General Escrow Questions
What is an Escrow?
Escrow arrangement can take many forms, but they will all generally involve a trusted third party holding title to specific assets, subject to the fulfilment of pre-determined conditions.
Why are Escrow Accounts used?
Escrow accounts give all parties confidence that the Escrow Assets will be available upon satisfaction of the conditions and that there will be no issue in enforcing payment or similar.
What is an Escrow Account?
An Escrow Account is a designated account with a regulated bank to hold cash. It is important that the account is structured in such a way that only escrow funds are held in the account and it is clear to the bank that the funds are client funds and are not the funds of the Escrow Agent. It is also best practice for funds being held for any length of time, that the funds are segregated from any other Escrow funds, to ensure that it is clear which funds belong to which client.
What happens if the Escrow Agent becomes insolvent?
In the event that the Escrow Agent becomes insolvent, provided the Escrow arrangements have been structured properly (as Elemental’s all are), the Escrow funds will be fully protected and separate from the insolvency. Elemental complies with the FCA’s safeguarding requirements, which means that we segregate all escrow funds.
What is an Escrow Agreement and what does it look like?
The Escrow Arrangement is governed by the Escrow Agreement and this sets out the rights and obligations of all parties. Generally, the Escrow Agreement is between the Escrow Agent and two or more Appointors. Elemental will generally draft the Escrow Agreement to meet the requirements of the Appointors, but it is also possible to use a draft provided by the Appointors, subject to certain conditions.
Fees and Set Up
How much does it cost?
The fees are dependent on a variety of factors including (i) the purpose of the escrow account; (ii) the value of the escrow assets; (iii) the likely duration of the escrow account and (iv) the number of transactions on the escrow account. A specific quote will be provided upon request.
How long does it take to set up?
From our perspective, the escrow arrangement can be set up and operational with a few days. However, this is dependent on prompt provision of all relevant KYC information and agreeing the Escrow Agreement. Therefore, it can often take longer to set up the arrangement, if this information is delayed.
What KYC requirements do you have?
Elemental needs to undertake thorough KYC checks on all appointors, which will likely involve the following:
- Evidence of the identity of all appointors;
- Evidence of the ultimate beneficial owners of all corporate appointors (holding 25% or more); and
- Evidence of the source of the funds and the purpose of the escrow arrangement.
If a law firm or accountancy firm is advising you on the structure, we may be able to rely on the KYC information held by such firm and provided to us.
Questions about Elemental
How is Elemental regulated?
Elemental CoSec Limited is registered with the FCA (Ref 666731) under the Payment Services Regulations 2009 (“PSRs“) for the provision of payment services. Elemental CoSec Limited also voluntarily complies with the safeguarding requirements under the PSRs, ensuring that funds are segregated from our own funds.
Elemental is also regulated by HM Revenue & Customs for the purposes of the Money Laundering Regulations 2007 and by the Information Commissioner’s Office for Data Protection.
How can I be confident in Elemental?
Apart from our regulation, Elemental is run and managed by UK solicitors and accountants to the highest of standards, which is recognised by our wide and prestigious client base.
We are trusted to provide services to the UK Government (HM Treasury), as well as being a member of the UK Government’s Advisory Network. As well as this, Elemental works with most of the UK magic circle law firms, a range of leading banks and financial institutions, including the European Investment Bank, Credit Agricole and the Bank of China.
You can also look at our testimonials page, for further evidence of the excellence of our work and track history.
What currencies can Elemental hold?
Elemental can hold cash in almost any currency in the World. The most common currencies are GBP, EUR and USD, but specific foreign currency accounts can be set up as needed.
Can Elemental hold assets other than cash?
Yes we can. If needed the assets can also be secured in Bank stored safety deposit boxes. Please get in touch to discuss further.
What bank will the funds be held at?
We only use UK regulated banks and, as at the date of writing, we use client accounts with Barclays Bank plc and Metro Bank plc.
What happens if there is a dispute?
The starting point under most Escrow appointments, is that funds are released upon receipt of a signed Release Notice from the appointors. However, specific arrangements can be put in place to deal with a dispute. These will be negotiated and agreed between the parties. Ultimately, this may require the obtaining of a court order or arbitration decision.