Escrow Agent

Definition‍

An escrow agent is a neutral, regulated third party who holds funds or assets on behalf of two or more transacting parties. The escrow agent releases the funds or assets only once all agreed contractual conditions have been met.

Why it matters

In complex or high-value transactions, trust is critical. An escrow agent safeguards funds, reducing the risk of fraud, non-performance, or dispute. In the UK, escrow agents can provide confidence to both parties by ensuring money is secure and only moved when all terms are satisfied.

How an escrow agent works in the UK

1. Agreement – The parties agree the escrow terms and sign an escrow agreement.
2. Deposit – The buyer, client, or paying party sends funds to the escrow agent’s safeguarded account.
3. Verification – The escrow agent confirms the funds are cleared and all pre-conditions are met.
4. Release – Once the agreed conditions are satisfied, the escrow agent releases funds to the seller or payee.
5. Reporting – Both parties receive closing statements for their records.

Note: In the UK, FCA-regulated escrow agents like dospay safeguard sterling funds in segregated accounts - ours are held via our tech banking partners at the Bank of England for maximum security.

Examples and use cases

• Property transactions – Holding deposits until contracts are exchanged.
• Corporate deals – M&A transactions where part of the purchase price is released post-completion.
• Construction projects – Securing retention money until project milestones are achieved.
• Luxury asset sales – Protecting both buyer and seller in yacht, jet, or fine art transactions.

‍Mini-FAQ

Q: Is an escrow agent regulated in the UK?‍

A: Yes. When handling client money as a payment service, escrow agents must be authorised and regulated by the Financial Conduct Authority.

Q: Who chooses the escrow agent?

‍A: The parties agree on a mutually acceptable escrow agent, ensuring neutrality and regulatory compliance.