What is the Dormant Assets Scheme (DAS)?

The Dormant Assets Scheme (DAS) allows financial institutions to voluntarily pay unclaimed financial assets to an authorised reclaim fund, Reclaim Fund Limited (RFL). The RFL is a non-governmental, “arm’s length body” owned by HM Treasury and overseen by UK Government Investments.

The RFL is authorised and regulated by the FCA and ensures firstly that all legitimate dormant asset holders will be repaid upon demand. Secondly, it will transfer any surplus that arises between claims and asset monies received from scheme participants for disbursement across good causes.

CASS impact

Effective 2 August 2024, the Dormant Assets Act 2022 expanded the DAS’s reach to include assets and client money within the investment and wealth sector.

This expansion is particularly relevant for firms with Client Assets Sourcebook (CASS) permissions, as it introduces new obligations and opportunities for these firms.

The Dormant Assets Act 2022 extends the scope of the dormant assets scheme to include a broader range of financial products, such as insurance, pensions, investments, and securities. Firms with CASS permissions, which manage client money and custody assets subject to certain qualifying conditions within the CASS rules, can now elect to transfer such assets to the RFL.

Existing regulations in CASS, specific to paying away allocated but unclaimed assets, remain in place, with the government allowing such assets to be paid away or transferred to the scheme.

Accurate books and records

Accurate identification and allocation of client monies and assets is a familiar concept to Firms with CASS permissions. The ease at which such assets can be transferred depends on the firm’s controls around client contact information, the accuracy of its reconciled client holdings and positions, and robust communication channels.

Firms must practice accurate and complete client lifecycle administration that ensures that such balances, when they reach specified periods, can be easily reconciled and associated customers can be contacted.

Trace & Contact

Upon completion of contract and return exercises, as detailed across the CASS sourcebook, firms participating in the scheme will report and transfer these dormant assets to the Reclaim Fund Ltd (RFL).

Under CASS best practice, detailed records must be maintained to ensure the transfer complies with both CASS and the Dormant Assets Act requirements.

Before transferring assets to the dormant assets scheme, firms must take reasonable steps to return them to their clients. Depending on the type of client and the values involved, firms will take formal steps to contact clients to return such assets and/or advise them of the potential transfer. Firms must document these efforts to demonstrate compliance with the regulations.

For firms holding client money pools or custody assets, the transfer of dormant assets must be managed carefully to avoid disrupting the overall client asset structure. This may involve adjustments to how assets are pooled or segregated, ensuring that the transfer of dormant assets does not adversely affect the interests of active clients.

Reconciliations

Firms with CASS permissions already adhere to strict rules regarding the reconciliation and safeguarding of client assets. The requirements under the Dormant Assets Act 2022 add an additional layer of complexity since firms must ensure accurate reconciliation of dormant assets before and after transfer to the RFL.

This includes updating records and ensuring that transferred assets are appropriately reflected in the firm’s CASS records.

It is therefore important that a firm ensures the appropriate level of control and oversight to dormant assets, ensuring the same level of accuracy, frequency of reconciliation, and data completeness is devoted to such balances and positions as those belonging to active clients.

If you would like to book a call with one of our specialists to learn more about DAS within Grath’s reconciliation solution, please contact us – we have a team of experts with over 40 years combined experience in the industry.