April 2005 - There's up to £20 billion sitting unclaimed in the UK's banks and building
societies. Right now it's doing nothing but boosting banks' profit figures, but
times are changing.
By Martyn Jones MP - www.charitytimes.com
What if we made a simple
proposition: Unclaimed assets
should be reinvested in society
and removed from banks using them to
boost profits, while still maintaining the
facility to return the assets to their
original owner if, unlikely as it is, they
were to make a claim.
A dormant bank account or unclaimed
asset, defined as an account lacking a
transaction for a certain time-span, rarely
rises to the ranks of front-page material;
yet such accounts amount to an estimated
£20 billion in the UK. Despite this, we
remain one of the few developed nations
to have failed to take a suitably pragmatic
stance. Here in Westminster, I am fighting
to see this change.
The subject was brought to my
attention as I completed a routine
exercise: checking my various standing
orders and direct debits. I discovered one
standing order paying the Nationwide
building society the princely sum of £1 a
month, as it had been for years. I thought
that it may have been for an insurance
policy or something similar, but
discovered the money was actually
going to a fundraising account for the
Wrexham Labour party, in a neighbouring
constituency where I had lived 20
years previously. But the party had
not benefited for all that time because it
did not know that the account existed.
I wondered what would happen if I
stopped paying that pound.The
Nationwide building society would be
sitting on a couple of hundred pounds
that did not belong to it, and no one
would know where the money was. It
soon became clear that this was not an
isolated incident. In fact, the amount of
such lost money in UK accounts runs into
billions of pounds.
Further revelations did little to
reassure, as I discovered individual banks
that held hundreds of millions of pounds
in such accounts were using the money
to boost profit figures.This continues to
be the case.
America, Canada and a host of other
countries including, most recently,
Ireland, have adopted schemes backed
by law to transfer such money away from
banks to reinvest in society.
Britain remains one of the few with a
mature financial sector to have avoided
legislating on the issue, and the current
official practice remains reactive:Potential
claimants can use the voluntary unclaimed
assets register. For charities and other
claimants, this register is costly and
invariably unsuccessful due to the voluntary
nature of the scheme, which means many
financial institutions don't participate.
Some progress has been made,
however.The British Banking Association
and Building Society Association have
now launched a tracing scheme to help
reunite funds with their rightful owners.
Along with the Treasury, I agree that this
represents a step in the right direction,
but it is far from being a comprehensive
solution and I lament the lack of
proactivity employed by the sector on
the issue. In 2004 I urged the financial
sector to adopt the tenet and spirit of new
regulations against using unclaimed assets
to boost profits issued by the International
Accounting Standards Board.
Similarly, the formation of the Balance
Charity foundation, which serves to
distribute unclaimed assets in the UK
from voluntary participants, is a promising
move, but it remains voluntary and is
used by only a few investment banks,
which are prevented from holding
unclaimed assets under FSA rules.
I have continued to lobby the
government and gained substantial
support within the House of Commons
for numerous Early Day Motions or
çEDMs'.Towards the end of 2004 I met
with the Chancellor to discuss the issue,
resulting in the issue's inclusion in his
pre-budget report.
As the report recognised, the money in
these accounts belongs primarily to the
designated owner. Indeed, over 40,000
Irish people have gained from an
unexpected windfall thanks to financial
institutions, instructed by law, using their
resources proactively to reunite funds
with their owners. However, when assets
and owners cannot be reunited, the
assets should be reinvested in society, as
long as the original owners' entitlements
to reclaim are preserved. In Ireland, such
a scheme for reinvestment has manifested
itself with over £21 million having already
been donated to community projects. In
Britain, this figure could easily run into
billions of pounds, making this a
startlingly more resonant issue.
Good progress is being made but it's
now time for a common definition of an
unclaimed asset and a statutory solution
that forces a common, proactive response
from the financial sector. As I continue to
lobby the government, I hope the issue of
dormant accounts may be included in
Labour's manifesto for this election.
Either way, what is now clear is that
the banks are on notice - and after the
election, the pressure for change is going
to be irresistable.
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