Whilst the popularity of the EB-5 Visa, propelled by desire for better education, business prospects, or a desire for long term US residency has led to a sharp spike in applications from the MENA region, there are recurrent issues that some investors from the region face. These are issues commonly seen by those attorneys with experience in working with investors from the region, but may easily be missed or go unsolved by others not as familiar.
Foreign Exchange Management Act (FEMA) and the Reserve Bank of India: FEMA is act of the Indian Parliament that controls all financial transactions flowing into and from India. The Reserve Bank of India (RBI) which controls all banking and financial transactions within India, have implemented the Liberalized Remittance Scheme (LRS) which dictates remittances leaving India by both Indian Residents as well as Indian nationals that are Non Resident Indian (NRI)/Person of Indian Origin (PIO)
Per an announcement of June 01, 2015, Resident individuals are allowed to remit up to $250,000 per financial year (1 April – 31 March) for any permitted current or capital account transactions or a combination of both. A Non-Resident Indian or a Person of Indian Origin, is allowed to remit an amount of $1 Million in any given financial year.
While a NRI/PIO may not have issues transferring the required capital ($500,000 for Regional Center Investment or $1Million for Direct Investment) an Investor who is considered to be a Resident of India must be very careful about how the money is transferred out of India. RBI does allow for an amount greater than $250,000 to be transferred, but this requires special permission and documentation of the need for a larger amount to be transferred.
Whilst United States Citizenship & Immigration Services (USCIS) had previously turned a blind eye to Chinese investors using several family and friends to transfer sums to reach the capital requirement, increasingly, they seem to be taking a harder look at such practices. It is imperative that Investors work with counsel that are qualified and familiar with structuring such transfers so as not to run afoul of the FEMA regulations, and also not raise any red flags for USCIS officers.
While India, like much of the Middle East also has a system of unregulated brokers who will transfer funds via the hawala system, these transactions are best avoided for India as hawala is not permitted. USCIS has repeatedly stated their official position, that any act deemed unlawful in the country where it occurred, will be deemed to be an unlawful act by USCIS; therefore, any Indian investor wanting to remit funds via hawala risks having their application denied.
Office of Foreign Asset Control (OFAC) Licenses for Iranian and Syrian Clients
Iranian Investors: While the U.S. does have sanctions against the Government of Iran, Iranian investors are the largest number of EB-5 investors from the Middle East. Prior to October 2012, Iranian Investors were required to secure a specific license from the Office of Foreign Asset Control (OFAC) allowing them to invest their money through the EB-5 program that is no longer a requirement.
An Executive Order issued in October 2012 authorized OFAC to issue general licenses to Iranians wishing to invest their money in the United States through the EB-5 program. Whilst the general license allows investors to save time, one must still be cognizant of the requirements one must fulfill in order to be approved for the license.
Syrian Investors: Syrian investors must first secure a Specific license from OFAC before they can invest via the EB-5 program
Transfer of Funds via Hawala: Unlike hawala dealers in India, many jurisdictions in the MENA region have a hawala system that is licensed and the use of an alternative remittance system is regulated. For purposes of EB-5 Investment, USCIS requires that the Investor be able to fully documents the source of funds as well as the path of those funds from the origin country to the U.S.
Alternate money transfer facilities such as Hawala that are common in the Middle East, are acceptable, but must be handled with extreme caution. USCIS will need to see an unbroken chain of control over the funds from the time it was sent to the time received; therefore, the regular “Honour System” of no receipts and no records will not work for USCIS. An Investor who elects to remit money via hawala, must have receipts and proof of transfer from the sending entity and receiving entity for each segment of the transaction chain.
Documenting Income in Trade Free Zones: USCIS requires that the investor be able to show that the funds used for the investment were earned through lawful means. One way of achieving this is via tax returns; however, USCIS is also aware of Trade Free Zones and will accept alternate financial documents in lieu of tax returns.
This may be an added burden for investors in Free Trade Zones, but in order to document the lawful source of funds, investors must be willing to provide alternative financial documents such as independently audited financial statements for 5 years will suffice
“Extreme Vetting” in the Trump Era: Immigration, and Immigrants in general, have been the focus of much of the wrath and vitriol emanating from the White House. The policies of the administration have been put into effect at both, the Department of State (DOS) that exercises control over the Consulates and Embassies as well as the USCIS.
The U.S. Department of State (“DOS”) on May 06, 2017, issued notice in the Federal Register that it proposes to carry out President Trump’s goal of “extreme vetting” by requesting information from a subset of visa applicants (both immigrant and non-immigrant) worldwide “in order to more rigorously evaluate applicants for terrorism or other national security-related visa ineligibilities.” The additional personal information desired to be collected includes:
- Travel history during the last fifteen years, including source of funding for travel;
- Address history during the last fifteen years;
- Employment history during the last fifteen years;
- All passport numbers and country of issuance held by the applicant;
- Names and dates of birth for all siblings;
- Name and dates of birth for all children;
- Names and dates of birth for all current and former spouses, or civil or domestic partners;
- Social media platforms and identifiers, also known as handles, used during the last five years; and
- Phone numbers and email addresses used during the last five years.
This additional information is to be collected via a new form DS-5535 to be completed by “certain, selected applicants”
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