Escrow

The word comes from English law. In Russia, escrow is called a conditional deposit and is governed by the Civil Code. The escrow agent receives money or property from one party and transfers it to the other when the agreed grounds arise. For money, an escrow account is opened at a bank.

How it works

1. The parties agree on the conditions and choose an escrow agent.
2. The buyer pays the money into the escrow account.
3. The seller performs its obligations: ships the goods, hands over the documents.
4. The escrow agent checks that the conditions have been met and transfers the money to the seller.
5. If the conditions are not met by the deadline, the money goes back to the buyer.

Where it is used

In Russia, escrow accounts are mandatory in shared-equity housing construction. They are used in the sale of businesses and in large real estate deals. In foreign trade, escrow is useful when the partners do not know each other and neither wants to pay or ship first. The alternatives in such a situation are a letter of credit or partial prepayment.

Limitations

Escrow costs money and requires a precise description of the conditions. If the parties disagree on whether the conditions have been met, the money stays with the escrow agent until the dispute is resolved. In an international deal, the escrow bank must suit both parties, and transfers to and from the account go through currency control.

How it looks through a broker

With us, escrow is available on request, for an additional fee: the roubles wait in a special escrow account at a Russian bank until the agent sends the currency to the beneficiary and are released only upon execution. The accounts are already open, so you don’t need to look for an escrow bank yourself. Under the usual scheme, the roubles are transferred to a network company under the agency agreement, which sets the execution period. This is how regular clients usually pay. More on the Payment protection page.