PAYMASTER PROCESS
Attorney Paymaster
A Paymaster acts as a neutral third party in a transaction between two or more individuals or businesses. Typically, under an escrow contract, the Paymaster accepts a buyer’s funds into his attorney trust account, safeguards the funds in the account, then later disburses those funds to the seller, in accordance with instructions detailed in the transaction agreement(s). Additionally, the use of a Paymaster is an effective means for intermediaries (e.g., brokers) to ensure they receive their fees, commissions or other compensation as contractually agreed among the parties. The Paymaster receives a fee for providing services. Entrusting funds to a neutral and trustworthy third-party Paymaster reduces the risk to all parties in a transaction. It assures sellers and intermediaries that contracted funds are safe and available for payment, while allowing buyers to receive contracted delivery of goods and services with reduced financial risk. PAYMASTER LAW may also serve simply to facilitate the transfer of funds from a sender (payor) to the preferred bank account(s) of one or more recipients (payees).
PAYMASTER LAW maintains its trust accounts (IOLTAs) at major US banks, facilitating the transfer of large currency amounts in domestic and international transactions.
For large currency transactions (e.g., involving art, precious metals, large loans, or fungibles and commodities, such as petroleum, natural gas, minerals, grains, financial instruments), banks and other financial institutions are not set up to handle matters (e.g., receive and disburse funds) on short notice and typically have demanding and tedious policies and procedures. In contrast, an Attorney Paymaster using an attorney account is ideally suited to implement transfers of transaction funds to multiple parties quickly and efficiently, as well as to manage funds safely and securely as a fiduciary.
Paymasters need not be attorneys. Nevertheless, attorneys frequently serve in the role of Paymaster because they use an attorney trust account or a dedicated fiduciary account to receive and to manage transaction funds. In the United States, attorney trust accounts (IOLTAs) accounts are used for short-term escrow transactions, as well as for holding client funds generally. IOLTA accounts are monitored by attorney regulatory authorities where an attorney is licensed and provide an additional measure of security for handling large sums of money. As a licensed attorney, an Attorney Paymaster is subject to strict regulation and risks disbarment if funds are mishandled.
Procedure
PAYMASTER LAW (dba of Law Office of Thomas J Swenson) serves as a Paymaster to receive incoming funds in escrow for large complex transactions and to disburse them to the sellers and brokers involved according to an IMFPA (Irrevocable Master Fee Protection Agreement), an SFPA (Sub-Fee Protection Agreement) or other disbursement agreement.
An IMFPA or other paymaster contract involves all parties: for example,, seller, buyer and intermediaries. The underlying transaction, however, must ultimately be executed between sender (buyer, lender) and receiver (seller, borrower) of the funds. Therefore, if you are an intermediary, please initiate a request for paymaster services only after sender, receiver and intermediaries have reached at least a tentative underlying agreement.
PAYMASTER LAW complies with national and international anti-money laundering (AML) laws, regulations and rules. Due diligence is conducted for each individual and business in a transaction to satisfy requirements of banks, money-laundering monitors and tax authorities. In particular, such transactions must comply with requirements and procedures imposed on banking institutions by U.S. federal authorities, including the U.S. Treasury Department and Homeland Security. After due diligence indicates that each person and document is authentic and compliant, PAYMASTER LAW will enter into a paymaster agreement to receive, manage and disburse funds.
Depending on the transaction, PAYMASTER LAW typically requests some or all of the following documents and information from the parties in order to provide its Paymaster services effectively and efficiently:
- A copy of valid driver’s license and/or passport
- Video meeting, face-to-face
- Completed IRS form W-9 for U.S. companies, citizens and residents
- Completed IRS form W-8BEN for non-U.S. residents, in some cases
- Qualified Intermediary agreement with U.S. IRS (in some cases of US payor and non-US payee)
- Copy of all transactional documents, including payment agreement(s)
- Escrow agreement
- Other pertinent client information
Comprehensive transaction information could include the following:
- Each party’s role in the transaction: sender, receiver or intermediary?
- Volume of funds? Country and banks in which funds are managed?
- Onetime transaction or periodical transactions expected?
- Sender of the funds? (individual, company?)
- Copy of passport
- Copy of proof of address
- Copies of contracts related to transaction
- Copy of fee agreement between intermediaries
- Qualified Intermediary certificates, if applicable
- Copy of fee/commission contract, paid by buyer or seller?
- Banking coordinates of parties to which funds/fees/commissions are to be distributed
- New entity set-up needed? (Entity type, domestic, foreign?)
- Other relevant client information
Parties to a transaction execute an IMFPA or equivalent document that outlines the amount of money each party will receive and how the funds will be disbursed to each person.
Please note that PAYMASTER LAW does not participate in underlying transactions or projects related to its Paymaster services. PAYMASTER LAW never gets involved in disputes between buyers, sellers and intermediaries, always remaining neutral. PAYMASTER LAW does not give opinions regarding the economic sense, risks, or advisability of a transaction. Similarly, PAYMASTER LAW does not opine about, much less vouch for, the integrity, competence or history of any parties. PAYMASTER LAW’s principal duties are (i) manage and disburse funds as agreed, (ii) avoid money laundering, and (iii) when relevant, assure compliance with US tax reporting and withholding requirements.
After AML due diligence is satisfactorily completed, PAYMASTER LAW can enter into a formal contract with the parties.
PAYMASTER LAW is capable of handling large amounts of crypto currency with the understanding its crypto exchange accounts and crypto wallets are not “attorney trust accounts”.
Confidentiality. PAYMASTER LAW treats all information as confidential, except as necessary to satisfy due diligence requirements of banks or to comply with demands from law enforcement authorities.
Performance by PAYMASTER LAW of a paymaster agreement could depend upon the willingness of banks to send and receive transaction funds (usu. based on due diligence results) and, therefore, cannot be guaranteed.
Fees
Typical Paymaster Management Fees
No setup fee
For each transaction, Paymaster charges are based upon the currency amounts being managed and the complexity of the transaction.
Exemplary rates
Payments above $25 million — 20 basis points (0.2%).
Payments from $10 million to $25 million — 30 basis points (0.3%).
Payments from $5 million to $10 million — 40 basis points (0.4%).
Payments from $1 million to $5 million — 50 basis points (0.5%).
Payments from $500,000 to $1 million — 100 basis points (1%).
Minimum paymaster fee $5,000.
Because each Paymaster solution is tailored to parties’ needs and to transaction details, these exemplary rates are for general guidance only. Final Paymaster fees are negotiated. Factors considered include, for example, number of payees, number of transaction payments anticipated, transaction duration, document drafting, US tax reporting/withholding requirements. Paymaster fees are increased for transactions involving crypto currency.
Rates reflect Attorney Paymaster fees only. Paymaster fees do not include additional costs associated with a particular transaction. Minimum fees and additional bank fees apply in most situations. It is assumed that bank charges and wire fees will be the responsibility of the account holder of the account that incurs the charges/fees. For example, PAYMASTER LAW will pay the incoming and outgoing wire fees incurred by PAYMASTER LAW’s IOLTA trust account (at major US bank) or other fiduciary account, but charges/fees of other sender or receiver accounts shall be borne by the respective account owners.
Note: Payments and disbursements for large transactions are conducted by wire transfers only. Cash, money orders or bank checks are generally not accepted.
Talk about Your Deals
Have any questions? PAYMASTER LAW is always open to discussing your commercial transactions, new projects, creative opportunities, and how to help you.