Whilst individual escrow providers have been offering services for years, the overall awareness of escrow is still relatively limited in the UK. A quick search on the internet will mostly likely return companies based in the US. 

Once you have searched for UK escrow services, choosing which provider is the right fit for you and your transaction is the next step, and making the right decision can make all the difference to your project.  We’ve put together some key points to consider when it comes selecting your Escrow Provider.

Key points to consider 

  • Bespoke vs Template agreements – depending on the type of project you are undertaking some escrow providers will be able to offer standard template agreements that are easily adaptable to fit your needs. Most often these are used for smaller value transactions such as private sales of goods. They can also be used for common place escrow agreements such as Party Wall Awards. The fees for these escrow services are generally lower as less time is needed by the escrow provider to draft the agreement. 

Bespoke escrow agreements allow for a much broader range of transactions to be covered, as they can be tailor made to reflect the individual needs of all the involved parties. For example; Where a corporate entity is fundraising via high net worth individuals, those investors will expect to see investment documentation and specific and dedicated escrow fees. Bespoke agreements work well as they can cover multiple investors.

  • Experience and expertise – For most, the main reason for choosing to use escrow is to provide a layer of protection regarding the flow of funds associated with their financial transaction. Your chosen escrow provider should help you to feel confident moving forward with your project. Selecting an escrow provider that has handled projects similar to your own and who understands the key points that will need to be addressed, can go a long way to helping you feel secure in the escrow arrangement. 

  • Fixed fee and % based quotes – Fees for escrow services can be calculated in different ways which can benefit different types of transactions. A fixed fee quote for services offers an upfront cost that will usually cover a pre agreed transaction amount and reflect the amount of dedicated time the provider will need to draft the agreement.

A percentage-based quotation is often offered when a client is unsure of the amounts and frequency of transactions or that is looking for an ongoing service with the potential for multiple transactions. This means that for every transaction to go through the escrow providers account, they will charge an agreed percent of the total amount, which will cover the services they have provided. 

In both cases you may be asked to pay an up-front amount to cover the cost of carrying out due diligence searches and the drafting of the agreement. This money is often needed before work can begin on drafting the agreement.  

Where does the FCA factor into your decision? 

You may come across escrow providers that state they are FCA registered or FCA authorised – this can provide reassurance, as escrow providers regulated or authorised by the FCA are required to comply with certain legislation and regulatory rules – if they do not meet the minimum standards they can face sanctions. This is certainly something to consider when looking at Escrow Service providers.  

Who are the FCA? 

The FCA stands for The Financial Conduct Authority. The FCA is a financial regulatory body in the UK who currently regulate the conduct of over 59,000 Financial Services firms and financial markets in the UK. Their objective is to; Protect Consumers, Protect Financial markets, and Promote Competition. The bases for their work and the standards set out by the FCA is defined by the Financial Services and Markets Act 2000 (FSMA). 

What does it mean to be FCA Registered / Authorised? 

When a Financial Services provider states that they are registered or authorised by the FCA it means that they have taken the appropriate steps to meet all the requirements needed to be regulated by the FCA for the regulated activity they have applied to become authorised/regulated in respect of.  These requirements are set out in the FCA Handbook. Once they have met the requirements and the FCA has confirmed that they are registered / authorised, the firm will be added to the FCA Register. This register is available online and lists the firm’s details. 

It is important to check a firm’s FCA registration/authorisation relates to escrow services, as there are many different types of FCA permission that can be sought. 

The FCA register can be viewed here.

Why you should choose a registered / authorised provider

Firms that are regulated by the FCA must conform to strict criteria that set out the way Financial Service providers interact with consumers. The FCA ensure that all the firms they supervise are compliant with the relevant provisions of the Financial Services and Markets Act 2000 (FSMA). 

Choosing to use an FCA registered / authorised Escrow provider can remove a lot of uncertainty you may feel about the legitimacy of the service they are providing. As FCA authorised/registered firms have to submit regular reports and supporting documentation to evidence their practise is in keeping with the FCA criteria, they are being consistently monitored by the FCA. Anyone can search for a firm on the FCA register, and we would encourage anyone seeking escrow services to check the Register for information on their chosen provider. 

The FCA register can be viewed here.

You can find more information on the escrow process here or you can contact us to find out how we can help you with your project.