Current through Register Vol. 24-18, September 15, 2024
(1)
Who is responsible for funds
deposited to and disbursed from an escrow trust account? The escrow
agent must establish a trust account or accounts in a recognized Washington
state depository. The escrow agent, through the designated escrow officer, is
responsible for depositing, holding, disbursing, and accounting for funds in
the trust account as provided in the act and the rules, regardless of how they
are received or disbursed. The designated escrow officer or branch designated
escrow officer must hold the funds in trust for the purposes of the transaction
or agreement and must not utilize such funds for the benefit of the agent or
any person not entitled to such benefit. For branch offices, the branch
designated escrow officer is also responsible for depositing, holding,
disbursing, and accounting for funds in the branch's trust account. The escrow
agent is ultimately responsible for all the actions of the designated escrow
officer or branch designated escrow officer.
(2)
What kind of an account can I use
as a trust account for my escrow services? Your trust account or
accounts must be designated as a trust account or accounts in the licensed name
of the escrow agent. Your trust accounts must be noninterest bearing demand
deposit accounts unless they are one of the following:
(a) An interest-bearing trust account or
dividend earning investment account containing funds pertaining to an
individual escrow transaction or escrow collection account, if directed to use
one by a written agreement between and signed by all principal parties to the
transaction. The agreement must specify the manner of distribution of
accumulated interest to the parties to the transaction;
(b) An interest-bearing trust account or
dividend-earning investment account containing only funds held on behalf of an
owner, vendor, lessor, etc., involving escrow collections, if directed to use
one by a written agreement or directive signed by the principal parties. The
agreement must specify the manner of distribution of accumulated interest to
the parties to the transaction;
(c)
An interest-bearing trust account containing funds related to transactions in
which a limited practice officer has prepared documents under authorization set
forth in APR 12(h); or
(d) An
interest-bearing trust account containing funds related to transactions in
which a licensed attorney has prepared documents. Your trust account must not
be used for any purpose other than that specified in the act or rules. You must
not use the trust account for the receipt or disbursement of funds for any
business other than that conducted under the act.
(3)
What information do I need to
provide to the department regarding my trust account? Each time you
renew your escrow agent license, you must provide the department with an
authorization to examine your trust account. This authorization must be on a
form specified by the department, signed by a representative of the bank, and
notarized.
(4)
Can I set up a
system of records and procedures that varies from this section? No. You
must establish and maintain a system of records and procedures as provided in
this section unless you receive advance approval from the department.
(5)
Who may have signatory authority
over trust account disbursements? The designated escrow officer must
have signatory authority on all trust accounts, and he or she may authorize any
employee that he or she supervises to sign disbursements by including them on a
bank account signature card. Branch designated escrow officers must have
signature authority for trust accounts at their branch, and may have signature
authority for other branches if the designated escrow officer authorizes it on
either a temporary or permanent basis. The signatory authority of any employee
other than a designated or branch designated escrow officer is discretionary,
may be conditional or temporary, and may be revoked by the designated escrow
officer at any time.
(6)
When
must my client's funds be deposited into a trust account? You must
deposit any funds you receive for an escrow transaction or collection account
into the escrow agent's trust account on the first banking day following
receipt.
This requirement does not apply to funds owned exclusively by
the agent.
(7)
What
do I need to do when I receive escrow funds?
(a) When you receive funds, you must record
the date, amount, source, and purpose on either a cash receipts journal or
duplicate receipt. If you use a duplicate receipt, you must keep it as a
permanent record.
(b) When you
deposit funds into your trust account or accounts, the deposit must be
documented by:
(i) For traditionally deposited
funds, a duplicate bank deposit slip that is validated by bank imprint or an
attached deposit receipt that bears the signature of the authorized
representative of the agent indicating that the funds were actually deposited
into the proper trust account;
(ii)
For funds received via wire transfer, posting of the deposit in the same manner
as other receipts with a traceable identifying name or number supplied by the
financial institution or transferring entity. You must also make arrangements
for a follow-up "hard copy" receipt for the deposit; or
(iii) For remotely deposited funds, a
follow-up "hard copy" receipt for the deposit.
