§760.850. Examination of Regulated Financial Organizations

a)         Purpose of Section 15-1002.1 of the Act

 

1)         Section 15-1002.1 of the Act establishes a system in which the Illinois Department of Financial and Professional Regulation (DFPR) will include unclaimed property compliance as part of the regular audits or examinations performed on State-regulated financial organizations. Because DFPR will perform regular examinations of these entities, the administrator will not perform unclaimed property examinations of these State-regulated financial organizations pursuant to Section 15-1002 of the Act.

 

2)         State-regulated financial organizations whose operations are either entirely or almost entirely within the State of Illinois shall be regularly examined by DFPR for compliance with unclaimed property laws. This should both ensure compliance with the Act and generally subject these State-regulated financial organizations to only one set of unclaimed property examinations.

 

3)         Section 15-1002.1 of the Act is not, however, intended to restrict the ability of the administrator to examine national banks, national credit unions, and other financial organizations that operate in multiple states. For financial organizations that operate in multiple states or are created pursuant to a federal law, the administrator should either participate in multi-state examinations to determine compliance with the Act and similar unclaimed property laws of other states or otherwise perform an unclaimed property examination pursuant to Section 15-1002 of the Act.

 

b)         Entities for which DFPR is the Primary Prudential Regulator. The administrator may perform an unclaimed property examination of a financial organization for which DFPR is the primary prudential regulator when either:

 

1)         the administrator consults with DFPR and DFPR has not examined the State-regulated financial organization for compliance with the Act within the past 5 years; or

 

2)         DFPR waives, in writing, the restrictions of Section 15-1002.1 and permits the administrator to examine a financial organization or group of financial organizations for compliance with the Act.

 

c)         Federally Chartered Financial Organizations

 

1)         The administrator may, at reasonable times and upon reasonable notice:

 

A)        examine the records of a financial organization that is a federally chartered bank, savings bank, or credit union if the administrator has reason to believe that the financial organization has failed to comply with the Act;

 

B)        issue an administrative subpoena requiring the financial organization or an agent of the financial organization to make records available for examination; and

 

C)        bring an action seeking judicial enforcement of the subpoena. [765 ILCS 1026/15-1002.1(c)]

 

2)         Reasons to believe under (c)(1)(A) of this Section include, but are not limited to, the following:

 

A)        A holder has submitted negative reports to the administrator for two successive calendar years;

 

B)        A holder has not submitted a report to the administrator for two successive calendar years;

 

C)        A holder does any of the following:

 

i)          adjusts its asset statements by writing off property that is presumed unclaimed property under the Act;

 

ii)         fails to follow generally-accepted accounting principles or the Act with respect to unidentified remittances or the establishment of unclaimed property liability accounts;

 

iii)        fails to follow generally-accepted accounting principles or the Act with respect to reporting unidentified credits;

 

iv)        fails to retain records 10 years beyond the period of abandonment to determine the reporting of property which could be presumed abandoned under the Act; or

 

v)         the holder's records precludes the holder from reporting property which could be presumed abandoned under the Act.

 

D)        The administrator is notified in writing by another governmental agency that a holder is not in compliance with the Act;

 

E)        The total unclaimed property remitted by a holder is below the average remittance for other holders in the same industry and that have assets of similar size to the holder;

 

F)         A holder does not report all types of unclaimed property that they may be holding as indicated by, but not limited to, the following:

 

i)          a previous examination of the holder; or

 

ii)         a comparison with asset types reported by other holders in the same industry and that have assets of similar size to the holder.

 

G)        A holder is discovered as a subsidiary or affiliate of another holder which has been or is being examined;

 

H)        A holder is discovered as a principal or holding company of another holder which has been or is being examined;

 

I)         An unclaimed property examination of the records of the holder has not been performed for 5 or more calendar years;

 

J)         Changes in a holder's business practices including, but not limited to, changes in financial status, technological advances, corporate structure, or change in ownership; or

 

K)        The administrator has issued a written notice of deficiency to a holder.

 

3)         This subsection (c) is intended to comply with federal law applicable to federally chartered financial organizations which provides that "lawfully authorized State auditors and examiners may, at reasonable times and upon reasonable notice to a bank, review its records solely to ensure compliance with applicable State unclaimed property or escheat laws upon reasonable cause to believe that the bank has failed to comply with such laws." [Section 412 of the Garn-St. Germain Depository Institutions Act of 1982, Public Law 970-320 (Oct. 15, 1982)]

 

d)         Primary Prudential Regulator. For purposes of the Act, DFPR is the primary prudential regulator for entities:

 

1)         for which it performs regular regulatory examinations that include unclaimed property compliance at least once every 5 years;

 

2)         that operate primarily or exclusively in Illinois; and

 

3)         that are created pursuant to one of the following Acts: Illinois Banking Act [205 ILCS 5], Savings Bank Act [205 ILCS 205], Pawnbroker Regulation Act [205 ILCS 510], Corporate Fiduciary Act [205 ILCS 620], Residential Mortgage License Act of 1987 [205 ILCS 635], Illinois Credit Union Act [205 ILCS 305], Currency Exchange Act [205 ILCS 405], Transmitters of Money Act [205 ILCS 657], Sales Finance Agency Act [205 ILCS 660], Debt Management Service Act [205 ILCS 665], Consumer Installment Loan Act [205 ILCS 670], Title Insurance Act [215 ILCS 155], Debt Settlement Consumer Protection Act [225 ILCS 429], Safety Deposit License Act [240 ILCS 5], Payday Loan Reform Act [815 ILCS 122], Foreign Banking Office Act [205 ILCS 645], and Foreign Bank Representative Office Act [205 ILCS 650].

 

e)         Related Entities Not Covered by Section 15-1002.1

 

1)         Nothing in this Section is intended to restrict the ability of the administrator to perform an unclaimed property examination pursuant to Section 15-1002 of the Act when DFPR is not the primary prudential regulator. Thus, if a financial organization has DFPR as a primary prudential regulator under this Section, but a separate entity related to that financial organization does not have DFPR as a primary prudential regulator, the administrator may perform an unclaimed property examination of that entity pursuant to Section 15-1002 of the Act even if the administrator would defer to DFPR's unclaimed property examination of the financial organization pursuant to Section 15-1002.1.

 

2)         EXAMPLE: If an investment company is related to a state bank chartered by DFPR, the administrator would be able to perform an unclaimed property examination of the investment company even if the administrator would defer to DFPR's examination of the state-chartered bank.

 

f)         Disputes Over Application. If there is a dispute over whether an entity is covered by Section 15-1002.1 of the Act, the administrator and DFPR should consult to resolve the dispute using the framework established by Section 15-1002.1 of the Act and subsection (a) of this Section.

 

g)         Training. When requested by DFPR, the administrator shall provide or otherwise make available appropriate training to employees or representatives of DFPR regarding the examination for compliance with the Act. DFPR shall be responsible for all expenses incurred for the training of DFPR employees or representatives.

 

(Source:  Amended at 46 Ill. Reg. 16898, effective September 26, 2022)