Escrow Agent Memorandum No. 00-04ES
To: All Escrow Agents and Interested Parties
From: Mark Thomson, Director of Consumer Services and Administration
Date: August 11, 2000
Subject: An out-of-state escrow company and the requirement to maintain the trust account in a Washington bank.
Question: If an escrow company is licensed in Washington and in another state that also has an in-state bank requirement for the trust account, and the company performs an escrow for two consumers, one located in each of the two states, how can it comply with the in-state trust account requirement in both states?
Response: Escrow agents who are licensed in Washington and in another state, California for example, may face a conflict when performing escrows for consumers located in both states.
In Washington, pursuant to RCW 18.44.400(2), a licensed escrow agent must keep trust account funds in a Washington bank. The trust account must be separate from the agent’s own general account, and shall be used for only the escrow account transactions involved.
An escrow agent licensed in California is subject to a similar requirement to maintain its trust account in a California bank.
In the event that the escrow agent is licensed in both states, and performs an escrow for a transaction involving a consumer located in California and a consumer located in Washington, then it faces the practical dilemma of an inability to simultaneously comply with the in-state trust account provisions of both state laws. It must keep the funds from this transaction in either its California trust account or its Washington trust account, but cannot keep the funds in both trust accounts at once.
This problem has surfaced with the advent of Internet escrow companies performing escrows for transactions involving personal property from Internet auction sites.
It is the Department’s opinion that in situations where it is a physical impossibility to comply with the requirements of both state laws, and where the other state has trust accounting requirements similar in nature to Washington’s, then the licensee may maintain the trust account funds in a bank located in the state where the property is located. The licensed escrow agent would be required to comply with all other requirements of the Escrow Agent Registration Act in completing the escrow transaction.
Companies performing interstate escrow transactions should maintain:
Accounting and record keeping systems to allow segregation of escrow accounts by state;
Account sub-ledgers which allow reconciliation with the state escrow accounts; and,
- Accounting records, such as deposit slips and evidence of electronic fund transfers, that provide an audit trail for interstate transactions.