The Sept/Nov 2019 edition of ACAMS Today features an article authored by DSA president, Alison Jimenez, titled “EB-5: Pathway to US Citizenship or Money Laundering Concern?”
The article provides an overview of the EB-5 immigrant investor program and financial institutions role in escrow accounts, offering securities, and bridge loans to developers.
AML and Fraud Risks are broken-down into:
- KYC issues
- Illicit or Unknown Source of Funds
- Transactions without a Purpose
- Funnel Accounts & Hawala
- Theft of Investor Funds and/or Ponzi Schemes
The article also discusses the disincentive for EB-5 immigrant investors to report suspected fraud and cases of financial institutions being drawn into litigation.
Rampant fraud in EB-5 investment schemes led the SEC to issue an Investor Alert in 2013. The SEC alert noted that the designation as a regional center “does not mean that the USCIS, the SEC, or any other government agency has approved the investments offered by the business.” The SEC has filed more than 30 enforcement actions since 2013 relating to the EB-5 program.
The DOJ has prosecuted dozens of EB-5 developers, regional center directors, immigration attorneys and finders for crimes ranging from theft to diversion to identity theft. Regional center officials have allegedly created multiple companies in order to obscure and conceal the path of investor funds. EB-5 program developers are alleged to have spent immigrant investor funds on vacations, personal residences, cars, satisfying margin calls and personal credit card bills. Regional centers have also used new investor funds to pay back prior investors, thereby creating Ponzi-like scenarios.