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In 2022, the Financial Sector Conduct Authority (FSCA) published the Discussion Paper on a Framework for Unclaimed Financial Assets in South Africa (the Discussion Paper) and invited public comment on it. This legal note summarises the comments received, sets out the FSCA’s response to key themes, and outlines the FSCA’s next steps for advancing the recommendations outlined in the Discussion Paper.

The purpose of the Discussion Paper was to seek stakeholders’ views on the 13 recommendations proposed by the FSCA. The main aim of the work was to explore ways to reduce the amount of unclaimed assets. This involved confirming the responsibilities of financial institutions in reuniting customers with their assets, as well as establishing requirements for the proper handling and reporting of such assets.

The feedback received from respondents regarding the 13 recommendations outlined in the Discussion Paper is summarised. These recommendations are grouped according to the following themes and are not discussed in sequential order:

  • The Central Unclaimed Assets Fund and matters relating thereto (Central Unclaimed [AA1] Assets Fund) - Recommendations 3, 4, 5, and 11.

  • Identification, management, tracing, and reporting of unclaimed assets (Unclaimed Assets Framework) - Recommendations 1, 2, 6, 7, 8, 9, 10, 12, and 13.

Recommendation 3: Establish a central unclaimed assets fund (Central Fund) to receive and manage unclaimed assets

The FSCA proposed that financial institutions be compelled to transfer unclaimed assets into a ‘Central Fund’. A single fund is also likely to generate value and efficiency through operating synergies and economies of scale, as well as making it easier for customers to search for unclaimed assets through a single search facility. As an alternative to the establishment of a central fund, the FSCA proposed that unclaimed assets be transferred to the National Revenue Fund (NRF).

Respondents voiced support for the design and implementation of a fair and efficient framework for unclaimed assets that systematically addresses unclaimed assets in a structured manner and that provides legal certainty for both consumers and financial institutions. The debate centres on the design and implementation factors. These respondents argued that unclaimed funds should remain with financial institutions and said they were in favour of a framework that regulates the management of unclaimed assets held by financial institutions.

Other stakeholders were generally in favour of a well-governed central fund. Some respondents argued that customers should have a choice in deciding where their unclaimed assets should be held. They suggested allowing customers to opt to keep their unclaimed assets with the relevant institution instead of transferring them to a central fund. Most respondents said that, if they had to choose between the two options (Central Fund or NRF), they would prefer to transfer unclaimed assets to the Central Fund.

Respondents raised various concerns regarding the proposal to transfer unclaimed assets to a central fund (including the NRF). Some of the concerns are highlighted below:

  • Corruption and a loss of trust in financial institutions

  • Potential breach of treating clients fairly principles

  • Disconnect between the central fund and the source of funds

  • Risk of losing important information (e.g., previously taxed amounts) during the transfer process, potentially compromising data integrity

  • Smaller administrators may lose business, potentially leading to closures and job losses

  • Increased costs and reduced investment return for members of funds.

  • The transfer of assets would impact the capital of prudentially regulated entities, such as banks, and negatively affect their profitability

  • Increase in operational costs for financial institutions, such as building and maintaining new systems and processes

  • Costs associated with setting up and running a central fund

  • Liquidity issues associated with a mass transfer of cash, particularly for historic unclaimed amounts

  • Potential conflicts of interest and grey areas between the regulator and the regulated if the FSCA were both a player and referee in the process

Respondents emphasised the importance of good governance.

Recommendation 11: Use of a portion of unclaimed assets for projects with social, environmental, and developmental benefits

The FSCA proposed that unclaimed assets should – where it is not possible to reunite those assets with their rightful owners – be used for positive impact initiatives such as social, environmental, and developmental projects. There were a range of opinions regarding the proposed redistribution of unclaimed funds.

Many respondents emphasised the importance of rigorous corporate governance frameworks and processes to prevent corruption and misallocation of funds. Several respondents argued for funds and assets to be held by financial institutions. They contended that the legal right and ownership belong solely to the beneficial owner, and the funds should not be utilised for any purpose until claimed. Respondents further stressed the importance of prioritising restitution in perpetuity.

