What does escrow mean, and how does it help protect consumers and businesses against fraud?
Some transactions, like grocery shopping or paying for a hotel room, are simple. Others are far more complex, time-consuming and risky – for example, buying a house or an expensive piece of art.
Escrow arrangements, both in the UK and elsewhere, help reduce the inherent risk of a large or complicated transaction. Below, we’ll explain what escrow means and show how it helps protect consumers and businesses against fraud.
Key takeaways:
Escrow is a secure arrangement where a neutral third party holds funds until all parties meet agreed conditions.
People often use escrow during high-value or complex transactions – for example, property purchases, M&A deals and luxury asset transfers.
Escrow protects both buyers and sellers by reducing fraud risk and ensuring transparency throughout the transaction.
Escrow accounts in the UK: how they work and when to use one
So, what exactly does escrow mean? In the UK, escrow is a contractual agreement in which a stakeholder or escrow agent holds funds on behalf of two or more parties during a transaction, releasing them when all parties have fulfilled their obligations.
The word “escrow” comes from the old French word “escroue”, meaning “scroll” or “scrap of paper" – in this case, an agreement or deed held by the trusted third party.
The conditions upon which funds are released from escrow vary. During a property transaction in England, for instance, funds are sent from the buyer’s solicitor to the seller’s solicitor on completion day, providing all parts of the conveyancing process have taken place.
What is an escrow account used for?
Stakeholders use escrow accounts to hold funds securely on behalf of the parties involved in a financial transaction. Once assets are in escrow, neither the buyer nor the seller has access to them until the terms of their agreement are fulfilled.
UK escrow accounts can be bank accounts or accounts held with alternative banking institutions. They’re commonly used to store funds during real estate transactions, mergers and acquisitions, large purchases and other scenarios where two or more parties need to meet certain obligations before deals can conclude.
Need an escrow account for a UK transaction? Interpolitan Money provides FCA-regulated escrow services for property purchases, M&A deals, legal settlements and cross-border transactions. Setup is fast, and a dedicated relationship manager guides you through the process. Speak to us about escrow now
What does a UK escrow service do?
Here's a step-by-step outline of the escrow process in the UK:
Agreement. Parties involved (buyer, seller and escrow agent) agree on the terms and conditions of the transaction, including the use of an escrow service.
Escrow Setup. The parties select an escrow agent or service provider trusted by all parties and establish an escrow agreement outlining the terms of the arrangement.
Deposit. The buyer deposits the agreed-upon funds into the escrow account, which is securely held by the escrow agent.
Verification. The escrow agent verifies the deposit and ensures that it meets the conditions outlined in the escrow agreement.
Transaction. Once all conditions are met (for example verification of payment, delivery of goods or completion of services), the escrow agent releases the funds to the seller or carries out instructions per the agreement.
Completion. After the transaction is complete, the escrow agent provides documentation to all parties confirming the release of funds or completion of the transaction.
Throughout the process, the escrow agent acts as a neutral intermediary, safeguarding the interests of all parties involved and ensuring a fair and secure transaction.
What can be held in escrow?
Many different things can be held in escrow, including electronic funds, cash, stocks, securities, real estate title deeds and other business or personal assets.
When escrow assets are physical – a valuable painting or piece of jewellery, for example – they're typically held in a vault or other secure location by the escrow agent.
Who pays the escrow fees?
In the UK, the party responsible for paying escrow fees can vary depending on the terms of the escrow agreement itself. Generally, it's a matter of negotiation and can be outlined in the contract or agreement between the buyer, seller and escrow agent.
Sometimes, the party benefiting the most from the escrow arrangement may bear the cost, while in other cases, the fees might be split between the buyer and seller. There may also be cases where one party agrees to cover the escrow fees as part of an incentive to close the deal.
How long does the escrow process take?
The escrow process can take as little as a few days or as long as several months, depending on transaction complexity, communication and the specifics of the escrow agreement.
Simple transactions with straightforward terms and minimal conditions can happen relatively quickly. Complicated transactions involving multiple parties and extensive due diligence can take much longer to finalise.
To ensure things go as smoothly as possible, it's essential for all parties involved to stay responsive, provide documentation and information promptly, and stick to the timelines outlined in the escrow agreement.
Ready to secure your transaction with a regulated escrow account?
We work with businesses, law firms, property developers and private clients across the UK and internationally. Every escrow arrangement is supported by a dedicated relationship manager and structured to meet your specific deal requirements.
FCA-regulated, with funds held in safeguarded accounts
Suitable for property, M&A, legal settlements, sports and media rights
Onboarding in as little as 48 hours
Multi-currency capable — over 55 currencies
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FAQ
Q: What is an escrow account used for in the UK? A: Escrow accounts in the UK are commonly used for property purchases, mergers and acquisitions, legal disputes, luxury asset transfers and cross-border transactions. Funds are held by a neutral third party until all conditions of the agreement are met.
Q: How long does escrow take in the UK? A: Simple transactions can complete within a few days. Complex deals involving multiple parties or jurisdictions typically take several weeks. Interpolitan can begin the escrow setup process within 48 hours of receiving your documentation.
Q: Who regulates escrow services in the UK? A: Escrow services in the UK are subject to FCA regulation when provided by an authorised financial institution. Interpolitan Money Plc is authorised and regulated by the FCA (FRN 900413).
Q: Who pays for escrow in the UK? A: Escrow fees in the UK are negotiable and outlined in the escrow agreement. In some deals, the buyer bears the cost; in others, fees are split. Our team can advise on fee structures during the initial consultation.
Q: Can a non-UK company use a UK escrow account? A: Yes. Interpolitan regularly provides escrow services to international businesses and private clients conducting transactions that involve UK parties or UK-based assets. We support payments in over 55 currencies across 160+ countries.