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by Dr. Wickrema Weerasooria

The term 'abandoned property' in banks is a technical term used in banking parlance. No customer would dream of abandoning his or her money in a bank. That would amount to an unsolicited gift of such money to the bank!

Basically, 'abandoned property' in banks means unclaimed money in dormant (inoperative) bank accounts and other articles (such as those kept for safe custody) belonging to customers of the bank which have not been operated on or transacted upon for a period of not less than seven years. (In Sri Lanka, as we see later, the period of non-operation has been made ten years by statute).

In developed western nations, such abandoned property is important for several reasons. Firstly, in those countries, most people have bank accounts. This is mainly because (unlike in Sri Lanka) salaries and wages are paid direct to bank accounts.

Secondly, many people maintain accounts with more than one bank. Thirdly, some individuals operate bank accounts without the knowledge of their immediate family members (A husband may operate an account without the wife's knowledge).

Fourthly, customers of banks migrate within the larger countries (USA, Canada, Australia) or to other countries, without informing the bank where the account is held and without stopping operations on that account. Lastly, a customer may die without operating on the account for a long period of time and their family members are unaware of the bank account.

Claim

In a research I conducted in 1999 in Australia through one of my banking law students whom I taught at Monash University, it was revealed that each year there were about thirty thousand such 'dormant' bank accounts to the value of about Australian dollars fifteen million and despite the excellent statutory procedure governing such accounts, many members of the public had little knowledge about money abandoned in banks by their family members.

Now, I briefly outline the statutory position in Sri Lanka. The Banking Act No. 30 of 1988 (sections 63, 72-76) deals with 'abandoned property' of customers in banks. Under those provisions details of all such money and property in the name of the owner etc, which have not been operated on for ten years must be notified by the bank concerned to the Monetary Board (Central Bank).

Within thirty days of so notifying the Central Bank, the bank submitting the particulars, must also publish in the daily newspapers in all three languages (Sinhala, Tamil and English) relevant particulars of the abandoned property including the names and addresses of the owners and also send a registered letter to the last known address of the owner. A bank may be exempted from taking these steps by the Central Bank.

Thereafter, the owner of such property or any person who can establish a claim to such abandoned property can claim such property by providing adequate proof to the Central Bank. The method of claiming such property is set out in section 75 of the Banking Act while section 76 enacts that any bank that fails to comply with these provisions relating to abandoned property shall be guilty of an offence under the Act.

Having set out the legal position in Sri Lanka as enacted by the Banking Act, we can now ask some practical questions. Have these statutory provisions been implemented? Has our Central Bank received reports or details of abandoned property of customers in our banks? As at 2004 we had about twenty two commercial banks operating in Sri Lanka.

Apart from the Commercial banks there are also the Licensed Specialised Banks, the largest of which is the state owned National Savings Bank which has (I believe) the third largest customer deposit base standing at nearly Rs.200 billion. Now all these banking institutions will have abandoned property as described earlier. Have they submitted reports of such property to the Central bank as required by law and if so what public knowledge has the Central Bank disclosed of such property?

Dormant

Here it is relevant to mention that in the case of the National Savings Bank (NSB) section 47 of the National Savings Bank Act No. 30 of 1971 which established the NSB has special provisions to have an 'Unclaimed Deposits Reserve' where monies in accounts lying dormant for over ten years are transferred.

Because of the huge deposit mobilisation of the three State Banks - namely, the Bank of Ceylon, the People's Bank and the National Savings Bank, - I am sure that all these three banks alone will have a considerable sum of money and property as 'abandoned property'.

It is here important to note that these statutory provisions in our Banking Act of 1988 relating to abandoned property in banks overcome two fundamental principles of banking law.

The first is the requirement of banking secrecy or confidentiality. Under the secrecy rule no bank can divulge information about a customer's account other than to the customer himself or with his approval to anyone else. The second rule is that a bank account is a contract between the bank and the customer and the period of prescription or limitation of actions for contract is normally six years.

