A Regional Center’s Perspective on EB-5 Investor Due Diligence

Foreign nationals applying for lawful permanent residence in the United States must make two evidentiary showings: their substantive eligibility for the underlying immigration benefit; and that they are admissible to the country. Federal agencies examine foreign nationals’ immigration filings and perform extensive background checks to determine whether they have satisfactorily discharged their dual burdens. In this regard, all prospective immigrants, irrespective of their preference category, undergo significant federal scrutiny. What tends to set apart foreign nationals seeking permanent immigration through the EB-5 program, however, is the degree to which they are screened and vetted before ever filing an immigrant petition.

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CanAm Enterprises (“CanAm”), as an operator of multiple regional centers throughout the United States, and as a vested stakeholder with over 30 years of experience, understands that investor scrutiny is not simply a governmental prerogative, but also an imperative of the EB-5 Program that directly impacts its integrity and long-term viability. As such, CanAm carefully evaluates each prospective investor to assess his or her suitability for EB-5 Program-based immigration before permitting him or her to subscribe to one of CanAm’s offerings. These assessments are comprised of essentially two components: financial and immigration suitability.

Financial Suitability

Before any discussion of financial suitability can begin, we must first acknowledge that all capital investment opportunities offered under the auspices of the EB-5 Program constitute securities offerings subject to regulatory oversight and enforcement by the Securities and Exchange Commission (“SEC”). With this understanding, CanAm was the first regional center to undertake the arduous process of establishing its own broker dealer entity exclusively dedicated to EB-5 capital investment offerings. CanAm’s broker dealer is registered with, and audited by, the Financial Industry Regulatory Authority (“FINRA”).

In conducting its financial suitability assessment, a broker dealer should initially evaluate a prospective investor’s qualifications as an Accredited Investor, as that term is defined under the Securities Act of 1933 (15 U.S.C. 77a et seq). Thus, in compliance with U.S. securities laws and the USA PATRIOT Act, a broker-dealer operating in EB-5 offerings should, at a minimum, require each prospective investor to disclose certain biographic, family, and occupational information, any previous travel to the United States, and, importantly, details regarding their net worth and anticipated source of EB-5 investment funds.

A broker-dealer should further evaluate the depth and quality of a prospective investor’s prior investment experience. In doing so, the broker-dealer should inform the prospective investor that EB-5 capital investments generally involve significant risk, that they are highly illiquid, and that they are at least five (5) years in term. These inquiries allow a broker-dealer to determine a prospective investor’s particular risk tolerance and capacity to exercise independent judgment in making an informed investment decision. Equally significant, the process allows the prospective investor to evaluate whether or not an EB-5 investment is the most appropriate immigration option given his or her unique circumstances.

Another important aspect of a broker-dealer’s financial suitability evaluation is background screenings through a third party, such as World Check – a division of Thomson Reuters Risk Management Solutions. World Check monitors over 400 sanction, watch, and regulatory law and enforcement lists and hundreds of thousands of information sources, often identifying heightened-risk entities and individuals months or years before they appear on a U.S. Treasury Office of Foreign Assets Control (OFAC) list. CanAm’s broker-dealer, at its own expense, screens prospective investors through the World Check database in order to identify any financial, regulatory, or reputational risks that could potentially undermine a prospective investor’s immigration eligibility or otherwise violate U.S. laws. In all instances, the background screening protects the confidentiality and security of the information collected from prospective investors.

Screening prospective investors for financial suitability is a critical safeguard against possible fraud and abuse. This is particularly true in light of the heightened SEC scrutiny of the EB-5 program and the anticipated expanded role of the Department of Homeland Security in monitoring regional center activity under a new statutory regime. Having a broker dealer dedicated to EB-5 not only enables CanAm to maintain quality control over the investor screening process and identify in advance any irregularities that could potentially undermine immigration eligibility, but more generally, bolsters CanAm’s ability to anticipate and quickly respond to the ever-changing landscape and trends in immigration and securities regulation and enforcement.