Recommendation 4: Provide for restitution in perpetuity

The FSCA proposed, amongst others, that non-liquid assets should be liquidated before transferring them to the proposed Central Fund. This recommendation primarily stemmed from their decision not to propose full restitution due to the intricate nature of executing it through the Central Fund or NRF.

The FSCA’s proposal entailed that claimants should be able to claim, in perpetuity, the value of the assets at the point of transfer into the Central Fund (or other fund as may be determined), as well as any accrued interest between the date of transfer and the date of claim.

Several respondents acknowledged the challenges and complexities involved in achieving full restitution. To uphold TCF principles, unclaimed assets should, therefore, remain with financial institutions rather than being transferred to a central fund.

Respondents highlighted the following concerns with regards to converting non-liquid assets to cash:

  • Converting non-cash assets to cash may raise legal concerns, as financial institutions are bound by contracts and mandates with clients.

  • Converting non-cash unclaimed assets to cash may result in losses for beneficiaries

  • Liquidating certain non-cash assets, such as delisted shares or longer-term assets, may pose practical challenges

  • Converting assets to cash may trigger capital gains tax events

  • There are operational complexities, and thus questions arise about who bears the administration costs of converting non-cash assets to cash before transfer

  • Converting securities to cash may present practical challenges

Some respondents highlighted the differences in treatment between cash and securities when it comes to restitution. Respondents had different views about the interest rate benchmark that should be used when calculating a claimant’s restitution value as per Recommendation 4. Some respondents proposed the establishment of a reasonable and justifiable ‘cut-off’ period instead of perpetual restitution.

Recommendation 5: Tax neutrality

The FSCA proposed that assets be taxed at the time of reclaim and that beneficial owners be treated in a tax-neutral manner.

Respondents supported the principle of tax neutrality. Most respondents proposed that unclaimed assets remain with financial institutions as they are best positioned to achieve tax neutrality and can remain responsible for any tax liabilities related to the assets until claimed.

Recommendation 2: Aligned approach to the treatment of unclaimed assets across all industry segments and adoption of a common escalation system for the identification of unclaimed assets

The FSCA proposed to develop a standard approach to the identification (including a common understanding of what is an unclaimed asset), monitoring, and responding to cases of possible unclaimed assets by financial institutions. The FSCA believe fees should be prohibited.

Aligned definitions

Different institutions and sectors have different policies and timeframes for defining and managing dormancy and unclaimed assets. Overall, respondents emphasised the need to consider the specific characteristics of each financial product class and sub-class and customer behaviour when defining dormancy or inactivity.


Institutions use various tracing techniques and methods to trace beneficiaries. Some respondents stated that the success of tracing efforts largely depends on how long an asset has been unclaimed for and whether a customer has a digital footprint or not. Some respondents indicated that third-party tracing agents deliver the most success. Several institutions emphasised the need for collaboration and access to information from entities like SARS, the Department of Home Affairs, as well as the Department of Labour to facilitate the tracing and verification process. Compliance with data protection laws poses challenges to the use of group-wide customer contact details for tracing purposes. The average cost per tracing effort seems to vary widely, depending on the type of claim and the level of tracing required. The average costs for investigative tracing ranged from R1,500 to R3,000. Some institutions recover tracing costs from dormant accounts whilst others bear the costs.

In response to the question about the financial impact on institutions should they be prohibited from charging tracing fees, most respondents indicated that it would most likely result in increased costs. Respondents pointed out that, should they be unable to charge fees, their tracing efforts might be limited.


There was general support amongst respondents for prohibiting fees on dormant accounts with zero or negative balances. Holders of unclaimed financial assets were generally against the proposal to prohibit institutions from charging fees on lost accounts/assets. Where the fee is linked to the return, it can never erode the investment balance to nil in the way a fixed monthly rand fee on an inactive bank account can.

Accounting of unclaimed assets

Institutions employ different accounting treatments for unclaimed financial assets. Unclaimed retirement fund benefits are typically recognised as a liability in the financial statements of retirement funds. Some banks transfer unclaimed assets to their income statement after a specified period, while certain issuers may classify them as accruals or liabilities.

Source: A Framework for Unclaimed Financial Assets in South Africa – FSCA Response to comments on Discussion Paper – March 2024

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