I am not even sure HOW one would go about escrowing the money for a tournament and who would provide "proof" of that escrow. How does that work? Does a bank take all the money into a special account and then they are responisble for disbursing it to the players? If I am a player who wants to know if the money is secure how would I find such information out and what proof should I ask for?
I have been curious about the actual logistics of how one knows for certain that the money for a tournament is truly guaranteed.
I spoke to a representative in the business department at my bank about this a couple years ago asking the same questions. For what it's worth I can describe what he said, but keep in mind this was some time ago and certainly, anyone can make the same type of phone call to their bank.
I will oversimplify it by saying an escrow is basically a checking account. You'll need the account number and upon request, the bank will mail or fax a statement with the account balance.
What makes it different from a checking account not only the fact that anyone can check the balance, but it is who is authorized to write the checks that sets it apart from a normal checking account. You can set it up where only the person making the deposits is authorized to withdraw. This is the easiest and relatively least secure, but better than nothing. Or this responsibility can be shared (for example, two party checks, one signature line for the promoter, one line for a licensed accountant) or the money can be completely deposited without any authorization to withdraw by the depositor and the checks will be written under contract by a third party (maybe an accounting firm) according to the terms of that contract or instructions. The third party process is the most secure.
The bank doesn't write the checks.
Once you set up an appointment with the banker and know who and how you want to distribute the money, it's supposedly the same amount of effort as opening up a regular checking account. The tricky part is having the cash ready and deciding who writes the checks. It obviously doesn't make sense to post prize money 6 months in advance, but perhaps a promise that it will be posted three weeks before the tournament starts would be sufficient.
I'm really at the edge of my knowledge on this topic and I know there are many different ways to do this as well, a letter of credit pops into mind, so if anyone with more experience with these wants to chime in or correct something, please do so.
Hope that helps a little.
