Why are law firms outsourcing escrows?
Law firms that historically held their clients' funds or assets in escrow are now increasingly looking to outsource this function.
The heightened scrutiny and regulation means that law firms are discouraged from bearing the responsibility of administering escrows themselves. Outsourcing to independent agents allows law firms to minimise risk and focus on their core legal expertise, thereby enhancing client service.
Along with law firms, banks are also becoming more hesitant to administer escrows. According to Mondaq ‘emerging capital frameworks such as Basel III will make it harder for banks to hold such short-dated escrows on their balance sheets’.
They went on to say ‘None of this is to say banks will avoid escrow services altogether. But they are getting choosier, and the willingness to extend these services will increasingly depend on the relationship with the client - and the potential for profit’.