As the EB-5 program has grown, prospective EB-5 investors have increased their due diligence research into potential projects. However, in many cases, it still is not enough.
After the Chicago Convention Center incident, most investors began evaluating the high level elements of the EB-5 offering.
To be sure that a project was viable, investors began visiting project sites to meet the team involved, confirm permits, titles, and approvals. They hired proven EB-5 professionals to review the project’s offering documents, including the plan for job creation, the project’s overall capital stack, and the 3rd party diligence reports many projects now provide.
Though many believe this strategy is enough to be effective, pending legislation has made it clear that an effective due diligence strategy requires an even more thorough evaluation.
In the recent case of Path America Regional Center, the EB-5 project appeared legitimate, and had assembled a team of top experts in the EB-5 industry. However, because the project lacked proper operational controls and a robust compliance strategy, misuse of investor funds jeopardized immigration outcomes and return on investor’s funds
This example proved that a robust due diligence review must include an assessment of the financial controls and compliance strategy put in place. Meeting EB-5 program requirements is essential to immigration success; issuers with a comprehensive compliance platform have the highest likelihood of achieving unconditional permanent residence for their investors.
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