Understanding the Escrow Qualification Process in Costa Rica: What Foreign Buyers Need to Know

Buying property in Costa Rica as a foreigner involves more than simply selecting the right location and signing on the dotted line. One of the most crucial - and often misunderstood - steps in the process is qualifying for escrow. Escrow companies in Costa Rica are heavily regulated under anti-money laundering (AML) and Know Your Customer (KYC) laws, which means they must verify the origin of funds before allowing a transaction to proceed.

Whether you’re purchasing property as an individual or through a corporation, here's what you need to know to ensure your funds are accepted and your transaction proceeds smoothly.

Why Escrow Qualification Matters

Escrow services in Costa Rica are governed by national laws and international AML standards designed to prevent financial crimes. For foreign buyers, this means that before funds can be transferred to an escrow account for a real estate purchase, you must prove the source and legitimacy of your money.

Escrow companies are required to conduct due diligence on all buyers and report any suspicious activity to regulatory authorities. Failing to meet these requirements can result in funds being rejected, frozen, or returned - delaying or canceling your property purchase altogether.

Requirements for Individual Buyers

If you are buying property using personal funds from a personal bank account, you will need to provide the following:

• ✅ KYC Individual Form: A document provided by the escrow company that collects your personal and financial details.

• ✅ Copy of Passport and Driver’s License (or a second government-issued ID): Must be valid and clearly legible.

• ✅ Utility Bill Showing Current Address: Should be recent, typically no older than 90 days.

• ✅ Bank Reference Letter: A formal letter from your bank confirming your account status and relationship with the institution.

• ✅ Bank Statements (Last 3 Months): Must be from the account where the funds will be sent from.

• ✅ Proof of Funds Origin: Examples include:

  • A CPA letter explaining how you earned or accumulated the funds

  • Property sales agreements

  • Loan or credit agreements

  • Inheritance documents

  • Investment account statements

Requirements for Corporate Buyers

If the purchase is being made through a corporate entity, the documentation required is more extensive:

• ✅ KYC Corporate Form: Provides details about the company’s structure, ownership, and source of funds.

• ✅ Copy of Manager's Passport: For the legal representative authorized to handle the purchase.

• ✅ Operating Agreement & Articles of Incorporation: Legal documents showing how the company is structured and who is authorized to act on its behalf.

• ✅ Utility Bill: To confirm the physical address of the company or its representative.

• ✅ Bank Reference Letter: From the corporate bank.

• ✅ Bank Statements (Last 3 Months): From the corporate account from which funds will be sent.

• ✅ Proof of Funds Origin: May include:

  • A CPA-audited financial statement

  • Invoices and contracts related to recent business deals

  • Loan agreements or sale of assets

What Happens If You Can’t Prove the Source of Funds?

This is where things can get complicated. If you cannot adequately explain or document where your funds came from, or if your funds have passed through multiple intermediaries or complex transactions, the escrow company may:

• ❌ Reject your escrow application

• ⚠️ Report the activity to financial authorities

• 🛑 Refuse to receive or hold your funds

• ⏳ Delay the entire real estate transaction

• 💸 Return your funds, often with wire fees deducted

Even if funds are received, if questions arise about their origin, the escrow company may freeze the money until it’s cleared or fully documented.

How to Ensure a Smooth Escrow Process

Here are a few best practices to help you or your clients avoid unnecessary delays:

• Keep It Simple: Avoid moving funds through multiple accounts unless necessary. The more direct the path, the easier it is to document.

• Prepare Early: Gather your financial documents before you even begin looking for a property.

• Use a CPA Letter: A signed statement from a certified public accountant can go a long way in proving that your funds are legitimate.

• Maintain Transparency: Disclose any loans, business transactions, or inheritance funds up front.

• Get Professional Guidance: Work with a trusted real estate agent, lawyer, and escrow company familiar with transactions involving foreign buyers.

Final Thoughts

Costa Rica is a welcoming country for foreign real estate investors, but the escrow qualification process can be a hurdle if you’re unprepared. By understanding the requirements and having your documentation in order, you can move forward with confidence and ease.

If you need guidance or a recommended escrow company with experience handling international transactions, reach out - we're here to help you navigate the jungle of real estate, every step of the way.