How to verify an escrow agent in a commodity deal
By the Vanguard Verify desk · Published 2026-10-24 · Updated 2026-10-24
Short answer: only use an escrow agent you choose and verify yourself. Confirm it is licensed or regulated for escrow in its jurisdiction by checking the regulator's own register, contact it through details you find independently (not links from the other party), make sure the receiving bank account is in the escrow company's exact legal name, and read the written release conditions before any money moves.
Escrow can protect both sides of a trade, but fake or unsuitable escrows are a well-documented risk. California's Department of Financial Protection and Innovation (DFPI), which licenses escrow companies in that state, warns people to be cautious when the other party insists on a specific escrow company and to avoid escrow services that ask you to pay an individual.
Step by step
- Pick the escrow yourself, or jointly. Be cautious if the seller or buyer insists on one particular escrow provider.
- Find the regulator. Escrow rules differ by country and state. In some places escrow companies are licensed; elsewhere escrow is offered by banks, law firms or regulated payment firms. Ask which authority supervises them and check that authority's public register yourself.
- Verify the company. Check the business register for the same legal name, registered address and directors. See is this company real? how to check.
- Contact them independently. Use a phone number from the regulator's register, not from an email or website link sent by your counterparty. You should reach a real person.
- Check the receiving account. The account name must match the escrow company's legal name. A personal account, a different company or a third-party payment app is a stop signal.
- Read the escrow agreement. Who signs, what documents trigger release, what happens on dispute, fees, and governing law. Release triggers should be objective documents, for example a bill of lading or an independent inspection certificate. See how to verify a bill of lading.
- Confirm by phone before every transfer. Payment details changed by email are a classic interception risk.
Escrow vs other ways to pay
| Method | Who holds the money | Main check |
|---|---|---|
| Licensed escrow company | Regulated escrow holder | Licence on regulator's register |
| Lawyer's client account | Law firm | Lawyer listed with the bar or law society |
| Documentary credit (LC) | Issuing bank's undertaking | Received through your advising bank |
| Bank escrow | Licensed bank | Bank licence and direct confirmation |
Red flags
- The counterparty insists on "their" escrow and will not accept any other.
- The website has no physical address or phone line, or the contact only replies from free email accounts.
- Spelling errors and inconsistent company details on the escrow site or documents.
- Instructions to pay an individual, a crypto wallet or a person-to-person app.
- Claimed seals and endorsements you cannot confirm with the issuer.
- Release conditions that let one side release funds alone.
- A deal priced far below market, used to rush you into paying.
Remember: buyers show proof of funds (POF), sellers show proof of product (POP). See POF vs POP.
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FAQ
Is escrow safe for commodity deals?
It can be, if the escrow holder is genuinely regulated, independent of both parties and bound by clear written release conditions. A fake or controlled escrow gives no protection.
How do I check an escrow licence?
Find the authority that supervises escrow in the escrow agent's jurisdiction and search its public register yourself. In California, for example, escrow companies are licensed by the DFPI.
Should the escrow account be in the escrow company's name?
Yes. The receiving bank account should be in the escrow company's exact legal name, never an individual or unrelated company.
What should trigger release of escrow funds?
Objective, verifiable documents agreed in writing, such as a bill of lading or an independent inspection certificate, not one party's unilateral instruction.
Vanguard Verify is run by Vanguard Trade Capital Goods Wholesalers DWC-LLC, Dubai South, Licence 14282. This answer is general information, not legal or financial advice.