E-commerce has appeared and developed along with the Internet. Online buyers and sellers can become fraud victims. Escrow Services reduce the number of fraud cases and guarantees online transactions. In Romania, those services are only just beginning to act, as the cyber fraud phenomenon is present in our country in the same rates as worldwide.escrow, e-commerce, cyber - fraud, escrow accounts, legislation, online auctions

Alexandru Cristian Rosu

Anca Elena Balasoiu

English

Research Papers in Economics

Aspects Regarding Escrow Services In Romania, As An Important Part Of E-Commerce Activity 
 
1 
 
ASPECTS REGARDING ESCROW SERVICES IN ROMANIA, AS AN IMPORTANT 
PART OF E-COMMERCE ACTIVITY 
 
Alexandru Cristian Rosu
1 
Anca Elena Balasoiu
2 
 
Abstract 
 
E-commerce has appeared and developed along with the Internet. Online buyers and sellers 
can become fraud victims. Escrow Services reduce the number of fraud cases and guarantees 
online transactions. In Romania, those services are only just beginning to act, as the cyber 
fraud phenomenon is present in our country in the same rates as worldwide.  
 
Keywords:  escrow, e-commerce, cyber -  fraud, escrow accounts, legislation, online 
auctions.  
 
Introduction 
 
Since the beginning of the 21st Century, the electronic  commercial transactions have 
increased around the world. Initially embraced in big nations such as the United States or 
Japan, shopping and developing financial transactions on the Internet quickly became popular 
in most of the world’s countries, including the Eastern Europe. But along with this 
phenomenon, came a new threat - cybercrime, involving unlawful online sale-purchasing of 
goods. The Escrow services represent a guarantee for both the seller and the buyer and the 
presence of such services on a website will increase the user’s trust in e-commerce.  
 
General Aspects 
 
The term “escrow” dates since 1590s, but its origin is a controversial one. In appears to come 
from the English “escrowe”, from the French term “escroue” referring to "scrap, roll of 
parchment" or from a Germanic source “scrot" meaning scrap, shred. Originally "a deed 
delivered to a third person until a future condition is satisfied", the term earned its sense of 
"deposit held in trust or security" in 1888. [1] 
  
Nowadays, the term refers to an arrangement and/or a transaction where an independent 
trusted third-party receives and disburses money (or documents) for two or more transacting 
parties, with the timing of such disbursement by the third-party dependent on the performance 
by the parties of agreed-upon contractual provisions, or an account established by a broker, 
for the purpose of holding funds on behalf of the broker's client or some other person until the 
confirmation or termination of a transaction. Also, “escrow” can refer to a trust account held 
in the borrower's name to pay obligations such as property taxes and insurance premiums.  
 
As mentioned above, Escrow service generally refers to money held by a third-party on behalf 
of transacting parties and it is often used in the U.S.A., in the context of real estate 
(specifically in mortgages, where the mortgage company establishes an escrow account to pay 
                                                   
1 Attorney, Assistant Lecturer at the Law School of the Romanian-American University 
2 Attorney, Assistant Lecturer at the Law School of the Romanian-American University JOURNAL OF INFORMATION SYSTEMS & OPERATIONS MANAGEMENT, VOL.5.2.1–SPECIAL ISSUE 
 
property tax and insurance during the term of the mortgage). Escrow companies are also 
commonly used in the transfer of high value personal and business property, like websites and 
businesses, and in the completion of person-to-person remote auctions (such as Amazon.com 
or Ebay.com), although the advent of new low cost online escrow services has meant that 
even low cost transactions are now starting to benefit from using escrow services.  
 
In many countries, escrow accounts are often used during private property transactions to 
hold solicitors' clients' money, such as a deposit, until the transaction is completed. 
 
It is a common belief that Escrow services are only used in buy-sell transactions, but, in 
reality, there are several types of Escrow services, depending on the area in which the service 
is being used. Therefore, we have Internet Escrow, Banking Escrow, Real Estate Escrow, 
Intellectual Property and Law Escrow. 
 
The vending industry always has known that "downtime can kill you," that an out-of-order 
machine is not making the sales needed to produce a return on the investment in it. They also 
know that frequent breakdowns annoy locations, who often cite undependable service as a 
prime reason for wanting to change operators. But the strategic cost is even steeper. 
 
In the past, informal surveys of vending patrons suggested that simple lack of confidence in 
vending machines was a major reason for not buying things from them. It was argued, 
eloquently, that a machine on which someone has taped a handwritten "out of order" sign is 
not only failing to generate any revenue, but also is sending a negative message about the 
reliability of any nearby vending machines - indeed, about vending machines in general. 
 
