What does escrow account mean, and is it a custodial account under regulation 34?

Mondo Social Updated on 2024-02-19

Article 34 of the Banking Supervision Law stipulates that the banking regulatory institution may, in accordance with the requirements of prudential supervision, take the following measures to conduct on-site inspections: (1) enter banking financial institutions for inspection; (B) ask the staff of banking financial institutions, and ask them to explain the relevant inspection matters; (C) access to and copy banking financial institutions related to the inspection of documents and materials, may be transferred, concealed or damaged documents, materials to be sealed; ......During the on-site inspection, there shall be no less than two inspectors, and legal certificates and inspection notices shall be presented; If there are less than two inspectors or fail to present legal documents and inspection notices, banking financial institutions have the right to refuse inspections.

The on-site inspection here does not refer to the supervision account, but to the seizure of the assets of the banking financial institution. Under normal circumstances, regulators do not have the power to directly seize bank assets.

The seizure of assets is usually carried out on the basis of a court ruling or other administrative order with legal effect, and is an enforcement measure that involves the control and custody of specific property, the protection of the rights and interests of creditors or the enforcement of legal documents.

Escrow accounts are typically used in the following situations:

1.Anti-money laundering supervision: Banks and other financial institutions are required by anti-money laundering laws and regulations to monitor customers' accounts to prevent and detect suspicious transactions.

2.Tax compliance: Financial institutions are required to monitor accounts under applicable tax laws and international tax information exchange (IDE) to ensure that customers comply with tax regulations.

3.Legal proceedings or administrative investigations: When a customer is suspected of illegal activities or is investigated, the relevant judicial or administrative authorities may request the financial institution to monitor or freeze specific accounts.

4.Monitoring of abnormal account activities: Banks should monitor account activities and take further regulatory measures against relevant accounts when abnormal transaction behaviors (such as frequent large-amount cash withdrawals, complex fund transfers without legitimate business purposes, etc.) are found.

5.Compliance with Laws, Regulations and Internal Policies: Financial institutions are required to supervise their accounts as necessary in accordance with various laws, regulations and internal risk management policies to protect the interests of consumers, prevent financial risks, and maintain the stability of financial markets.

In general, a supervisory account is a measure of supervision and control of financial accounts taken by financial regulators, financial institutions and, in certain cases, courts and other judicial bodies for specific regulatory purposes.

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