Hi PowerUp,

I actually looked into setting up a domain name escrow service awhile back(ultimately chose not to proceed with the project), so I may be able to answer a few questions.

As for fraud, bank wires are as safe as it gets and this would be the recommended funding method if you're low on cash and can't handle fraud/chargebacks. I strongly wouldn't recommend accepting checks, money orders, or ACH. I learnt a valuable lesson about this myself a couple months back when I went to cash a $15900 USD check... I live in Canada and because the check was so large (and from a different country), the bank outright refused to cash it. They sent it off to collections and it was a full month before I got the money in my account. I'm sure Escrow has some kind of favorable treatment with banks and doesn't have this kind of stuff happen to them, but this could lead to serious problems with an escrow service if such happened to you. This might also be the reason why Escrow has a limit on the size of checks (to avoid triggering a collections requirement).

There is no way to prevent credit card fraud. The best you can do is to require people to fax in a form signing that they authorize their card to be charged including their credit card and a piece of ID (like Escrow does). Telephone verification is also recommended. There is credit card software on the market which can help detect credit card fraud. Credit card numbers are basically assigned based on certain factors (see the math behind credit cards here: http://www.thetaoofmakingmoney.com/2007/04/12/324.html ). Not allowing certain countries (it's not discrimination -- it's common sense when it comes to credit cards!) is also recommended. Data on who it is suggested to exclude is readily available via google.

If you do choose to accept credit cards, make sure you choose a good credit card processor. Some credit card processors like say Authorize.net seem to offer a very low rate (but hit you with HUGE chargeback fees if chargebacks are filed). Consider opening a merchant account at your bank. Depending on your bank, rates may be subject to transaction volume and might not be a better alternative than many of the solutions available online.

As for record keeping, I would recommend checking with a lawyer, as this is a very serious matter and not one you'll want to take lightly. Operating an escrow service may also require an escrow license, depending on where you reside. If you're unsure about whether a license is required or not, do make sure to inquire about it as the consequences of running an unlicensed escrow service are very serious in some places. Due to the sheer volume of dollars that will be coming in and going out, I'd recommend keeping as much information about transactions as possible -- your business model is a prime candidate for auditing.

Wish you all the best with it