When engaging in certain business transactions, you must follow federal and your State’s regulations to remain compliant with the law—in fact, depending on the property being transacted, you may need to comply with laws most people have never heard of. When you or your business engages in those transactions, working with a firm that offers paymaster, escrow and commission dispersal services can help the transactions go smoothly and ensure that all the appropriate legal boxes are checked in the process.
The paymaster is a neutral third party that receives funds from a buyer, holds them in escrow until all the people in the transaction agree that everything is ready and then disburses the funds according to the contract’s terms. Then the paymaster reconciles the escrow account and fills out all the appropriate IRS paperwork. Transactions in which it’s a good idea to engage with a paymaster service include:
- Personal Protective Equipment (gloves, masks, ventilators, and protective gear)
- Real estate
- Jet fuel
- Gold, diamonds and precious stones
- Note transactions or guarantees
These transactions must be compliant with various federal entities, including the U.S. Department of Homeland Security, U.S. Treasury, and sometimes the Department of State. Navigating the maze of legal requirements to avoid delays in the process can be confusing, but getting something wrong could mean serious fines or penalties. These transactions are also typically in the millions of dollars, so there are a lot of downsidesin the event of an error.
Know Your Customer (KYC) & Anti-Money Laundering (AML)
One of the most important aspects of large domestic and international financial transactions is KYC, or know your customer. These are legal requirements that compel companies conducting transactions to know who is on the other end, confirm that person’s identity and conduct due diligence in identifying any potential risks related to doing business with that person or entity.
The requirement falls under anti-money laundering (AML) laws, and failing to adhere to the rules can lead to sanctions, fines and other damages that could come from working knowingly or unknowingly with money launderers or terrorists. It can also protect your business from losses that are the result of an illegal transaction.
Why Use Paymaster Services?
One of the biggest benefits of using a paymaster service instead of traditional letters of credit through a financial institution is the ability to conduct transactions without the hassles normally associated with going through banks, including credit checks or the need to have an established relationship with the financial institution.
Paymasters aren’t party to the transaction; they are only involved to make sure everything goes as planned and that all compliance issues are addressed. Paymasters take care of checking the identify of all parties in the transaction. They may look at:
- Driver’s license or passport
- IRS forms for U.S. or non-U.S. citizens
- Transaction documents
- Recorded report of any pending exchanges that the paymaster is involved with
This protects companies by providing compliance for KYC and AML regulations while avoiding the need to conduct all the necessary background checks on your own.
Contact Cantley Dietrich for Paymaster Services
To find out more about paymaster, escrow and commission dispersal services through Cantley Dietrich, contact us today.