How funds leave an escrow account: instructions, verification and payment security

Every escrow arrangement ends in a payment. This note sets out what has to be true before money leaves the account. The answer is worth setting out plainly, because it is fixed by the escrow agreement rather than left to the agent’s discretion.

What makes an instruction valid?

The escrow agreement defines it. It names the people authorised to instruct, the form an instruction must take, and the conditions under which the agent may act on one. Funds are released in accordance with the agreement and valid authorised instructions, or against documentary evidence expressly specified in the agreement, and on nothing else. An instruction from the wrong person, in the wrong form, or outside what the agreement contemplates does not entitle the agent to act.

Who may give an instruction

The authorised signatories are settled at drafting stage, alongside the other matters counsel settle at appointment, and the time to think hard about them is then. Which individuals, acting singly or jointly, in what combinations for what actions; whether electronic signature is acceptable and in what form; and how a signatory is added or replaced, which should itself be a documented process under the agreement rather than an email from whoever remains. Signatories can change during a long arrangement, and an agreement that sets out how a signatory is replaced avoids an amendment later.

What is checked before funds move

The agent’s review is a comparison of the instruction against the agreement: the right signatories in the right combination, the form the agreement specifies, and a payee and amount fixed in the documented instruction. It is one step in the lifecycle described in how we work, and it is the step this note is about. Where release turns on a document rather than an instruction, the agent checks that the document produced answers the description the agreement gives. Where the instruction does not match the agreement, the agent does not release the funds. The role is non-discretionary, and the agent has no authority to act on an instruction that does not comply.

How are account details verified?

Payment redirection is a persistent fraud pattern in transactional work: a convincing email, apparently from a known counterparty, notifying a change of bank details shortly before a payment falls due. Against that pattern, the value of the arrangement is the discipline already described: a payee and amount fixed in a documented instruction, in the form the agreement specifies, from the people it authorises. Treat any unexpected change to payment instructions as a reason to pause and confirm before sending funds.

What these controls do not cover

Documented instruction mechanics reduce the opportunity for a redirected payment, because the payee and amount are fixed in an instruction that has to satisfy the agreement’s own requirements, not in the most recent email anyone received. These controls do not extend to your own systems or correspondence. The same verification practice you apply to other payment instructions applies to instructions on the escrow account.

What the agent will not act on

Instructions that conflict, instructions from one party where the agreement requires both, and instructions to depart from the documented mechanics. The workable position, set out in the release conditions note, is that the agent holds, notifies the parties of what it has received, and continues to hold until it receives a joint instruction or a determination it may act on in the form the agreement specifies. The agent has no authority to depart from the documented mechanics, whatever a party requests.

Where verification ends

Titanium does not provide fraud prevention services, does not monitor the parties’ own communications, and gives no legal, tax or investment advice. It holds funds under the applicable client money arrangements and releases them in accordance with the escrow agreement and valid authorised instructions, or against documentary evidence expressly specified in the agreement, subject to applicable law and regulatory requirements.

Ask us how the instruction mechanics would be documented for your transaction.

Common questions

Can bank details be changed by email?

Titanium verifies account details directly with the recipient before payment. Changes are handled through the verification procedure recorded in the agreement, not on an emailed instruction alone.

How quickly is a valid instruction processed?

A valid instruction is processed the same or next business day.

What happens if a signatory leaves during the arrangement?

The agreement should set out how an authorised signatory is replaced, which avoids an amendment at the point of release.