(c) The traceable identifying name or number
supplied by the financial institution in (b) of this subsection does not need
to be a name or number you use to identify the transaction, but must be enough
to allow the department to track and verify the transfer.
(8)
What are my responsibilities
regarding my individual client ledgers? You must maintain an individual
client ledger for each escrow transaction or collection account for which funds
are received in trust. All receipts and disbursements must be posted in the
individual client ledger. Your client ledgers are subject to the following
requirements:
(a) Credit entries must show the
date of deposit, amount, and name of remitter.
(b) Debit entries must show the date of
check, check number (if funds are disbursed via check), amount of check, and
name of payee.
(c) You must prepare
monthly trial balances of each client ledger. You must reconcile the ledger
with both the trust account bank statement and the trust account receipts and
disbursement records. The reconciliation must be signed by the designated
escrow officer or branch designated escrow officer, and must be maintained as
permanent records.
(9)
What are my obligations regarding a reconciled trust account? Your
reconciled trust account or accounts must be equal at all times to your
outstanding trust liability to clients. Your outstanding trust liability to
clients must equal the trial balance of all of your escrows with undisbursed
balances.
(10)
What
requirements must I meet for disbursements of trust funds?
(a) Disbursed funds must be good
funds.
(b) Unless otherwise
authorized by (c) of this subsection, in the escrow instructions, you must make
trust fund disbursements by check or cashier's check. Checks must be drawn on
your trust account or accounts, and must identify which specific escrow
transaction or collection account the disbursement relates to. Cashier's checks
may be issued by the financial institution and drawn upon the trust account.
The number of each check and its amount, date, payee, and the specific client's
ledger sheet debited must be shown in the cash register or cash disbursement
journal. All data must agree exactly with the check as written.
(c) You may make disbursements via wire
transfer or ACH if both of the following are true:
(i) You have made arrangements with the
financial institution that holds your trust account or accounts to provide you
with a follow-up "hard copy" debit memo when funds are disbursed via wire
transfer; and
(ii) You retain in
the transaction file a copy of instructions signed by the owner of the funds to
be wire transferred identifying the receiving entity and account
number.
(d) You may make
disbursements via ACH if both of the following are true:
(i) The ACH disbursements are restricted to
fees payable to the escrow agent and reoccurring payments made to payees in the
escrow transaction. See subsection (13) of this section for further
restrictions on escrow agent fees; and
(ii) You print and retain the ACH
confirmation or a copy of the confirmation screen. The retained documentation
must, at a minimum, include payee, payment date, escrow trust account number
debited, and confirmation number assigned to the ACH transaction.
(e) You may make appropriate
transfers between escrow accounts by ledger entries alone if you use either:
(i) A transfer form containing the date of
the transfer, the amount being transferred, the identity of the accounts being
debited and credited, and the signature of a person authorized to approve
disbursements; or
(ii) An intrabank
debit memo transfer form, and all escrow accounts involved in the transaction
are closed through the same bank account.
(f) If you are making recurring transfers
between collection escrows, they must be authorized by standing escrow
instructions on file from all appropriate parties.
(g) See also WAC
208-680-560.
(11)
I have a voided check written on
the trust account. What do I need to do with it? You must permanently
deface the check and retain it as a permanent record in the individual escrow
or collection account file.
(12)
What are my obligations regarding fees payable to me for my escrow
services? You must be paid via a separate check or bank transfer, drawn
on the trust account and bearing the escrow or transaction number, for escrow
and service fees. This payment must be provided for in the escrow instructions.
All of your fees relating to a transaction may be combined in a single check,
or transfer, but the settlement statement or an addendum signed by the
principal parties must itemize the included charges.
(13)
What are my obligations regarding
fees payable to me for my collection account services? Your collection
account fees may be paid with a single check for each collection period as long
as such a check is supported by a schedule of fees and identified to each
individual account. Your fees must be paid monthly unless the collection
contract agreement provides a longer collection period.
(14)
May I have funds in my Washington
trust account that are not related to a Washington escrow transaction or
collection account? No. Only funds related to the services you provide
under the authority of your Washington license may be placed in your trust
account. No other funds may be in the trust account for any reason.
