Some countries in Africa, Asia, and the Middle East impose restrictions on the management of U.S. currency within their jurisdictions. So how can prospective EB-5 investors from these countries meet EB5 funding requirements while abiding by their home-country restrictions? While it can be difficult to transfer money out of nations that have capital export restrictions, several options exist for EB5 investors.
One of the methods EB5 investors can use is a “currency swap”. This method operates over two steps. First, an investor transfers the amount of their local currency that is equivalent to the minimum investment amount to a third-party intermediary. Then, upon receipt of the transfer, the intermediary will transfer the investment funds to the appropriate EB5 escrow account in U.S. dollars. There are three types of currency swaps depending on who – or what — is acting as the third-party intermediary. However, when completing the I-526E petition, investors must provide source-of-funds documentation to prove the legality of their investment capital. The difficulty of this process depends on which avenue an investor chooses to take. Investors in this situation should consult an experienced EB5 attorney to decide on the best course of action.
The first type involves a swap between an EB5 investor and someone they know personally — a relative or a friend. It involves reaching out to a friend or relative who already legally possesses U.S. currency outside of the investor’s country of origin. If they accept, both parties can move forward with the two-step process detailed above.
The second type of currency swap occurs with a licensed money exchanger instead. Investors who choose this method often have the easiest time proving the lawful source of their third party’s funds because the company is licensed to operate as an official currency exchange agency.
The third type of currency swap involves unlicensed, unknown third parties. While this may be the only option for investors from certain countries, it tends to present the most problems. These kinds of individuals or entities are often unable to provide proper source-of-funds documentation, which can lead to I-526E petition denial.
EB5 investors who do not wish to utilize the currency swap method can instead use the Hawala system. This system is an informal method of transferring money without any money physically moving from one place to another. It is generally used in the Middle East, Africa, and on the Indian subcontinent. However, a distinguishing aspect of the Hawala system is how there is often very little written record documentation of transactions. Naturally, this can lead to problems when demonstrating investment source-of-funds.
