Banks holding Sh200bn in unclaimed assets as widows and orphans suffer

People walk into the National Social Security Fund offices in Nairobi. Pension funds, commercial banks and insurance firms are some of the institutions that hold billions in unclaimed assets. Photo/FILE

When Mr James Kanyotu, Kenya’s longest-serving spymaster, died on February 13, 2008, he took with him a number of secrets that will never be known.

Apart from his exploits in the world of intelligence, Mr Kanyotu was a wealthy businessman with extensive interests in the hotel industry, banking, aviation, real estate and large-scale farming.

For nearly all the years he served as Kenya’s head of intelligence, the enigmatic Kanyotu was an intensely private man.

He was so secretive that three months after he died, a city law firm placed an advertisement in the papers asking anyone with information about the former spy chief’s Will to pass it to Judy Thongori & Company Advocates.

The lawyers and Kanyotu’s family have never said whether the Will was finally found. But if it has not been located, and his family cannot trace his vast wealth, chances are that assets of an undetermined amount are lying undeclared in the accounts and safes of bankers, stockbrokers, insurance companies or lawyers. And the same has happened to the undeclared assets of thousands of Kenyan widows, widowers, orphans and other potential beneficiaries whose relatives or benefactors departed this world without revealing their whereabouts.

Assets ranging from bank deposits to dividend cheques, retirement benefits and, more recently, money held in mobile phone cash transfer services by deceased people often lie unclaimed because there are no laws governing what institutions holding the assets should do.

There are no official figures on the amount of unclaimed assets in the country but, according to a survey by the Retirement Benefits Authority (RBA) in conjunction with the Unclaimed Property Asset Register (Upar), the figure could be anything between Sh40 billion and Sh200 billion. This amount mainly includes cash deposits in banks, insurance premiums, retirement benefits and dividends.

A task force appointed by the ministry of Finance in 2008 found that banks were holding the largest amount of unclaimed assets and found one bank with a whopping Sh1 billion.

“A majority of banks transfer unclaimed balances on dormant accounts into their profit and loss accounts after periods determined by their internal policies. These periods range from as short as two to five years to the more usual six to seven years. One bank recognises unclaimed assets as income after 10 years of dormancy,” the task force reported.

Their entitlements

The process of tracing unclaimed assets is not provided for in Kenyan law. And the country does not have a tracing service to enable pensioners to follow up their entitlements from their employers.

Many benefits from pension funds or schemes or firms that may have been sold, merged, wound up voluntarily, closed down due to business downturn or become bankrupt go unclaimed. Other people lose their direct entitlements if they were employed on contract terms.

The matter becomes compounded in cases where the employees have emigrated to other countries.

Some of the funds held by the banks belong to colonial settlers who left the country at independence. Other moneys belong to accident victims while some cheques are returned to banks after the indicated owners cannot be found due to wrong addresses or misspelt names.

Analysts Joe Ngigi of the Unclaimed Property Asset Register and Vincent Kimosop of the Institute for Legislative Affairs say the rise of mobile phone money transfer has opened a new deposit for unclaimed assets.

They were referring to instances where people die or move to foreign countries with cell phone money transfer deposits in their SIM cards or unused air time credit. Over time, the analysts say, the deposits could become huge.

“Our baseline searches indicated that there was almost Sh200 billion worth of unclaimed financial assets lying with more than 500 different organisations,” said Mr Ngigi, the chief executive officer of Upar.

A large amount, 45 per cent, is held by commercial banks, 25 per cent by insurance firms, while pension funds hold about Sh40 billion. Others include shares held at the Nairobi Stock Exchange (NSE) and utility deposits to service providers such as the Kenya Power and Lighting Company and Nairobi Water Company.

On the Safaricom website, for instance, there is a description of the safeguards available in the event of unforeseen eventualities.

“For registered users, the money remains in their account as long as their Safaricom SIM is active on the network. As no interest is paid on this money, it is not in the customer’s interests to leave money in their account for an extended period. If their Safaricom subscription expires, we will contact them to request that they withdraw their money. For unregistered users, if they do not cash their M-Pesa funds in seven days, the money is automatically returned to the sender’s account,” Safaricom says.

Currently, there is no law that directs how institutions that hold unclaimed assets for long periods should dispose of them. The task force created by the ministry of Finance to examine the issue recommended the creation of such legislation.

“The current situation in Kenya contrasts sharply with the best international practice. It is estimated that the overall universe of unclaimed financial assets in the financial system, the corporate sector and other institutions, including utilities, may exceed Sh200 billion,” the task force report, seen by the Sunday Nation, says.

The team estimated that 60 per cent or more of these assets may never be claimed by their owners or beneficiaries for reasons ranging from passage of time, death of owners, missing records, lack of asset tracking mechanisms and the absence of necessary law. The law does not require “mandatory notification or reminders to potential unclaimed financial asset owners nor the disclosure or publication of unclaimed financial assets”.

They recommended that such a law be passed to protect the interests of potential unclaimed financial asset owners, such as widows and orphans.

Samburu MP Joseph Lekuton has prepared a Bill he plans to introduce in Parliament that would compel institutions holding unclaimed assets to surrender them to the Treasury to hold them in trust.

“These unclaimed assets can either be fully disclosed to potential beneficiaries or be surrendered to the Treasury to be put in a special account that will be administered by the government for development purposes. Moreover, these institutions trade with these unclaimed assets and make and declare billions of shillings in profits every year. The would-be beneficiaries continue to wallow in abject poverty,” Mr Lekuton is quoted as saying in the current edition of the Kenya Parliament magazine.

Stocks and shares

“The proposed trust fund will be the main depository for all the moneys that become or are deemed to be unclaimed assets such as unclaimed death benefits, income from stocks and shares and uncollected pension benefits,” Mr Lekuton said.

The Unclaimed Financial Assets Bill was drafted in 2008 but has not yet been acted on. If it is passed into law, such assets will, after seven years, revert to a trust fund to be regulated by a state agency to be known as the Unclaimed Financial Assets Authority.

Under the principle of bona vacantia (all assets belong to the government), unclaimed property automatically reverts to the holder (government) if no one claims it. Such laws exist in the US, the UK and South Africa; the government is supposed to keep a register of the assets, which is open to the public. In South Africa, the registrar of societies prepares a list of unclaimed dividends and publishes them every year.

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