Tom Sporkin Quoted in Compliance Week Article, "As SEC Targets EB-5 Fraud, the Visa Program Could Raise Money Laundering Risks"Thomas A. Sporkin
Tom Sporkin was quoted in Joe Mont's Compliance Week article, "As SEC Targets EB-5 Fraud, the Visa Program Could Raise Money Laundering Risks," on March 29, 2016.
The good news, if you live in another country and want to skip to the front of the U.S. immigration line, is that a government program that grants visas to overseas investors is more popular than ever. The catch: The program, which critics say is rife with the potential for fraud, could visit money laundering and sanctions problems upon the banks facilitating the process.
Congress created the Employment-Based Fifth Preference program, better known as EB-5, an employment-based visa program, in 1990. It was intended to encourage capital investment in the United States by foreign investors in exchange for “green cards.” Conditional visas are offered to foreign nationals (and eligible dependents) who invest $1 million (or $500,000 in rural or government-designated “targeted employment areas”) in a new commercial enterprise that creates at least 10 full-time jobs.
Approximately 10,000 EB-5 visas are available each fiscal year, subject to Congressional reauthorization. The Immigrant Investor Program Office within the Department of Homeland Security’s U.S. Citizenship and Immigration Services administers the program, which draws investors through regional centers and private promoters.
An important precaution is to ensure that no party to the transaction appears on government sanctions or terrorism lists, says Thomas Sporkin, a former senior SEC enforcement official, now a partner with law firm Buckley Sandler: “You don’t want to be a pawn in a terrorism finance game.”
If a bank is instructed to disburse funds to a project coordinator, it should strive to validate the arrangement and “make sure the money is really going to its purported purpose,” he says. “It should only disburse the money to an agent who it’s comfortable with. I’d want something like a typical construction contract where you have milestones and inspections prior to the release of funds.”
Among his advice: confirm the identity of the source and ultimate recipient of funds; seek the ability to audit the promoter's books and records; independently confirm the use of proceeds; and review the promoter's prospectus for warning signs of fraud. The risk profile of prospective customers and the EB-5 project itself should be addressed in the financial institution's risk assessment and transaction monitoring rules.