If your offer has been accepted for a business and proceeded through due diligence successfully, then the final stages of closing the deal are on the horizon. By this point, finalizing the transaction is a matter of signing the contract, setting up escrow (typically Escrow.com) and swapping funds for assets.
The Escrow service provides protection for a buyer by allowing inspection of the assets for a pre-agreed period (typically one or two days) before releasing the funds. In the event there are any issues not already highlighted during due diligence, the buyer’s funds are protected while clarification or rectifications can be made. If this cannot be achieved , either party can seek remediation for a grievance through Escrow.com’s arbitration service.
FE International firmly believes that a well-defined escrow process is paramount in safe, secure and successful deal making. All transactions require either Escrow.com or attorney escrow.
Escrow.com has recently launched a ‘Know Your Customer’ (KYC) policy to ensure that all buyers and sellers are appropriately verified – here we dive into some of the changes to ensure that buyers and sellers know what to expect.
What Is A ‘Know Your Customer’ (KYC) Policy?
A KYC policy is extremely straightforward – it is a simple process used, particularly in the regulated banking industry, to ensure that all parties involved have verified identification. In this way, Escrow.com can prevent chances of money laundering, corruption and bribery and ensure that agents, consultants, buyers and sellers are the correct representatives.
KYC polices have expanded over the years, particularly with a rise in cyber fraud and terrorist financing. KYC policies help companies protect themselves by ensuring that they are doing business with legitimate entities, whilst protecting individuals who may have otherwise fallen victim to financial crime.
What Does This Have To Do With Escrow?
Escrow.com started implementing a KYC policy November 2016. From now on, all customers are required to verify their accounts in order to conduct a transaction on the platform.
In their words:
As a financial and safe payments service, we are required to verify the identities of the individuals in our system that are making and receiving payments.
Though this was not required previously, regulators have evolved alongside technology and are now making this a requirement for all Banking and Escrow companies. This is to make sure, we as an Escrow company, provide our due diligence in fighting and countering Terrorist or funding of illegal activities.
We have been rolling this since last year in November and currently, it has become mandatory for all accounts new or old. If you are working with an Escrow company that does not perform this procedure and claims to be providing Escrow services, then they are operating illegally.
What Do I Need To Do?
Shortly after signing the Asset Purchase Agreement, you will be invited to Escrow.com and asked to verify your account.
Account verification is a quick and easy step to take, so to avoid any delays during deal execution and transfer you should make sure to complete the steps promoptly.
Some important information:
- The verified identify must be the same as the beneficial account holder’s name on any bank account used to pay or receive funds from Escrow.com.
- Before any funds are disbursed both buyer and seller will need to go through the verification procedure.
- In order to go through that procedure, the following requirements apply.
Requirements for Individuals and Companies:
In Summary
KYC policies have increased in prevalence over the last few years. They serve to protect institutions and individuals from fraud and money laundering activities. Escrow.com has recently made this a mandatory requirement if looking to use their platform to transact. If looking to sell or buy a business and are planning on using Escrow.com, it is important that buyers and sellers verify their account to avoid any delays during the process.