By Mr Vaibhav Tambe Founder & CEO, TransBnk
Complex and high-value deals are on the rise in India on the back of increasing per capita income and spending power by the day. These tailwinds have led to the benefit of big-ticket projects especially in the real estate sector. However, the ambiguity of bankruptcy and prolonged delays in real estate project deliveries across the country have kept investors at bay from exploring real estate to its full potential. To secure the investors’ interest, the government has come down heavily on defaulting parties through regulatory changes and compliance demands.
Escrow accounts – a modern-day facilitator, acts in favour of benefiting all the stakeholders by ensuring smooth and transparent transactions. However, with the continuously changing environment on the regulatory and compliance front, adapting to the changes has become a task for Escrow providers. In a bid to help them operate while abiding by the dynamic regulations, here is a list of ways that escrow providers can consider.
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Increased Vigilance: Over the past decade, there have been various cases of money laundering from notorious businesses in India. To clamp down on the situation, the government has introduced Know Your Customer (KYC) and Anti-Money Laundering regulations and has made them stringent to comply with. To be in line with the same, escrow providers can be increasingly vigilant in cross-checking the nature and history of their clientele’s transactions. The escrow providers can deep dive into checking the clients’ source of funds, where they transfer it, etc.
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Working with compliance regulations in real-time: As previously said, in a new instance related to fraudulent transactions of scale, the government keeps introducing fresh regulations and compliance checks. Escrow providers are known for being the frontrunners in noticing fraudulent transactions with their involvement in high-value complex transactions and hence provide noteworthy information in real-time to the regulator that in turn leads to the establishment of a robust compliance framework. This is possible to achieve by abiding by the concurrent laws and compliance requirements at the local as well as international levels.
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Seek Legal Guidance: Given that the nature of transactions in complex deals can be out of the purview of expertise from the escrow providers alone, it is best to fall back to basics and seek legal advice from subject matter experts including compliance officers who specialize in regulatory matters. They aid by decoding newly introduced laws and guidelines to ensure that the providers abide by the latest standards for carrying out transparent and smooth transactions and operations.
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Tech-backed solution: Escrow providers increasingly are relying on technology solutions which ensure the maintenance of compliance standards. Relying on blockchain technology, escrow providers can encrypt sensitive data to safeguard transparent transaction records. Using advanced software is also seen now in practice among escrow providers to monitor and report doubtful activities.
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Timely education and Training: It is crucial to educate and train the employees with dedicated compliance and regulation procedures to keep them aligned with the updated regulations and compliance framework. Hosting frequent workshops and knowledge sessions aids the staff in being watchful and guarantees undeterred compliance standards at all times.
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Frequent Audit and Review: Frequent audits and reviews, both internal and external Escrow providers often conduct internal and external audits to assess their adherence to regulatory requirements. These audits help identify areas for improvement and ensure ongoing compliance.
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Association with Regulator: Maintaining communication and frequent association with regulatory bodies help keep the escrow providers informed on the latest regulations and compliances. The association helps escrow providers seek guidance and be informed about the prospective changes/ updates in the regulatory and compliance framework.
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Inform the customers: Imparting knowledge about the latest compliance standards and regulatory information is equally important for escrow providers to ensure transparent transactions while following regulatory protocols. Communication of the guidelines leads to informed and calculated decisions by the customers and hence decreased chances of unforeseen dire consequences.
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Developing robust strategies for Risk Management: Escrow providers should forecast worst-case scenarios and develop robust risk management strategies to mitigate the potential risks regarding compliance failure throughout the transactions. The strategies include monitoring risks frequently and planning practical actions to tackle them.
Acclimatizing to the fast-changing regulatory and compliance landscape has become the need of the hours for escrow providers. To achieve this seamlessly, the aforementioned measures of being actively in touch with industry experts and flexible in adapting to the ever-changing standards have become a need in the current times for escrow providers to follow. This approach in turn helps them to maintain healthy relations with the clients as well as the regulatory authorities while safeguarding the investor interest.
