Examination of Witnesses (Questions 20
TUESDAY 15 MAY 2007
Q20 Mr Todd: There is quite a lot
of detail to be worked on, how the central reclaim fund would
actually work. One area would be on the timetable of the identification
of accounts by an institution and the collection by the central
reclaim fund. What do you think would be a reasonable timeframe
for that process to take place?
Mr Storey: If I can ask Peter
to explain the Irish experience.
Mr Storey: The Irish experience,
as I have alluded to before, allows for a reawakening period,
so in the first run through the legislation it was 31 March 2002,
the depositing institutions had to identify dormant accounts that
had not been transacted on for 15 years. There was then a 12-month
reawakening process, at which time the rules said that if the
balance was greater than X the account holder had to be written
to, there had to be notices in branch's and there had to be Press
Q21 Mr Todd: Is that a rolling process?
In other words, what you are referring to is the start of the
exercise, and does that roll then because obviously new accounts
will become qualifiers under the scheme as time goes on. Is the
same gap imposed all the way through or is that a one-off to start
the scheme off?
Mr Graham: The 12-month was a
one-off because this had not been done before and there is an
annual identification on 30 September each year and for a reawakening
by the following 31 March.
Q22 Mr Todd: Then the transfer from
the reclaim fund to the disbursement agency, what sort of interval
are we talking about there?
Mr Graham: We were not involved
in looking at that aspect of the fund; we were merely looking
at the deposit takers and putting into the central pot.
Q23 Mr Todd: So what do you think
would be a reasonable interval between the receipt of the money
by the fund and its transfer of the proportion of it to the disbursement
Mr Storey: There is no reason
why that should not happen immediately. It is working out what
proportion it should be.
Q24 Mr Todd: How frequent should
those transfers be, the transfers from the collection agency to
the disbursement agency?
Mr Storey: If the institutions
are identifying and paying over funds on an annual basis it makes
sense for that to happen at that time, or within a few days, weeks,
Q25 Mr Todd: If we followed the model
that happened in Ireland there presumably would be pretty much
a rolling process of transfers from the institutions to the reclaim
Mr Graham: That happens once a
year in terms of putting money into the central pot. However,
when the customer comes back to the deposit taker and satisfies
the deposit taker that they are the customer, money goes out of
the central pot or the reclaim pot, the reserve accounts on a
Q26 Mr Todd: How should the money
be handled when it is in the reclaim fund? There is reference
to prudent management of the resource in the reclaim fund, and
are there any constraints that should be placed on that?
Mr Storey: As the Chairman mentioned,
the Irish experience has been that despite the enormous efforts
that the institutions have put into reawakening accounts many
have reawakened after funds have been transferred to the Central
Fund, so it is I think relevant, to look at other jurisdictions
and the profiles of monies and to ensure that sufficient is available.
Q27 Mr Todd: In other words one of
the criteria would be to have funds invested in relatively liquid
forms of investment so that you can transfer money back out rapidly
to a customer when they have been identified?
Mr Storey: Yes.
Q28 Mr Todd: Is there a requirement
to disclose the investment profile of the monies transferred to
the reclaim fund, so obviously somebody can be in an interesting
earning account of some scale and transferred to the reclaim fund,
and is there a requirement to disclose that interest rate to the
fund and say, "This was earning 5%" or whatever?
Mr Storey: No, that was not a
requirement in Ireland and frankly that would be an horrendous
administrative exercise for both the institutions making the transfers
and indeed for any central funds to keep track of. You are talking
about tens of thousands, hundreds of thousands of individual accounts.
Q29 Mr Todd: Particularly some of
these dormant accounts?
Mr Storey: Precisely, very odd
characteristics. No, it was an essential and, we believe, very
valuable aspect of the Irish system that the institutions needed
to retain very full information of the characteristics of each
account, the proceeds of which have been passed to a central fund,
so that if that account was reawakened the customer could be put
back into the position in which he was previously. The central
fund had no such information; this therefore meant that there
were no security issues, it was not prone to fraud, which is a
serious issue to consider and the administration burden placed
on the central fund was swept aside.
Q30 Chairman: You mentioned that
the Irish dormant scheme did not involve a central register of
dormant accounts, therefore minimising the flows of information
and keeping costs low. How feasible would the establishment of
a central register be in the UK and what obstacles would it come
Mr Storey: It would be a nightmare
in my view. It would be an administrative nightmare and a very
costly exercise and fraught with fraud difficulties.
Mr Graham: I am sorry to interrupt,
Mr McFall, but one thing is very important to understand, that
the anti money laundering regulations in the United Kingdom came
in in 1993. Even when they came in there were grand-fathering
arrangements which mean that I, as an existing customer of whichever
bankNatWest Bank, National Westminsterthe National
Westminster did not need to formally identify me with electricity
bills, driving licences, passports, et cetera. So when you have
this money you will have "Todd M" might be the only
information you have on that account holder. There will of course
be an account number and a balance in that account.
Q31 Chairman: Subsequent to the dormant
accounts being acted on in the Republic of Ireland life insurance
was brought into the scheme?
Mr Storey: That is the right,
about two years afterwards.
Q32 Chairman: What impact did this
have? It has not been envisaged here, that is why I am asking.
Mr Storey: Yes, although I think
Mr Brown made reference to it in his pre-budget speech two years
ago about the possibility of that following. In the Republic of
Ireland now the proceeds of unclaimed life assurance policies
are now subject to very similar regulations to the dormant accounts
that we are currently discussing, but the Irish government left
two years for the dormant bank account regulations to bed down.
Q33 Chairman: So it would be a good
idea to have the same thing here but giving a space in between
establishing the scheme and looking at life insurance?
Mr Storey: I am not sure that
I would express a view as to whether it is a good thing to implement
it or not.
Q34 Chairman: But it would be fertile
Mr Storey: Yes.
Q35 Chairman: The Republic of Ireland
Scheme, is it successful and if it is successful what is that
success down to?
Mr Storey: It has been successful
in releasing net over those first three years still 198
million for the causes for which the fund was established. It
did create huge administrative burden and cost for the institutions
involved and particularly for the dormant life assurance funds.
That is an ongoing costmost of the banks are interested
in it for technical reasons. The banks and the insurers have to
employ more people to do more things. In our view the secret of
its success has been the creation of a level playing field and
that came about through compulsion, although there were some disadvantages
Q36 Chairman: If we have a voluntary
scheme here what incentive would there be for financial institutions
to ensure that they get the maximum returns to remit?
Mr Graham: Other than demonstrating
good cooperative citizenship?
Q37 Chairman: Yes.
Mr Graham: Cynically one finds
it hard to understand why there is a benefit.
Mr Storey: It will be inconsistent
with the objectives of the institution to maximise shareholder/policyholder
Chairman: Can I thank you for your evidence
and also for your written submission and your help to us before
we went to the Republic of Ireland. We did get a lot out of that
visit, which was largely down to yourselves. Thank you very much.