The cabinet on Tuesday approved a draft Escrow Account Act that extends coverage to all types of contracts on top of existing capital-market-related transactions, product and service purchases, and real estate deals.
According to government spokesman Sansern Kaewkamnerd, the new law, intended to protect buyers and sellers from fraud and deceit, requires a neutral third party to take care of the benefits or interests of the parties to a contract.
An escrow account is a temporary pass-through account held by a third party during the process of a transaction between two parties. This is a temporary account that operates until the completion of the transaction process, after all conditions between the buyer and seller are settled.
Thailand has enforced an Escrow Account Act since 2008. Under the act, the use of an escrow account is voluntarily entered into by the contracting parties.
Only commercial banks and finance companies under the law governing financial institutional business and banks "established under a specific law" may operate as escrow agents.
To operate as escrow agents, the financial institution must be licensed by the finance minister, based on the recommendation of the Escrow Business Operation Supervision Committee.
The act lists the conditions and requirements for engaging in escrow business, the rights and duties of the parties to an escrow agreement and those of an escrow agent, and the powers of the escrow committee.
Escrow agents will be monitored by the committee, which has the authority to order them to correct or stop prohibited activities and to perform their duties in compliance with the act. Criminal penalties are prescribed for escrow agents committing fraud.
Once in escrow, the funds cannot be transferred unless the parties have reached an agreement or a court has passed final judgement.
The law also provides that, in the event the escrow agent becomes bankrupt, the funds in the escrow account and the property under enforcement will be protected against attachment or seizure.
According to a Finance Ministry source, from 2008 to the present there were a total of 41 escrow accounts worth about 100 billion baht, but no single escrow account pertained to a real estate transaction.