Escrow.com President Brandon Abbey discusses Escrow.com and the challenges of starting an escrow company.
Big ticket domainers — and even smaller ones who want safe domain transfers — often turn to Escrow.com for domain name escrow services. The company was founded in 1999 by Fidelity National Financial, but has been privately held since May 2004. I’ve met Escrow.com president and managing director Brandon Abbey at a handful of domain name shows, and have always been curious how the company runs. In the interview that follows, you’ll see that the escrow business is highly regulated. Abbey will tell you (and he’s not joking) that the penalties for not running a tight ship are high: he’d go to jail.
DOMAIN NAME WIRE: It seems that more and more companies are offering escrow services for domains. What makes escrow.com different?
ABBEY: Escrow.com is an escrow company; most other companies offering domain escrow services are not licensed as an escrow company. We have very stringent requirements regarding how we manage our clients’ funds and personal property. All our employees have been through and passed a background check conducted by the California Department of Corporations (DOC). The DOC sets the requirements for bonding; we have a $4M bond. You will notice that some escrow companies do not offer services in California and Arizona. This is because they do not have the appropriate licenses. These companies are not subject to the same stringent regulations we are. If an unlicensed escrow company were to perform escrows for a California buyer or seller they would be in violation of the Financial Code. The potential penalty is a fine, not to exceed $10,000, imprisoned in county jail for up to a year, put in state prison or punished by both fine and imprisonment. Arizona penalties appear to be just as severe and Idaho also requires an escrow license. It is illegal for a California escrow company to earn interest on their clients funds. All money retained by Escrow.com is held in a non-interest bearing trust account at Bank of America. We have our books reconciled every month by one of the most respected accountancy firms in the country, Morton Alan Haas & Co. Funds belonging to our clients are safe.
DOMAIN NAME WIRE: How difficult is it to set up an escrow company? Tell me more about getting “licensed” to run an escrow service.
ABBEY: When the company changed hands in 2004 we did not have an Arizona license. The application process and requirements are not easily met. After much due diligence by the state we obtained application approval and our CFO, Escrow Manager and I flew to Arizona to meet with the Department of Financial Institutions. After an extensive review of our business practices and policies we were granted a license. The licensing entities have the right to conduct an onsite audit of your operation at any time. These audits are paid for by the escrow company including travel and lodging. The barrier to entry is getting higher, especially if you do it right.
DOMAIN NAME WIRE: Can you give me an idea of the volume of domain transactions you handle, either in dollar terms or number of domains? In many ways this is the “silent market” that doesn’t get reported on DNJournal.
ABBEY: This is not information we report. Many of our clients do not want to see their transactions in print. I can only remember a couple of times where both the buyer and seller asked me to verify their transaction publicly.
DOMAIN NAME WIRE: How many resources does Escrow.com commit to preventing fraud? What are some of the steps the company takes to make sure transactions do not involve fraud?
ABBEY: Everyone at Escrow.com is on the lookout for potential fraud. We have been involved in the reporting and takedown of well over a thousand fraudulent escrow websites. In 2007 the Internet Crime Complaint Center reported that there was close to $160M in losses for Internet auction related fraud. Most if not all could have been prevented if the victim used our service. We have built a very close working relationship with the FBI and have assisted them on numerous cases. We have a number of internal checks we go through when approving and releasing funds. Many of these checks are built into the system, but all transactions are reviewed manually by management before closing.