On 22 September 2022, the Financial Sector Conduct Authority (FSCA) published a discussion paper on the framework for unclaimed assets in South Africa (Discussion Paper). The Discussion Paper is aimed at building on the work conducted by the National Treasury in respect of unclaimed retirement benefits and fostering debate on how lost accounts and unclaimed assets should be treated in a way that is consistent with treating customer fairly principles.
According to the Discussion Paper, lost accounts and unclaimed financial assets are a global challenge and unclaimed retirement benefits impact underprivileged and vulnerable people in South Africa disproportionately.
In this regard, there is an estimated ZAR 88.56 billion in unclaimed assets held by financial institutions across the financial sector. Given the lack of a common understanding of what constitutes an ‘unclaimed asset’, ‘dormant account’ and a ‘lost account’; and a lack of reliable and trusted data, the amount of such assets may be much higher.
The Discussion Paper seeks to curb the practical challenges in identifying and reuniting unclaimed assets with their rightful owners or beneficiaries, and also seeks to reduce the levels of unclaimed assets in future. To this end, the FSCA has proposed 13 recommendations in support of a holistic and consistent approach to the treatment of lost accounts and unclaimed assets across financial institutions within the financial sector.
The FSCA proposes that the following types of assets be included within the scope of the proposed Unclaimed Asset Framework: retirement fund benefits; bank deposits; participatory interests in collective investment schemes; life and non-life insurance policies; and securities including any investment, income, dividend, or other proceeds in respect of or derived from those financial products and financial instruments.
It is noted, however, that certain potential pools of unclaimed assets, like the South African Revenue Services, the Road Accident Fund and a few others are not included in the Discussion Paper and will form part of later work.
The FSCA recognises that consultation with industry is critical in understanding where and how potential dormancy and unclaimed assets may arise, the criteria that should be applied in the classification of dormant accounts and unclaimed assets across the various sectors and financial products, and the practical challenges in identifying and reuniting these assets with customers.
The next step is for interested parties to submit comments on the proposed recommendations and respond to the key questions in the Discussion Paper, which will inform the FSCA’s ultimate recommendations to the National Treasury and the extent to which some recommendations can be implemented on a prioritised and accelerated basis.
The FSCA has invited interested parties to submit comments on the Discussion Paper (using the comments template) to [email protected] by Wednesday, 30 November 2022. The Discussion Paper and the comments template can be accessed here.