(15)
What kinds of disbursements am I
not allowed to make from my trust account? You may only make
disbursements from your trust account for authorized purposes. Specifically,
you may not make disbursements:
(a) For items
not related to a specific escrow transaction or escrow collection
account;
(b) To any person or for
any reason before the closing of an escrow transaction, or before the happening
of a triggering condition set forth in the escrow instructions. You may make a
disbursement before the closing of a transaction or before a triggering
condition if you receive a written release from all principal parties of the
escrow transaction or collection account. Unless the disbursement is disputed
under WAC
208-680-560, you are permitted to
disburse earnest money funds without a written release if the earnest money
agreement terminates according to its own terms prior to closing and provides
for such disbursement;
(c) Relating
to a specific escrow transaction or collection account in excess of the actual
amount held in your trust account in connection with such transaction or
collection account;
(d) To pay any
fee owed to you, your employees or for your own business expenses. Such fees or
expenses must be paid from your own general business operating account and not
from your trust account or accounts;
(e) For bank charges of any nature. You must
make arrangements with your bank to have any bank charges applicable to the
trust accounts charged to your regular business bank account, or to provide a
separate statement of bank charges so they may be paid from your regular
business bank account. However, you may pay bank charges from the interest you
receive on trust accounts allowed under subsection (2)(c) or (d) of this
section;
(f) If the Washington
financial institution's trust account does not have the ability to
automatically charge fees to another account, or does not provide a separate
statement for the service fees as required by (e) of this subsection, and the
account is debited for service fees, you must deposit funds from your general
business or other nontrust account to cover the service fee charged within one
banking day after receipt of notice of the charge;
(g) On lease or rental contract collection
account for pre-authorization of payments by the financial institution for
recurring expenses such as mortgage payments on behalf of the owner if the
account contains tenant security deposits or funds belonging to more than one
client;
(h) On lease or rental
contract collection accounts, of funds received as a damage or security deposit
involving a lease or rental contract, to the property owner or any other person
or persons, without the written authority of the lessee. You must hold these
funds until the end of the tenancy, at which point you must disburse them to
the person or persons entitled to the funds under the terms of the rental or
lease agreement, and as consistent with the provisions of
RCW
59.18.270, Residential Landlord-Tenant Act,
or other appropriate statute.
(16)
If I choose to use a computer
accounting system, what additional requirements do I need to meet? The
provisions of this section apply to both manual and computerized accounting
systems. However, there are some additional requirements if you choose to use a
computer accounting system.
(a) Your computer
accounting system must provide a capability to back-up all data
files;
(b) You must print receipt
and check registers at least once monthly. You must retain printed records as
permanent records. Reconciliations and trial balances must be conducted at
least once monthly, and then printed and retained as a permanent
record;
(c) You must maintain a
printed, dated source document file to support any changes to existing
accounting records;
(d) If your
computer accounting system has the ability to write checks by filling in fields
on existing checks, the check number must be preprinted on the check or a
voucher copy retained by the supplier. Your computer accounting system may
assign suffixes or subaccount codes before or after the check number for
identification purposes;
(e) If
your computer accounting system has the ability to print entire checks on blank
check stock using MICR toner or a similar system, it must track all checks that
are printed. Those checks must be verifiable against your check register to
ensure no duplication or skipping of check numbers;
(f) The check number must appear in the
magnetic coding which also identifies the account number for readability by the
financial institution's computer; and
(g) All checks you write must be included
within the computer accounting system.
(17)
I have unclaimed funds in my trust
account. What do I need to do with them? Unclaimed funds are governed by
and defined in the Uniform Unclaimed Property Act of 1983,
chapter
63.29 RCW. If you have
unclaimed funds in your trust account, your designated escrow officer or branch
designated escrow officer must contact the department of revenue for
disposition instructions. You must maintain a record of the correspondence
relating to unclaimed funds for at least six years.
You must dispose of unclaimed funds in accordance with this
section on a rolling basis . You must examine your books at least once a year
to determine if you have unclaimed funds. If you have unclaimed funds in your
trust account, they must be disposed of pursuant to
chapter
63.29 RCW. See also WAC
208-680-425.
Statutory Authority:
RCW
43.320.040 and chapter 18.44 RCW (as amended
by 2010 c 34). 10-20-124, §
208-680-410, filed 10/5/10,
effective 11/5/10.
