Residency and citizenship by investment programmes are a popular way for wealthy individuals to gain access to the country they ultimately wish to reside in. There are many firms that claim to specialise in this area. However, some of these ‘service providers’ don’t always have the noblest of intentions; which is why these types of investment programmes sometimes make the headlines for all the wrong reasons.
While these sensational news stories can be concerning, the reality is there have been very few fraudulent cases recorded when it comes to the U.S. government’s EB-5 investment visa programme. According to the IIUSA (Invest In the USA), the number of Securities and Exchange Commission (SEC) enforcement actions for EB-5 totalled 28 cases from FY2013-2016. That is less than 1% of the total 3,116 enforcement actions brought by the SEC for enforcement actions across the entire U.S. financial service industry during the same period.
So more often than not, there’s a good story to tell when it comes to EB-5 as this programme creates jobs, ensures foreign direct investment and results in investors getting what they want – the American green card and ultimately, U.S. citizenship if so desired.
The EB-5 investment visa programme allows foreign investors to obtain an American green card after investing $500,000 and creating 10 or more American jobs. With current approval times for South African investors at approximately 16 months, it is the fastest, safest and most secure way to obtain a U.S. green card.
For many, it’s a winning proposition which enables them to legally access the United States. But unfortunately this programme, like every industry, has experienced a few high profile frauds. While these incidents are extremely rare, we advise anyone considering an EB-5 visa application to make sure they’re dealing with a reputable firm that has strong investment program with a high likelihood for success.
Here are four steps to protect yourself and your investment:
- Seek professional advice from an accredited advisor
Only deal with a firm that specialises in the EB-5 program, and caters to investors from your country. You can check the firm’s status with the U.S. Citizenship and Immigration Services (USCIS). Every company offering access to the EB-5 program needs to apply to the USCIS to be designated as a “regional centre”. Check whether the firm you are dealing with has this designation at www.uscis.gov. However, bear in mind that USCIS approval of an EB-5 regional centre doesn’t mean it necessarily endorses the activities of that centre or minimises your risks as an investor. This is just another way to check the legitimacy of the business you are dealing with.
- Take note of any third parties involved
Is the company or person you’re dealing with using any third parties, such as an immigration attorney, to secure your visa? If so, it is important to do your due diligence around their competencies and reputation too. LCR, for example, works with most of the major EB-5 experienced law practitioners in the United States. Indeed, they highly recommend their clients engage an experienced EB-5 immigration law specialist to assist with filing the EB-5 petition. Unlike most EB-5 firms, LCR also uses a broker/dealer to distribute their offering documents and ensure compliance with SEC and Financial Industry Regulatory Authority (FINRA) regulations.
- Check out the investment claims
The success of your application depends entirely on the success of the project you’re investing in; so it’s important to conduct your own due diligence on the specific project you’re investing in. For instance, if the investment involves construction of commercial real estate, you can check U.S. county records to see if the issuer has the correct permits, etc. You should also find out whether you can contact existing clients the regional center or developer has worked with in the past for references.
- Find out what happens if your application is unsuccessful
One of the most important ways LCR ensures their projects are safe for investors is that they will return the investment capital if the application is denied at the I526 stage. This means that LCR’s interests are aligned with the investor’s in terms of ensuring both the project and the investor are compliant with all requisite EB-5 visa program requirements.
The EB-5 industry has not always been well regulated in the past, so unfortunately there have been a few unscrupulous operators that have, at times, tainted the image of the industry. In most of the cases where fraud was involved, the investors did in fact end up receiving their green cards, but some lost their capital. The SEC has intervened in some of the high profile cases to recover some of the money for these investors. One positive outcome of this is that the regulations around EB-5 are likely to be tightened once the program gets re-authorised, which we expect to happen on or before September 30th 2017.