Washington State Department of Financial Institutions

ESCROW AGENT ALERT #95-1

December 18, 1995

In recent weeks, the Department of Financial Institutions has initiated several investigations into alleged trust account violations. In all of these cases, the allegations involve potential commingling of trust account funds with other accounts, poor accounting practices, and in some Cases, outright theft. These investigations involve a large number of consumers and hundreds of thousands of dollars. The potential harm to the public is enormous. While some may lose their earnest money, others may lose the total value of their homes or life savings.

In light of these recent developments, we would like to make all of our licensees aware of the Department's position regarding such violations. I have initiated a "ZERO TOLERANCE" policy regarding certain escrow trust account violations, such as commingling trust account funds with other accounts conversion of trust account funds, and poor accounting practices. Violations of RCW 18.44.070 and paragraphs (2) through (14) of WAC 308-128E-011 will result in immediate regulatory attention. Because of the potential for serious harm to the public, this policy will remain in effect indefinitely.

The Escrow Agent Registration Act clearly defines the duties and responsibilities of an escrow agent in handling a client's escrow account. The Washington Administrative Code sets out in equally clear language the procedures which must be used and under what circumstances they must be used. Test requirements should not be ignored. Any material commingling of trust account funds with other accounts or intentional conversion of trust account funds will result in license revocation and criminal referral.

The purpose of this Alert is to inform you as to how the Department intends to enforce the provisions of the Escrow Agent Registration Act. We take these matters very seriously and will consider any violation of the Act with equal regard, however, violations of the trust account procedures will be given our most immediate and forceful attention.

DFI