In these modern times, security of sensitive data is at the forefront of everyone’s minds. Clients, vendors, and employees should be able to trust that their sensitive data such as social security numbers and account numbers are safe in your hands. You most likely have protocols in place within your company to maintain data security. If you send paper forms through regular mail to report to the states, then you could compromise the security you’ve tried so hard to ensure along the way.

The format used for electronic reporting results in a NAUPA II file. The NAUPA II file is a text file that places certain information in certain positions in the file according to the NAUPA specifications. It does not provide much security on its own as it is easily opened.

A few years ago, the company that provides the software the states use to open your report files came up with the NAUPA Encryption Utility. This company very graciously shared the encryption with other software vendors so they could incorporate it into their systems. UPExchange has this type of encryption in place. As far as I know, every other unclaimed property reporting software provider has it as well.

States continue to move away from paper reporting in favor of electronic reporting. First, let me describe the true difference between the two types of filings as I know many holders are confused. Paper reporting means you enter all of your owner detail into forms approved by the state. Electronic reporting means you enter your owner detail on a state website or in reporting software, such as UPExchange, that can generate the NAUPA II format as a TXT or HDE file. Don’t get this confused with the cover sheet. No matter which method is used, almost every state still requires a hard copy of the coversheet so they can collect the original signatures that are required.

Some states, such as Tennessee, no longer accept the paper forms even if you have only one record to report. Other states will allow a handful of properties to be reported on paper, but require electronic reporting for larger reports. Virginia, for example, will accept paper forms if you have less than 25 records. Even the states who technically allow you to report small numbers of properties on paper forms would still prefer that you submit them electronically.

Why do the states have a preference? Paper reporting used to be the only method available. This required someone at the holder site to fill out state forms, often using a typewriter! The paper forms would be mailed to the state. When the state received the paper forms, someone on the state’s staff would have to manually enter the data from the paper forms into the state’s reporting system. As you can see, this is very labor intensive on both ends. It also leaves both sides open to clerical errors such as transposing social security numbers.