NCJ Number
152096
Journal
Journal of Security Administration Volume: 17 Issue: 1 Dated: (October 1994) Pages: 18-36
Date Published
1994
Length
19 pages
Annotation
This article provides an overview of the escrow industry in California, the characteristics of escrow violations, and the control mechanisms of this industry.
Abstract
An escrow is the depositing of funds and documents by a buyer and a seller with an impartial agent for delivery on completion of the terms of the escrow instructions. California law requires all corporations engaged in escrow activity to be licensed pursuant to the regulations administered by the Department of Corporations; however, specific entities are exempted from the escrow law, including banks, trust companies, savings and loan associations, attorneys, insurance companies, title companies, and real estate brokers. These exemptions leave these entities primarily to the responsibility of various State and Federal agencies that have traditionally regulated them. When the real estate market in California took a downturn in the late 1980's, escrow violations increased. Trust account shortages were by far the most frequent manifestation of escrow fraud. Several factors that facilitate escrow law violations are the complexity and invisibility of escrow activities, large amounts of money involved, misrepresentation of audit reports, ample opportunity to violate trust, decentralized regulation, meager resources to investigate cases, and the lack of public outcry against these violations. These factors, coupled with the lack of fear of reprisal evidenced by the relatively few felony prosecutions, has created a situation in which the misuse of escrow funds has become an attractive opportunity for people who handle these funds. 3 tables, 3 notes, and 30 references