Myth: EB-5 enables money laundering.
Fact: EB-5 funds are heavily scrutinized to prevent money laundering.
In addition to the detailed source of funds review performed by DHS, the US banking system is regulated to ensure that money laundering does not occur and to identify potential threats.
U.S. banks accepting foreign funds must comply with Know-Your-Customer (KYC), Anti-Money Laundering (AML), and Bank Secrecy Act (BSA) requirements.
In addition, investors are subject to Office of Foreign Asset Control (OFAC) requirements. The OFAC Specially Designated Nationals (SDN) list specifies individuals, businesses, and countries with which U.S. entities are prohibited from doing business based on foreign policy or national security concerns.
All U.S. persons, including banks and EB-5 issuers, are subject to OFAC regulations, and are required to block transactions involving, on behalf of, or in the interest of entities on the SDN list, and must reject any transactions in violations of other sanctions.
For a person included on or linked to the SDN list, attempting to participate in the EB-5 program would be unsuccessful; the funds would be blocked before the initial investment was ever made, and the foreign individual involved would lose access to those blocked funds.
In a series of recent blogs, we explored common EB-5 myths to reveal the facts about the EB-5 program:
- U.S. Citizenship is not “for sale”
- EB-5 is not an immigration shortcut
- EB-5 investors are extensively vetted
- EB-5 funds are heavily scrutinized to prevent money laundering
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