Banking Act amendment corrects unclaimed money snafu

An amendment to the Banking Act, which was passed last week, gives banks an exemption from reporting unclaimed money in accounts that have been reactivated.

Last year, the Government amended Treasury legislation, which reduced the inactive period before unclaimed money in inactive accounts was to be transferred to the government. The period was changed from seven to three years.

However, some approved deposit-taking institutions had nominated accounts as inactive and then subsequently allowed transactions on the accounts.

Under the amended Treasury legislation, the ADIs were required to transfer all unclaimed money as assessed on the assessment date, including any from "reactivated accounts".

ADIs affected in this way were put in a position where they would have had to close the reactivated accounts and transfer the funds to the government or commit an offence by not transferring all unclaimed money.

Some ADIs have been put in a position where they transferred the money to the government, kept the reactivated accounts open and then made up the balances from their own accounts.

The new law amends the Banking Act to allow ADIs to exclude reactivated accounts from their reporting statements and so they will not have to make unclaimed money payments to the government.

The new law also allows the Treasury to provide refunds directly to ADIs, which it did not have the power to do previously.