Immigration Suitability

In addition to evaluating a prospective investor’s financial qualifications, a regional center must also consider the likelihood the prospective investor will receive an I-526 petition approval. Because CanAm prepares all the project-related components that ultimately comprise an investor’s I-526 petition filing package, its assessment at the pre-filing stage focuses largely on the prospective investor’s anticipated source(s) and path(s) of EB-5 investment funds.

A regional center should also conduct in-depth discussions regarding prospective investors’ capital sources and intended remittance strategies. In doing so, a regional center must rely both on its own collective knowledge and the expertise of reputable migration agents and immigration counsel to identify potential red flags that could complicate or preclude I-526 petition approval. Even so, all regional enters should be cognizant that source of capital and remittance methods that had been deemed suitable in hundreds of other instances may be deemed unsuitable in a given investor’s petition as USCIS adjudication trends can and often do change abruptly. As such, a best practice is to consider each prospective investor’s case individually.

All regional centers should also consider whether there exist any impediments to a prospective investor’s admissibility to the United States. In this regard, a regional center should inquire about, among other things, any prior criminal history, prior applications for admission (non-immigrant or immigrant), and, as relevant, the bases and circumstances surrounding any prior denial of admission. Here, too, a regional center should work with immigration counsel to identify and assess any potential admissibility issues or complications.

Only after achieving a reasonable level of assurance that a prospective investor is likely suitable from both a financial and immigration perspective, does CanAm provide the prospective investor with offering materials for review. Should an investor proceed with the subscription process, he or she is further screened by CanAm’s escrow agent, which performs a search of the investor’s name against the Specially Designated Nationals (“SDN”) list and other sanctions and prohibited persons lists issued and maintained by OFAC. The escrow agent and will not accepts funds if an investor’s name appears on an OFAC list.

Conclusion

Due diligence is critical to the EB-5 program. Prospective investors are rightfully counseled to studiously evaluate potential EB-5 investment opportunities and to meticulously scrutinize all materials provided and assertions made by a regional center to identify any red flags that could undermine their individual immigration and investment objectives. Likewise, a broad range of EB-5 stakeholders – including immigration attorneys, regional centers, migration agents, and financial institutions – share responsibility to thoroughly vet and screen prospective investors to assess their suitability for EB-5 program-based immigration.

Walter S. Gindin

Walter S. Gindin is the in-house immigration counsel for CanAm Enterprises, where he is responsible for developing and overseeing all aspects of the preparation of I-924, I-924A, I-526, and I-829 submissions to the USCIS, as well as providing guidance on immigration law and policy. Prior to joining CanAm, Mr. Gindin was an associate at a full-service immigration law firm where he worked with EB-5 investors, regional centers, and developers to prepare and file both direct and regional center-based EB-5 petitions. Mr. Gindin also worked with companies across different industries to secure a variety of family-and-employment-based immigration benefits for their employees. From 2011-2013, Mr. Gindin served as a staff attorney at the U.S. Court of Appeals for the Second Circuit where he drafted bench memoranda and orders for motions and appeals involving diverse areas of law, including immigration, constitutional law, civil rights, and criminal law. Mr. Gindin received his bachelor’s degree in economics and master’s degree in political science from New York University, and his Juris Doctor with Distinction from the University of Iowa College of Law. While in law school, Mr. Gindin served as an editor on the Iowa Law Review and was a member of the law school’s Immigration Clinic. He is an active member of the New York State Bar and the American Immigration Lawyers Association and represents LGBTQ asylum applicants through Immigration Equality.

 

About CanAm Enterprises With three decades of experience promoting immigration-linked investments in the United States and Canada, CanAm Enterprises has a long and established track record. Based on a reputation of credibility and trust, CanAm Enterprises has financed 55 project loans and raised more than $2.8 billion in EB-5 investments. CanAm Enterprises exclusively operates several USCIS-designated regional centers that are located in the city of Philadelphia, the Commonwealth of Pennsylvania, the county of Los Angeles, the metropolitan region of New York, Hawaii, Florida, and Texas. For more information, please visit www.canamenterprises.com