Here ya go Swami....
Jackie has done some good research on this topic. I went through the legal process about 3 years ago and am quite up to speed on it as well.
Reasearched and written by Clevfan
The idea of escrow accounts is a very good one, but the problems it poses make it pretty much impossible , imo.
I for one am very concerned about Neteller being used to facilitate an escrow account. By doing this, they open themselves up to being investigated for being an escrow service without the proper licensing which is required in some states, California being the one who is the hardest on unlicensed escrow services. The fact that they are in Canada does not matter, since they would be violating the laws by holding in escrow any funds from a resident of California without registering as as an escrow company and applying for the proper license. The same would go for Peep as well, since he would be considered to be an escrow agent.
As a user of Neteller for all of my gambling transactions, I fear that they are taking a huge risk by doing this, and I have to rethink my wanting to use them for fear that the authorities could take actions against them, thus jeopardizing their business.
Here is the law for California:
ESCROW LAW
The Escrow Law is contained in Division 6 of the California Financial Code, commencing with Section 17000. The regulations are contained in Subchapter 9, Title 10 of the California Code of Regulations commencing with Section 1700 (10 C.C.R. § 1700, et seq.).
The Escrow Law protects members of the public who entrust their money or other assets to independent escrow agents in California. Escrow agents, joint control agents and Internet escrow agents are subject to the provisions of the Escrow Law.
Persons or companies performing escrow services over the Internet in California, or performing escrow services over the Internet for consumers in California, are subject to the licensing requirements of the Escrow Law. See Press Release No. 00-13 on the Department's home page for information regarding the enforcement of these licensing requirements.
The definitions in the Escrow Law determine who is subject to the licensing requirements of the law.
The Escrow Law defines "escrow agent" as any person engaged in the business of receiving escrows for deposit or delivery. The Escrow Law defines "Internet escrow agent" as any person engaged in the business of receiving escrows for deposit or delivery over the Internet.
"Joint control agent" is defined under the Escrow Law as any person engaged in the business of receiving money or other property for disbursal or use in payment of the cost of labor, material, services, permits, fees, or other items of expense incurred in the construction of improvements upon real property.
Finally, the Escrow Law defines "escrow" as "any transaction wherein one person, for the purpose of effecting the sale, transfer, encumbering, or leasing of real property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by such third person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by such third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter."
The Escrow Law requires any person engaged in the escrow business or joint control business in this state to be a corporation organized for that purpose and to be licensed by the Commissioner.
The following persons are excluded from the licensure requirements of the Escrow Law:
1. Any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies.
2. Any person licensed to practice law in California who has a bona fide client attorney relationship with a principal in a real estate or personal property transaction and who is not actively engaged in the business of an escrow agent.
3. Any person whose principal business is that of preparing abstracts or making searches of title that are used as a basis for the issuance of a policy of title insurance by a company doing business under any law of this state relating to insurance companies.
4. Any real estate broker licensed by the Real Estate Commissioner while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required.
The requirements for obtaining a license are as follows:
1. Payment of the application fee. Fees for filing an application are $625 for the first office or location and $425 for each additional office or location along with an investigation fee of $100 for each location. The fees are non-refundable.
2. Membership in Escrow Agents' Fidelity Corporation (EAFC). An escrow agent must be a member of EAFC if the escrow agent will be engaging in the following types of escrows as specified in Section 17312(c) of the California Financial Code:
a. Real property escrows, including, but not limited to, the sale, lease, exchange, or transfer of title, and loans or other obligations to be secured by a lien upon real property.
b. Bulk sale escrows, including, but not limited to, the sale or transfer of title to a business entity and the transfer of liquor licenses or other types of business licenses or permits.
c. Fund or joint control escrows, including, but not limited to, transactions specified in 17005.1 of the California Financial Code and contracts specified in Section 10263 of the Public Contract Code.
d. The sale, transfer of title, or refinance escrows for manufactured homes or mobile homes.
e. Reservation deposits required under Article 2 (commencing with Section 11010) of Chapter 1 or Part 2 of Division 4 of the Business and Professions Code or by regulation of the Department of Real Estate to be held in an escrow account.
f. Escrows for sale, transfer, modification, assignment, or hypothecation of promissory notes secured by deeds of trust.
3. Fidelity bonding. Each applicant must file with the Department a fidelity bond if the transactions processed are of the type not listed in Section 17312(c) (i.e., the transactions listed in paragraph 2 above). The fidelity bond must provide fidelity coverage on each officer, director, trustee and employee of not less than $125,000 for the purpose of indemnifying the escrow agent (or the escrow agent's successor in interest) for loss of trust obligations held by the escrow agent as a result of fraudulent or dishonest abstraction, misappropriation, or embezzlement of trust obligations by an officer, director, trustee, or employee of the escrow agent.
