Dormant Assets Act 2022

Legal background

26. The current legal framework for the Dormant Assets Scheme is set out in the 2008 Act.
27. Part 1 of the 2008 Act deals with the transfer of balances in dormant accounts. This includes provisions about the general Scheme (section 1), provisions about the alternative scheme for smaller banks and building societies (sections 2 and 3), and provisions about the functions of a reclaim fund (section 5). Under each scheme, the customer retains against the reclaim fund whatever right to payment of the balance the customer would have had against the bank or building society had the transfer(s) not happened. Under the 2008 Act, the reclaim fund must meet reclaims and manage dormant account funds in a way that enables it to meet whatever reclaims it is prudent for it to anticipate.
28. Under the general Scheme, a bank or building society may make a transfer to an authorised reclaim fund from a dormant account, provided the reclaim fund consents to the transfer. After the transfer, the customer no longer has any right of reclaim against the bank or building society, rather this liability is transferred to the reclaim fund.
29. In addition to the general Scheme, there is an alternative scheme for smaller banks and building societies. Under this scheme, a smaller bank or building society can itself transfer money from a dormant account to certain charities (for example, a charity with which it has a special connection). The reclaim fund and the charity must consent to the transfer, and a proportion of the money from the dormant account must be transferred to the reclaim fund. In determining what this proportion must be, the reclaim fund must take account of the need to have access at any point to enough money to enable it to meet whatever reclaims it is prudent to anticipate (section 2(4)). After the transfer, the customer no longer has any right of reclaim against the bank or building society, but instead can claim from the reclaim fund whatever they would have been owed had the transfer not happened.
30. Section 1 and section 2 of the 2008 Act provide for transfers to be made to an "authorised" reclaim fund. Section 6 defines "authorised" as meaning authorised for the purposes of the Financial Services and Markets Act 2000 (FSMA ). Section 31 of FSMA makes provision for "authorised persons", including a person who has a Part 4A FSMA permission to carry out one or more regulated activities (as set out in section 22(1) and Schedule 2 of FSMA). The 2008 Act made various amendments to FSMA. This included adding the activities of a reclaim fund to the list of activities in Schedule 2 to FSMA (Schedule 2 provides a non-exhaustive list of activities which may be specified under section 22 of FSMA as regulated activities). Article 63N of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) specifies activities of reclaim funds that are regulated activities for the purposes of FSMA.
31. Section 5 of and Schedule 1 to the 2008 Act set out requirements about provision to be made in the articles of association of a reclaim fund. For example, the objects of a reclaim fund must be restricted by its articles of association to those matters in section 5(1) e.g., the meeting of reclaims.
32. Part 2 of the 2008 Act makes provision about the distribution of money under the general Scheme. Under the general Scheme, dormant account money is distributed by the Big Lottery Fund (now operating as TNLCF). Schedule 3 to the 2008 Act makes further provision about the functions of TNLCF in relation to dormant account money.
33. Section 16 makes provision about the distribution of dormant account money by TNLCF, in particular that it must distribute dormant account money for meeting expenditure that has a social or environmental purpose. Section 17 makes provision about the apportionment of dormant account money between the different nations in the United Kingdom. An order prescribing the percentages for the purpose of section 17(1) was made in 2011 (SI 2011/1799 ). Section 18 provides further restrictions as to the purposes for which, or people to which, dormant account money can be distributed for meeting English expenditure. Sections 19-21 provide a power for the respective devolved administrations to set out such restrictions for the relevant nation's expenditure by way of order. The Welsh ministers have made an order (SI 2010/1317) , as have the Scottish ministers (SSI 2010/278) .
34. There is also a power to give directions to TNLCF under section 22. This requires TNLCF to comply with any directions given to it by the Secretary of State (in relation to English expenditure) or by the devolved administrations (in relation to their nation's portion of the expenditure). A direction under section 22 may specify, for example, matters to be taken into account in determining the persons to whom TNLCF distributes money, or the purposes for which TNLCF may or may not distribute money. In addition, the Secretary of State (but not the devolved administrations) may give directions under subsection (4) relating to operational matters such as financial management, staffing and accounts. TNLCF must be consulted before any direction is given under section 22.