, reducing homelessness, and helping young adults successfully transition out of foster care by providing necessary community, education, and housing support and lobbying government for policy changes supporting young people.

Challenges and Opportunities

Every jurisdiction and organization managing dormant accounts faces numerous challenges.  Symposium participants cited awareness and legitimacy among  the biggest challenges facing the sector.  Companies remitting dormant funds and people claiming money need to have a high level of trust that assets are being managed responsibly, which requires a strong element of transparency and evaluation of the end result.  Speakers felt it was important to demonstrate that the funds directed to charity were having a meaningful social impact.

Vancouver Foundation takes a community-based approach to philanthropy. As part of the granting process, the Foundation asks charities to identify issues that are important to them.  Panels of community experts then review the proposals and select those most likely to succeed. Kevin McCort told the symposium the Foundation is now asking charities to go beyond expected service delivery by working at the systemic level to address the root causes of social problems.

“It takes time to get an organization to shift from a service mentality to a system change mentality,” he told the symposium.  But with the right types of support in place, the results are meaningful and long-lasting.

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