Managing dormant bank accounts, dividends – Punch

By The Citizen
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The issue of unclaimed bank deposits has recently returned to the front burner of public discourse. In voicing its frustration with the huge volume of unclaimed deposits in failed banks, the Nigeria Deposit Insurance Corporation has reminded Nigerians that the regulators have so far failed to address this potent problem. More purposeful initiatives are urgently required therefore to recover all such money and deploy same productively in the economy.

The laxity of our regulatory environment is evident in the inability of the Central Bank of Nigeria, the Securities and Exchange Commission and the government to come to grips with dormant bank accounts, unclaimed deposits, unclaimed company dividends and even inheritances.  The NDIC concern is only a small part of the huge pie of unclaimed monies that unscrupulous bankers and company bosses are sitting on.

According to Umaru Ibrahim, the Managing Director of NDIC, some depositors of the failed banks had failed to come forward to claim their money. One explanation is that most of such unclaimed deposits ranged from N200 to N1,500 per customer, many of whom reckon that the rigour of verifying their claims is not worth their while. The money is now sitting in the CBN's vaults.

But not so the huge funds that the surviving banks are holding tightly on to, with no definitive, creative direction from the CBN of what to do with them.  The incompetence of the regulators is deepened in the mystery surrounding the sums. No one has officially given a definite figure of exactly how much is being held individually and collectively by the banks. With the CBN and the banks rebuffing media requests for information on the figures, estimates of dormant bank accounts in the deposit money banks range from N100 billion to N1 trillion!

In March, Arunma Oteh, Director-General of SEC, disclosed that the value of unclaimed dividends in the capital market by December 2012 stood at N60 billion. This represents a 46 per cent increase over the N41 billion unclaimed dividends by December 2011.

No serious government allows such carelessness to continue and Nigeria's should not be different. Dormant accounts are bank deposits that feature zero activity over a period of time and every economy has had to grapple with the phenomenon. Like unclaimed dividends - dividend (profit) payable to shareholders by companies - the volume of dormant bank accounts is usually high. Governments around the world are concerned that the owners or beneficiaries of such monies be found and also seek to prevent banks and companies from converting them to their own use. The United Kingdom banks have £500 million as dormant accounts and another £435 million in dormant National Savings and Investment accounts (a national postal savings scheme). Canada's banks have $500 million in dormant accounts.

The CBN and SEC need to come up with more robust responses to the challenge of unclaimed monies. In March 2011, the CBN instructed Nigerian banks to undertake audits of all their dormant accounts and forward the details to it. There has since been no effective follow-up to identify and contact the owners/beneficiaries. A similar directive by the Reserve Bank of India in 2008 was, unlike in Nigeria, followed up and new rules now make it mandatory for Indian banks to track all owners of the country's 10 million inoperative accounts. The CBN should compel banks to make more strenuous efforts to track owners of dormant deposits here, including contacting referees and next-of-kin of the account holders.

The CBN should also review the period of inactivity within which an account can be declared dormant. The six months adopted by Nigerian banks fall short of the one-year operating in Malaysia, two years in India and three years in the UK.

Going forward, the CBN should initiate legislation to create a special fund like Malaysia's Registrar of Unclaimed Moneys, a state agency that warehouses unclaimed deposits after seven years of dormancy. Under the UK's Dormant Bank and Building Society Accounts Act passed in 2008, the state reinvests unclaimed money in the community. It authorises the government to collect money unclaimed for 15 years and spend on charity, lottery funds and community projects, though claimants can still collect with interest anytime they come forward.

We should take a cue from other jurisdictions and recover unclaimed money from banks and companies. Though some of our banks do write owners of inoperative accounts, follow-up is often lacking when there is no immediate response. SEC should lobby the National Assembly to quickly pass the Unclaimed Dividend Trust Fund bill now before the parliament into law to allow for proper management of unclaimed dividends.

It is crucial for banks to simplify the authentication processes for owners/beneficiaries. The present processes are cumbersome, time-consuming and expensive. This is a disincentive to investment. The NDIC should simplify its account authentication. Claiming dormant money becomes worse in Nigeria where documentation is required from the federal and state governments. The process has given room invariably for corruption.

All stakeholders should tackle the issue with urgency. Properly managed, unclaimed funds can be recovered and utilised in the economy and also encourage savings and investment.