The fidelity bond may contain a deductible; however, the escrow shall deposit with the Commissioner a surety bond satisfactory to the Commissioner in the amount of the deductible. The amount of the surety bond shall always be maintained in the amount of the deductible of the fidelity bond. The surety bond shall run to the state for the use of the state to cover any loss of trust obligations that the escrow agent's fidelity bond does not cover due to the fidelity bond's deductible.
4. Minimum financial requirements. Financial requirements must be demonstrated through submission of audited financial statements that indicate that the company has liquid assets in excess of current liabilities of $25,000 and tangible assets in excess of total liabilities of $50,000. If branch offices are maintained by the escrow agent, the tangible net worth requirement increases by 50% of the requirement for the first branch office and 25% for each additional branch office. Any losses projected by the applicant during the first few months of operation as shown in the applicant's proposed budget must be taken into consideration when calculating the tangible net worth and liquid assets.
5. Surety bonding. Each escrow agent must file with the Commissioner a surety bond of at least $25,000. The bond is intended to be used to pay to the state or any person any amount that is due to the state or such person under the provisions of the Escrow Law. The amount of the bond required may increase up to a maximum of $50,000 depending on the escrow liability of the company. The bond must be increased by $5,000 for each additional licensed office.
In lieu of the surety bond a licensee may deposit with the Commissioner a cash bond in the amount required. The cash bond may be represented by cash deposited in a bank, an industrial loan company or a savings and loan association. Such cash deposits or certificates must be assigned to the Commissioner and may not be included in the assets of the licensee for purposes of the tangible net worth and liquid asset requirements.
6. Background checks. All stockholders, officers, directors, managers and employees must have background checks performed by the Department. These background checks include, among other things, obtaining criminal history information through the Department of Justice and conducting civil court checks for activities that would indicate previous involvement in fraud, embezzlement, fraudulent conversion, or misappropriation of property. Each stockholder, officer, director, manager and employee will be required to file fingerprints cards, which must be cleared through the Department of Justice. Applicants may use the Live Scan program to submit fingerprints electronically to the Department of Justice for clearance. The fee for each clearance is $10 plus any fee charged by the Department of Justice or the live scan operator.
7. Minimum experience. The Escrow Law requires a manager who possesses a minimum of five years of responsible escrow experience to be stationed at the licensed location during open office hours.
8. Signed affidavit. An applicant must provide a signed affidavit certifying that the applicant has read and is familiar with the Escrow Law and regulations.
9. Branch offices. An applicant must file a branch office application to establish additional business office locations.
10. Escrow Management Training class. The Department conducts an Escrow Management Training class for new owners and managers. Applications may be obtained by calling the Los Angeles office of the Department of Corporations at (213) 576-7690. All completed applications and the applicable fees should be forwarded to the Los Angeles Office at 320 West 4th Street, Suite 750, Los Angeles, CA 90013-1105.
-----------------------------------------------------------------------------------------
Here is a press release from California showing how they go after unlicensed escrow firms:
GRAY DAVIS, Governor
WILLIAM KENEFICK, Acting Commissioner
Contact: G.W. McDonald
(213) 576-7615
Julie Stewart
(916) 323-7120
California Escrow Law Protects Online Consumers
Sweep of Online Escrow Companies Shows Risks
Sacramento, September 13, 2000 --The California Department of Corporations today announced the results of a sweep of online escrow companies offering their services on the Internet. The department’s action seeks to bring the companies into compliance with the California Escrow Law.
Since March 2000, the department has issued 27 orders to companies offering escrow services to the public on the Internet, requiring them to obtain a license or to stop offering their services in California. Two additional companies have obtained licenses voluntarily. Of the orders issued, six of the companies are in California and 13 are in other states. All but three companies have obtained licenses, pulled their websites or put disclaimers on their websites that their services are not available in California. In addition, eight companies in Canada, Mexico and Australia have been contacted and efforts are proceeding to notify them of state requirements and to bring them into compliance with California law.
The Escrow Law regulates independent escrow companies in California and provides important protections to California consumers. State law requires licensing of companies that act as a middleman and hold customer funds in a trust account until the confirmation of delivery of goods, services, or the performance of a promised action has been completed.
The licensing and regulatory process ensures that companies, their owners and key employees have been subject to background checks, that their financial records are in proper order, and that all customer funds are segregated in trust accounts until the terms of the escrow are met.
-------------------------------------------------------------------------------------------------------
Here is a link showing that they do indeed go after foreign company’s which offer escrow service, all of these company's are or have been investigated:
http://www.corp.ca.gov/pressrel/nr0013f.PDF
