Why Unclaimed Property Is a Hidden Fintech Risk

For many fintech executives, unclaimed property compliance generally has been a lower-priority operational concern, often dispersed across finance, legal, tax, or compliance functions. However, with the expansion of digital wallets, payment platforms, and digital asset ecosystems, state regulators are paying closer attention to dormant balances, inactive accounts, and customer assets that ultimately might fall under unclaimed property law. The financial implications are significant. In 2023, states held roughly $70 billion in unclaimed property, a figure that has almost certainly risen since.

What was once primarily viewed as an accounting issue is emerging as a broader operational, regulatory, and reputational challenge for fintech companies and financial services organizations alike. As regulators search for new enforcement opportunities and revenue sources, digital asset and fintech companies are drawing more scrutiny. Many organizations still underestimate how quickly these risks can develop, particularly when compliance responsibilities span multiple departments, systems, and jurisdictions.

Why unclaimed property is gaining more attention

At its core, unclaimed property refers to financial assets that remain inactive or abandoned for a specified period of time. Traditionally, it included items such as uncashed payroll checks, dormant bank accounts, vendor payments, or other outstanding credit balances.

Today, the definition is expanding alongside the financial services ecosystem. Digital wallets, crypto asset holdings, stored-value accounts, and payment platform balances are entering the conversation as states attempt to apply existing law to newer financial technologies. In many cases, those laws were written decades before digital assets existed, which means regulators and organizations now must interpret how older frameworks apply to modern financial products. For fintech organizations, this shift creates a complex environment in which expectations are changing faster than standardization.

The issue is even more complicated because unclaimed property law largely is administered at the state level. Each state maintains its own dormancy rules, reporting requirements, and enforcement priorities. Some states have updated statutes specifically to address digital assets while others rely on broad catchall provisions to assert jurisdiction over emerging asset types. That inconsistency has created substantial uncertainty for organizations operating across multiple jurisdictions.

Fintech companies under scrutiny

The growth of fintech platforms has fundamentally changed how consumers hold and interact with financial assets. Digital wallets and payment applications often maintain customer balances for extended periods of time. Crypto asset investors intentionally might leave assets untouched for years as part of long-term investment strategies. Some users create accounts, fund them, and later abandon them altogether.

State regulators, in particular, are paying close attention. As fintech adoption accelerates, regulators recognize that many platforms hold large pools of customer assets that can eventually become dormant under state unclaimed property rules. Combined with the public visibility surrounding digital assets and fintech growth, the industry has become an attractive area for enforcement activity.

Audit activity has followed closely behind. In many cases, third-party auditors working on behalf of states actively monitor industry developments, mergers, funding announcements, and public filings to identify organizations that might represent potential audit opportunities. Because these audits frequently are conducted on a contingency-fee basis, states often face little downside in expanding enforcement efforts. For organizations that have not focused on unclaimed property compliance, the resulting exposure can be substantial.

Operational complexity behind the risk

One reason unclaimed property risk often goes unnoticed is because responsibility rarely sits within a single department. Finance teams oversee reporting obligations, and legal departments interpret dormancy requirements. Technology teams often control the systems necessary to track account activity and customer information, and compliance and tax groups manage interactions with regulators. Without strong coordination across all these functions, critical gaps can emerge.

Digital assets introduce additional complications. Many fintech platforms historically prioritized customer privacy and streamlined onboarding, which sometimes resulted in limited customer address information or incomplete identifying data. That lack of information creates challenges when determining which state has priority rights to dormant assets.

State priority rules generally require organizations to remit property based on the customer’s last known address. When address data is unavailable, obligations default to the company’s state of incorporation – a dynamic that previously has benefited states such as Delaware, where many corporations are organized.

At the same time, states themselves are still struggling to standardize how digital assets should be reported. In some cases, organizations are asked to classify digital assets under broad generic reporting categories because no dedicated reporting code exists. That arrangement can create inconsistencies regarding dormancy periods, reporting treatment, and audit interpretation. The operational burden will continue to grow as organizations navigate emerging guidance that is fragmented across jurisdictions.

Why audits create significant exposure

Unclaimed property audits often surprise organizations because they operate differently from many traditional financial or tax audits. Lookback periods commonly extend 10 report years or 13 to 15 transaction years, depending on state dormancy periods. In situations where records are incomplete or unavailable, states frequently apply estimation methodologies to calculate liability. Those estimates could be based on limited historical data, and they can result in substantial financial exposure.

The audit posture itself also can seem unusually aggressive. In the unclaimed property world, organizations often must demonstrate why assets should not have been reported rather than regulators first proving noncompliance. For fintech companies operating in fast-growth environments, maintaining consistent historical records across evolving systems and platforms can become especially difficult. Mergers, acquisitions, platform migrations, and rapid expansion can further complicate record retention and reporting consistency over time. Organizations that discover compliance gaps late in the process could face significant remediation costs, operational disruption, and reputational concerns.

Digital assets: New legal and customer challenges

Digital assets introduce another layer of complexity because of their volatility and ownership expectations. Many states currently require organizations to liquidate digital assets before remitting them as unclaimed property. For account holders, that requirement can create unintended financial consequences if assets later appreciate significantly in value.

Regulators recognize the potential issues this creates. Some states are exploring ways to hold digital assets in their native form rather than requiring liquidation while federal lawmakers have proposed legislation intended to strengthen consumer protections and create greater consistency regarding dormant digital asset treatment.

At the same time, organizations face growing customer expectations about transparency and communication. Consumers could react negatively if long-held digital assets were transferred to the state unexpectedly, particularly if they were unaware of dormancy requirements or inactivity thresholds. These concerns elevate unclaimed property beyond a purely regulatory issue and place it squarely within broader customer experience and reputational risk discussions.

What organizations should prioritize now

As enforcement activity increases, fintech and financial services organizations are taking a more proactive approach toward unclaimed property compliance. Many are evaluating the full scope of potential exposure across all asset categories, including digital wallets, payment balances, and crypto asset holdings. Others are reassessing how customer activity, dormancy tracking, and reporting processes operate across systems and departments. To implement a successful, comprehensive unclaimed property program, it’s important to establish written policies and procedures as early as possible and secure buy-in from key functional areas.

Improving customer data quality also has become more important. Better address information, activity tracking, and communication processes can significantly reduce uncertainty regarding reporting obligations and customer remediation efforts later.

Cross-functional governance is equally critical. Effective programs often require ongoing coordination among tax, legal, compliance, finance, operations, and technology teams so that organizations can address requirements consistently. Some organizations are also exploring voluntary disclosure or compliance programs with states before formal audit activity begins. Early remediation efforts could help reduce penalties and create more manageable resolution pathways.

Beyond compliance

Changes in unclaimed property enforcement and compliance expectations are reshaping risk for fintech and digital asset companies. As digital assets move further into mainstream financial services, regulators likely will increase their focus on dormant balances, reporting obligations, and customer asset protections. Additional federal involvement and continued pressure for greater standardization could gradually reshape the landscape in the near future, but organizations still encounter significant uncertainty today. Across the board, the challenge extends well beyond filing requirements.

Unclaimed property intersects with operational governance, customer experience, data management, regulatory strategy, and enterprise risk management. Organizations that proactively address these issues can better position themselves to reduce financial exposure, strengthen compliance readiness, and build greater operational resilience as expectations continue to evolve.