As vending finds more applications in the retailing mainstream, and so must handle a wide 
range of merchandise at prices far higher than the old blue-collar-based business could have 
imagined, confidence in vending machines becomes more and more important. All the old 
correctives , fast dispatch of well-trained technicians, good records of service calls and their 
dispositions, effective preventive maintenance programs, selection of machines and 
components on the basis of reliability and durability , remain important, and new ones (like 
telemetry) deserve study. [2] 
 
There is a universally recognized rule that for every pro there is usually a con, and the world 
of ecommerce is not exempt from that rule. Any type of online process or system that is 
capable of taking payment via credit card is open to abuse by the more unscrupulous and 
devious elements that haunt the Internet. It is also important to remember that it's not only 
credit card transactions that are under threat. Hacking into programs that hold personal 
information such as bank account numbers, names and addresses etc., is another area that has 
a vast income potential for those who would use the information illegally. 
 
Ecommerce security is more a case of prevention rather than cure, and to this end designers 
are constantly developing new and innovative anti-intrusion solutions into their ecommerce 
programs. The use of highly sophisticated encryption software and secure servers are just a 
couple of the numerous methods employed to keep the uninvited out. And although it's true to 
say that at present no system can be guaranteed to be one hundred percent secure or fool Aspects Regarding Escrow Services In Romania, As An Important Part Of E-Commerce Activity 
 
3 
 
proof, today's rapid advances in software and technology certainly seems to be heading in the 
right direction. [3] 
Internet escrow 
 
This is the service provided by a third party to make sure a fair transaction is made over the 
web between a buyer and seller. Many websites provide this kind of service as a method of 
security for those who do business over the internet. When using internet escrow, the buyer of 
a product or service sends his money to the escrow service instead of the seller. At the time 
that the product is delivered or the service is rendered to the buyer, the escrow service 
releases the payment. 
 
The ease of online shopping coupled with the instant availability of such a wide variety of 
items has made the internet a popular destination for buyers and sellers of all kinds of 
products and services.  This boom of internet transactions has been accompanied by an 
inevitable rise in fraudulent behavior on the web. In order to eliminate the chances that one of 
the parties involved is the victim of fraud, a website specializing in internet escrow services 
can be used. 
 
When using internet escrow, a small fee is rendered to an escrow service in exchange of 
monitoring the transaction between a buyer and a seller. First, the party buying the product 
sends the required payment to an escrow service, who verifies that the payment is valid and 
the specified amount is correct.  
 
The service then contacts the seller and asks him to send the desired product to the buyer. 
Once the buyer notifies the escrow service that he has received the product or service as 
advertised or agreed upon, the service releases the payment to the seller. This way, Internet 
escrow prevents the possibility of both the payment and the product being in the hands of one 
party at any point during the transaction, helping to eliminate any type of illegal activity by 
either party.  
 
If the product or service that is being sold is of minimal value, then the parties in question 
might want to skip the extra payment to the escrow service and take their chances, since a 
small amount of money is at stake. For more expensive items like jewelry, art or electronics, 
internet escrow provides a safety net for both parties.  
 
Buyers enjoy the benefit of knowing that their payment is protected from theft and will only 
be released when they have received what they purchased. Sellers don't have to worry about 
checks without coverage or other invalid payments and don't have to be concerned about 
fraudulent claims of buyers saying that they never received their package. The Internet 
Escrow services have developed along with the online auctions, as a direct and easy way of 
selling and purchasing goods. Not having a guarantee like a strong brand can offer to a buyer, 
the Escrow service became an urgent need against the cyber fraud phenomenon. Still, the 
illegal activity affects the escrow services in such that event with the use of an escrow service, 
one can become a victim of a fraud. 
 
An example of such a fraud related to an escrow service is the following: the perpetrator will 
propose to the other party the use of a third-party escrow service for safety. The victim is JOURNAL OF INFORMATION SYSTEMS & OPERATIONS MANAGEMENT, VOL.5.2.1–SPECIAL ISSUE 
 
unaware that the perpetrator has actually forged a true escrow site and created one that closely 
resembles to a legitimate escrow service.  
The victim sends the payment to the fake escrow service and receives nothing in return. In 
other cases, the victim sends merchandise to the subject and waits for his/her payment 
through the escrow site which is never received because it is not a legitimate service. [4] 
 
Due to an increasing number of such frauds, users can now report them to several agencies 
and institutions specialized in e-commerce claims, such as The FBI and NW3C’s Internet 
Fraud Complaint Center or The Federal Trade Commission’s Complaint Form for the United 
States or the UK’s National High Tech Crime Unit. 
 
Some of the most popular websites for online shopping, such as eBay.com, have their own 
location for reports regarding the escrow frauds (If the fraud site is being recommended by an 
eBay user, you can: report the user to eBay; post on the eBay Escrow Discussion Board). [5] 
 
Aspects regarding legal provisions 
 
Normally, a legal functioning escrow service must have a license given by a state authority. 
Those services are required to have bonds that ensure customers can recoup money lost in the 
escrow process. 
 
If the state legislation does no imply such a disposition, the client may endure inequitable 
clauses, as the in many such agreements, escrow agents are held to a mere gross negligence 
standard and benefit from indemnity and harmful provisions. [6] In the United States of 
America, some states have developed legal provisions regarding escrow. For example, the 
state of California has The Escrow Law that is contained in Division 6 of the California 
Financial Code. 
 
