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The U.S. EB-5 immigrant investor program provides foreign nationals with the opportunity to obtain a U.S. green card and residency for themselves and their immediate family members. Under the program, a prospective investor must invest $900,000 into a U.S. government approved commercial enterprise. Since its inception the program has received great interest from expanding markets such as China and India. Evidently, the requirement of a high investment has made the program synonymous with wealthy families, and thus increasing the chances of applicants being exposed to fraudulent activities. Therefore, it is crucial that potential investors are proactively aware of ways to prevent being defrauded.

1. Choosing the right EB-5 project

The United States Citizenship and Immigration Services (“USCIS”) regulates the EB-5 commercial project that a regional center is proposing on developing. Under the conditions set by the program the development must generate 10 jobs for U.S. persons for a period of 5 years, failure to maintain these jobs will result in a rejection of the investor’s EB-5 application. It is therefore important for a prospective investor to do their due diligence on an EB-5 project and regional center prior to making their investment. These are a few basic questions an investor must ask prior to making their investment:

• How long has the regional center been working on the EB-5 program?
• Does the regional center have a strong reputation for development and completion of successful projects?
• Did that regional center complete previous projects on time?
• Has the land been purchased?
• Has the regional center obtained a zoning permit?

Furthermore, investors can minimise their risk by aligning their investment with a regional center that has experience in developing the same type of project successfully in the past. This provides both the investor and the regional center knowledge on what is to be expected and projected solutions to any problems they may face with the project.

1. Knowledge on how the project developer intends to use the investment money

It is important that prospective investors understand how the capital investment will be spent. At times a developer may inform the investor that the money will be invested in multiple projects, this has often resulted in the funds being misspent for personal purchases. These multiple projects could be other projects that the investor is working on and these projects are usually unrelated to each other, such as restaurants, assisted living facilities etc. However, this does not mean that all mixed projects are evidence of fraudulent activity, it simply suggests that investors should ideally focus on singular focused projects.

1. Due diligence on project management

Prior to entering into any agreement, prospective investors must be satisfied with the integrity of the parties involved in the project, more specifically the management and disbursement of funds. It is crucial that investors take note of the agreements between the new commercial enterprise and the job creating entity. In a legitimate project, the new commercial enterprise collects funds and disburses them to the job creating entity, these funds must flow independently.

The disbursement agreement for the project should outline in detail how funds will be used at each stage of the planning, construction, and operations. Investors must review the project documentation to ensure that their investment funds will be used specifically to fund job creation as per the requirements of the EB-5 program. Moreover, prospective investors should ensure that they have obtained the services of an independent accountant to audit the performance of a fund manager.

The EB-5 program is undoubtedly a great program with good benefits for foreign nationals and their families. Given that there are methods available to reduce investors’ risks from fraud, general fraudulent activity in the industry should not deter prospective investors from participating in the program.

We are a team of U.S. licensed lawyers with over 7 years of experience in helping individuals and families apply for U.S. residency via the EB-5 program. We actively assist and guide you on your journey to obtaining U.S. Green Card and Residency. With the American Legal Center of Dubai, we will always ensure and assist you with conducting the relevant due diligence to make your investment a success. Contact us today for more information.