Public notice

In other words, if a customer fails to file action against the bank within six years after making a demand for repayment, the bank is entitled to plead prescription although in practice banks do not raise the issue of prescription. However, even this six year limitations rule is overcome by the statutory provisions in the Banking Act relating to abandoned property where even after ten years a claim can be made.

From what has been mentioned earlier, two matters are highlighted for consideration by the regulator which for Sri Lanka is our Central bank. Firstly, are our banks observing the statutory requirements relating to abandoned property? If they do so, what steps have the Central Bank taken to inform the general public of abandoned property in banks.

A public notice in the newspapers is the best way to enable people to furnish proof to the Central Bank that they are entitled to such abandoned money or property as provided in section 75 of the Banking Act.

The practice in Australia which is outlined below is recommended for Sri Lanka because our population is about the same although we have fewer bank accounts and may be even fewer amounts of "abandoned property".

In Australia, the report of abandoned property is made not to the Central Bank but to the Treasury. The Treasury then annually publishes a consolidated statement of abandoned property in all the banks in a special issue of the Government Gazette.

Private newspapers also copy this special issue of the Government Gazette and publish a separate supplements. The issue of the newspaper containing this supplement is literally sold out. People buy that paper to see whether any of their family members or relations have left (abandoned) monies in banks.

From the published names and addresses many people are entitled to trace the money and lodge claims. If no satisfactory claims are made the abandoned property is transferred to the Consolidated Fund of the Treasury and becomes public money.

We may consider following the Australian practice. Any suggestions and comments on this issue are welcome.

Genuine claims

I would also like to share with the general public a story of an unclaimed or abandoned property in a bank that concerned me. My father (N.E. Weerasooria Q.C.) died in 1974.

When I returned from Australia from Monash University in 2001, while going through some old documents and files of my father for purposes of academic research, I came across a savings pass book of my father's in the Ceylon Savings Bank (CSB).

It had commenced in 1948 and the last deposit was in 1968 with a balance of about Rs.58,000/= (a fair sum at that time). This amount had not been included in my father's testamentary case because the Executor had been unaware of this savings book and the deposit.

I then submitted the Savings Book to the National Savings Bank (NSB) (the legal successor to the CSB) and asked for payment with interest.

The Bank inquired into my request and found that it was a Savings Book issued by its branch in Kandy and because the last transaction was in 1968, the Kandy branch no longer had any records.

However, because the savings book was an original and my claim was genuine, the NSB paid me a sum of Rs.128,000 (made up of the principal sum of Rs.58,000 plus interest thereon from 1968 - 2001). I mention this to show that banks will pay any genuine claims relating to unclaimed/abandoned property.

Nomination

In conclusion, it may be that there is no issue as to 'abandoned property' in banks in Sri Lanka. It may also be that unlike in developed nations, Sri Lankans do not abandon property in their bank accounts and always inform their family members of such accounts so that they can claim the money if the occasion (for example, death arises).

It may also be that the statutory provision now available by an amendment to our Civil Procedure Code which permits 'nomination' in deposit/savings accounts prevents 'abandoned property' from arising. But 'nomination' is not available to current (cheque) accounts. All these are issues that can impinge on the topic of abandoned property in banks.

After I prepared this article, I contacted the Bank Supervision Department of the Central Bank and was informed that the Central Bank was in the process of finalising the forms in which commercial banks have to report abandoned property to the Monetary Board.

A special format is required because section 73 of the Banking Act states that abandoned property must be reported "in such form as the Monetary board may determine" etc. The wording of this section is unfortunate because banks have now to wait for a prescribed format from the Central Bank to submit their report. Such prescribed forms are not required in Australia.

Also, the Banking Act came into operation in 1988 and now it is well over fifteen years but no reports have yet been submitted. One would expect speedier implementation of legislation. I welcome any suggestions or comments on this issue.

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