The Escrow Law protects members of the public who entrust their money or other goods to 
independent escrow agents in California. This Law also applies to the Escrow agents, joint 
control agents and Internet escrow agencies. Persons or companies performing escrow 
services over the Internet in California, or performing escrow services over the Internet for 
users in California, are subject to the licensing requirements of the Escrow Law. Another 
benefit of this law comes from the fact that it provides a series of definitions of terms such as 
"escrow agent”, "joint control agent" and "Internet escrow agent".    
 
In the European Union, the Payment Services Directive that commenced on 1 November 
2009 has for the first time allowed the introduction of very low-cost Internet escrow services 
that are properly licensed and government regulated. The regulatory framework in the EU 
allows these web-based escrow services, which operate along the lines of expensive Letter of 
Credit service run by banks for international buyers and sellers, but at a cost in cents rather 
than thousands of Euros, the ability to enhance security in commercial transactions [7]. 
 
Another problem regarding forged Escrow services is that the buyer provides some of his 
personal data in order for the transaction to be completed. Therefore, aside from losing a sum 
of money, the user’s personal rights are broken. 
  Aspects Regarding Escrow Services In Romania, As An Important Part Of E-Commerce Activity 
 
5 
 
 Globalization made the transnational corporations and other large business more powerful 
and, at the same time, more responsible. The last centuries’ preoccupation for an international 
established responsibility of multinational corporations in respect of their human rights abuses 
was failed.[8] 
 
These aspects represent a new point of view that will surely lead of a lot of discussions and 
hopefully, to a new set of legal provisions.  
 
Escrow Services in Romania 
 
The Internet Escrow Service is a relatively new actor in Romania, as is being used since 2009. 
Following the foreign pattern, this type of service was first used by okazii.ro, the biggest and 
most popular website in Romania, in the area of person – to – person good auctions. The 
service had a money back guaranteed system, in case the buyer did not receive the good that 
he or she auctioned for. The only condition for the service to be enforced is the purchased 
product’s value to be at least 100 lei (approx. 20 EUR at the date of the present article). The 
fee for the service is 3% from the value of the transaction and it is paid by the buyer. Also, it 
is important to mention that the buyer pays less by using an escrow service, that he or she 
would pay for an unsafe transaction paid at delivery or by national mail. 
 
Currently, the market of independent Internet Escrow Services is expanding in Romania, as 
more and more companies appear in this area.  
 
Also, many of the bank institutions in Romania have developed escrow services for their 
clients, with fees between 1 and 3% from the value of the transaction. 
 
 
 JOURNAL OF INFORMATION SYSTEMS & OPERATIONS MANAGEMENT, VOL.5.2.1–SPECIAL ISSUE 
 
Conclusions 
 
The Escrow Service appeared as a necessity on the financial market and later on the e-
commerce market, due to the new, ever changing types of frauds and criminal deeds that are 
created faster and faster in our days. It is said that the criminal world will always be one step 
ahead from the “good science”, as every progress seems to come with a darker side that 
scammers will take advantage of.  
 
Escrow Services have proven their utility in commercial - auctions area and after the main 
sites started to collaborate with such services, the users trust towards online transactions has 
increased. 
 
In Romania, as middle class lifestyle gets a faster rhythm every day, the number of online 
purchase transactions increases. Here, Escrow Services represents a new element for most of 
the users but nevertheless, useful for the companies managing the websites, as well as for the 
parties of the online transactions.  
 
References 
 
1.  From http://www.etymonline.com; 
2.  Tim Sanford – Up and Running, www.vendingtimes.com 
3.  John Sheridan – Ecommerce - Safe and secure, http://ezinearticles.com/?Ecommerce-
--Safe-and-Secure?&id=210451 
4.  http://www.ic3.gov/crimeschemes. 
5.  for further details, see www.escrow.com. 
6.  see Escrow – Wikipedia, the free encyclopedia, New York, 2010.  
7.  Costica Voicu, Alexandru Boroi, Florin Sandu, Ioan Molnar, Mirela  
Gorunescu, Sorin Corlateanu, “Criminal Business Law” (“Dreptul penal al 
afacerilor”), Ed. C. H. Beck, Bucharest, 2006. 
8.  Tabusca Silvia – “International Economic Law: Is there any tension between the trade 
regime  and human rights?”, published in “Romanian Economic and Business 
Review” vol.5.4-1/2010.  
 
 

Alexandru Boroi, Florin Sandu, Ioan Molnar,

Ecommerce - Safe and secure,

Economic Law: Is there any tension between the trade regime and human rights?”, published

for further details, see www.escrow.com.

the free encyclopedia,

ASPECTS REGARDING ESCROW SERVICES IN ROMANIA, AS AN IMPORTANT PART OF E-COMMERCE ACTIVITY

http://www.rebe.rau.ro/RePEc/rau/jisomg/WI11-2/JISOM-WI11-2-A17.pdf

ASPECTS REGARDING ESCROW SERVICES IN ROMANIA, AS AN IMPORTANT PART OF E-COMMERCE ACTIVITY

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics