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Fund Settlement & Custody Protocols ​

In the context of RWAs, a payment is not merely a transfer of value but a regulated securities transaction. Unlike e-commerce, where payments are processed instantly, investment capital must pass through a rigorous "Gatekeeper" phase before it is accepted.

This document outlines how the platform enforces SEC Rule 15c2-4 (Escrow) and BSA/AML standards to ensure that funds are only accepted from verified sources and held securely until settlement.

1. Pre-Transaction Verification (The Gatekeeper) ​

The system should enforce a "Blocker" logic: no financial transaction is permitted until the entity behind the wallet or bank account is identified.

Identity & Accreditation Checks ​

Before the payment gateway is unlocked, the investor’s profile is validated against third-party databases.

  • Identity Verification: The system should confirm the investor's identity to satisfy SEC Regulation S-ID (Identity Theft Red Flags Rule). This prevents the use of stolen financial credentials.

  • AML Screening: The user is screened against global watchlists (OFAC, UN Sanctions) in compliance with the Bank Secrecy Act (BSA).

  • Eligibility: For Regulation D 506(c) offerings, the system should verify the "Accredited Investor" status via CPA letters or income review.

Regulatory Impact: Under FINRA Rule 2090 (Know Your Customer), the platform must understand the essential facts concerning every customer before executing a transaction on their behalf.

2. Custody & Escrow (SEC Rule 15c2-4) ​

Once the investor is verified, funds are not transferred to the issuer directly. Instead, the system routes capital to a segregated safety account.

The Qualified Custodian ​

For Regulation D and Regulation A+ offerings, funds are transmitted to a Qualified Third-Party Escrow Agent.

  • Segregation: Investor funds are held in a non-interest-bearing FBO ("For Benefit Of") account, distinct from the platform’s or issuer’s operating funds.

  • Contingency Management: Per SEC Rule 15c2-4, the custodian is legally prohibited from releasing funds to the issuer until the offering’s specific closing conditions (e.g., Minimum Funding Target) are mathematically met.

Why this protects the investor: ​

If the offering is cancelled or fails to meet its target, the Escrow Agent acts as a neutral third party to return funds to the investor, bypassing the issuer entirely.

3. Payment Rails & Settlement Times ​

The platform supports multiple payment rails, each subject to specific banking regulations regarding settlement times and finality.

Fiat Transfers (ACH & Wire) ​

  • ACH (Automated Clearing House): Typically settles in 1–3 business days. The system marks the investment as PENDING_SETTLEMENT until the banking partner confirms receipt.

  • Wire Transfers: typically settle same-day or next-day.

  • Record Keeping: In compliance with FINRA Rule 4511, the platform retains immutable records of every transaction intent, timestamp, and bank confirmation code for a minimum of six years.

Electronic Wallets & Crypto (RWA Specifics) ​

  • The Travel Rule: For crypto payments, the system should capture the originator’s information to comply with FATF Recommendation 16.

  • Stablecoin Validation: The system should verify that the payment token is a permitted asset (e.g., USDC/USDT) and not a sanctioned privacy coin.

4. Reconciliation & Transparency ​

Transparency in fund status is a requirement under Regulation A and Regulation CF disclosure rules. The investor must know the precise location of their capital at all times.

Status Reporting ​

The dashboard updates the investment state based on webhooks from the banking provider:

  1. Payment Initiated: The system should have generated payment instructions.

  2. Payment Processing: Funds are moving through the Federal Reserve or Swift network.

  3. Funds Settled (Escrow): The Custodian confirms receipt.

  4. Payment Failed: The transaction was rejected (e.g., Insufficient Funds, AML Flag).

Risk Management: By waiting for "Settlement Finality" before minting or distributing tokens, the platform eliminates Counterparty Risk (the risk that the investor receives the asset but the payment bounces).