In reading some forum threads and email chains over the last couple of years, I think there is some confusion about the Know Your Customer (KYC) verification at Escrow.com, Payoneer Escrow, and other escrow services. As far as I understand, the KYC verification process is not a form of due diligence for a buyer or seller.
From what I understand, KYC verifies that the buyer and seller in a transaction are who they say they are when the transaction is set up. If a scammer or thief is one party to a deal, the KYC process would likely not be able to “out” that party as a scammer or a thief. The process would simply verify that their banking details match their account details.
Let’s say that Joe is buying Example.com from Bob using a domain name escrow service. I believe the escrow service will verify that Bob and Joe are who they say they are. They do not verify that Joe has the funds to buy Example.com nor do they verify that Bob actually owns the domain name or has the right to sell the domain name. Essentially, if Bob stole the domain name or otherwise has no rights to sell the domain name, that is something that the escrow service would not check.
I do not think it is the escrow service’s responsibility to do due diligence. I also do not think it is feasible for them to do it either. If the escrow service did due diligence, the escrow service would need to have a thorough investigative process, and that would cost a lot more money than they currently charge. It would also be quite a bit of risk to them if they miss something. In addition, imagine if you brought a deal to them to transact and they couldn’t verify ownership and canceled a legitimate deal simply because they couldn’t verify ownership. The buyer should do due diligence before agreeing to a deal or at least before transacting.
One positive aspect of the KYC verification process is that if a deal is consummated with a thief or scammer, Escrow.com would have that person’s banking and address details. I am pretty sure the other party would need to get a subpoena for that information, but it should be available if legal action is pursued. This is probably of little consolation to someone who was scammed as legal fees can be very high and the likelihood of recovering funds paid to buy a domain name that ends up stolen is pretty slim or would be less than the legal fees required to hire an attorney to see this through.
Domain buyers and sellers need to do their own due diligence before transacting.