ATOL Escrow Trust
The CAA have continued to focus on ensuring appropriate protection of advance customer monies through the ATOL Scheme and requiring ATOL holders to maintain adequate liquidity to meet future obligations.
Escrow Accounts have been introduced as an option for ATOL holders with the objective of providing financial security.
An ATOL escrow account and an ATOL trust account have many characteristics in common (https://premioconsultancy.com/atol-trust/)
An escrow arrangement is designed to protect a set and/or variable percentage of consumer funds collected, and the amount is reconciled on a weekly basis.
Agreed Protected Funds
– The ATOL Holder is required to place a percentage of Consumer Funds into Trust – the Agreed Protected Funds.
– The percentage is specified by the CAA but is typically 70%.
– The quantum of Agreed Protected Funds is based on a calculation of Cash to ATOL Client monies
Payment into Trust
Funds for licensable transactions are collected by ATOL Holder
– Topping up the balance of the Agreed Protected Funds is sometimes made once per week or fortnightly in some cases to level up the Agreed Protected Funds for that particularly reporting period.
– If the Agreed Protected Funds on a Relevant Compliance Reporting Day is a figure greater than the total amount standing to the credit of the Trustee Account, the ATOL Holder shall within one Business Day of the date of the relevant Compliance Certificate pay the funds into the Trustee Account such that the balance of the Trustee Account equals at least the Agreed Protected Funds recorded in this Compliance Certificate.
Claims from the Trust Account
If the Agreed Protected Funds on a Relevant Compliance Reporting Day is a figure less than the total amount standing to the credit of the Trustee Account on that Relevant Compliance Reporting Day, the ATOL Holder may submit a Payment Request for the amount in excess.
– The Payment Amount should not leave the amount standing to the credit of the Trustee Account below either the Agreed Protected Funds and/or the Minimum Applicable Protected Funds, whichever amount is the higher.
– Testing is not necessary for the release of funds. Controls are based on the process of preparing the cash to ATOL client monies ratio.
– Early release of funds for flight payments are not permitted.
Several travel businesses have witnessed the benefits of Escrow Trust Accounts during the impact of COVID19 on the travel industry.
Escrow Trust Accounts have helped ATOL Holders that use advance funds to pay airlines before the consumer has enjoyed the holiday.
With Escrow Accounts being in line with ATOL Trusts, both consumers and travel businesses benefit from this protection, thus strengthening the UK travel industry.