Payment & trade finance

Escrow account

An arrangement in which the buyer’s payment is held by an independent third party – a bank, notary or licensed payment institution – until agreed conditions are met, such as confirmation of delivery or a satisfactory inspection report. Once the condition is met the money goes to the seller; otherwise it returns to the buyer. Simpler and cheaper than a letter of credit, it bridges the trust gap in mid-sized deals between new parties. Always verify that the escrow provider is genuinely licensed and independent.

Related terms

Advance payment and deposit/balance structure

The buyer pays all or part of the price before shipment. A common structure is a 10–30 % deposit on signing and the balance against copies of shipping documents or on arrival. The deposit funds the seller’s raw materials and production; to protect it, the buyer may ask for an advance-payment guarantee, an escrow account or a verified supplier. A large prepayment to a new supplier is the highest-risk situation for fraud.

Payment diversion fraud (business e-mail compromise) BEC

A fraud in which an attacker breaks into the seller’s or buyer’s e-mail, or writes from a look-alike domain, and at payment time announces that “our bank account has changed”, diverting the money to their own account. It is one of the costliest frauds in international trade and the money is often unrecoverable. Defences: confirm any IBAN change by voice on a previously known phone number, tie account changes to two-step verification inside the platform, watch for look-alike domains and start large payments with a small test transfer.

Explained in the trade handbook

Trade handbook