Claimants of dormant financial assets and accounts held by the State will be allowed to nominate other beneficiaries of the idle cash, shares, and dividends if Parliament approves proposed changes to the law aimed at unlocking billions of shillings owned by missing account holders.
The Finance Bill, 2023 has proposed to amend the Unclaimed Financial Assets Act, 2011 to increase the number of persons entitled to receive payment or delivery of assets in dormant financial accounts.
The unclaimed assets include sums payable on travelers cheques, money orders, cheques, drafts, and other instruments that are outstanding for more than two years.
They also include demand, savings, and time deposits in banks that have been left idle for more than five years, and life or endowment insurance policies or annuity contracts that have matured or terminated if unclaimed for more than two years after the funds became due and payable.
The Unclaimed Financial Assets Act, 2011 currently limits claims from dormant accounts to one claimant—a position that has been blamed for slowed transmission of dormant assets leading a huge stockpile of idle cash held by the Unclaimed Assets Financial Authority (Ufaa).
“The Bill seeks to amend section 28 of the Unclaimed Assets Act, 2011 to provide for the appointment of other persons as beneficiaries of a claimant,” the Finance Bill 2023 reads in part.
The law change would see rightful claimants who are sick, incapacitated, outside the country, or in any way unable to claim their assets to designate another person to receive the assets on their behalf.
Tax experts say that the proposed amendment to the law will make the process of paying unclaimed assets held by the government to be more flexible.
“This proposal will allow flexibility in who may receive assets approved for disbursement by the Authority,” said tax experts at KPMG.
If approved, the law change will be effective from July 1.
This comes at a time the government has been pushing to mop up idle assets held by State agencies and private firms to the custody of Ufaa to be disbursed to their rightful owners.
This saw the National Treasury through the Finance Act, 2022 waive penalties and fines for companies holding unclaimed financial assets to encourage them to surrender the assets to the State agency.
The 12-month waiver ends next month.
The unclaimed assets have been mounting largely due to bureaucracies that make it hard for rightful claimants to get their unclaimed assets.
By January last year, the assets had hit Sh55 billion, a sharp growth from the Sh300 million unclaimed assets that were estimated at Ufaa’s establishment.
The red tape involved in the process of beneficiaries claiming the assets has seen the amount that has been reconnected with the owners at a low of Sh1.5 billion (2.7 percent) over the eight years, a problem Ufaa’s management has admitted to being a hindrance to its operations.
The authority holds the assets in the form of cash (over Sh20 billion), shares (over Sh30 billion), and other treasures.
Auditor-General Nancy Gathungu, in the 2018/19 report on Ufaa raised concerns over the low rate of the reunification of the assets with owners.
“The rate is significantly slow, standing at 1.5 per cent of receipts as of 30 June 2019. Management attributed the slow pace to the Unclaimed Financial Assets (UFA) Regulations, 2016 which do not support the reunifications,” Ms Gathungu said.