The U.S. Citizenship and Immigration Services (USCIS) is truly a diligent and authoritative department. Although the application requirements for EB-5 (U.S. investment immigration) are the most lenient among mainstream immigration countries (applicants must be at least 14 years old, with no requirements for language, education, or management experience, and only need to provide a reasonable explanation for the source of the $500,000 investment), the USCIS adjudication standards can be tightened at any time. Recently, the USCIS has issued multiple Requests for Evidence (RFE) regarding the method of 'third-party currency exchange,' which means that the immigration applications (I-526) of some investors may be affected. Let us understand what third-party currency exchange is.
A: Before investing $500,000 into the project escrow account, most investors need to convert their RMB (after explaining the source) into USD. At this point, funds can be remitted to an overseas account through an individual's foreign exchange quota, or exchanged with a friend who already has USD in an overseas account (the latter is third-party currency exchange).
Generally speaking, the operational process of third-party currency exchange is: The EB-5 investor transfers the RMB investment funds to an intermediary (an individual or institution, same below) with an RMB account in mainland China. The intermediary then transfers the equivalent value in USD from their overseas account to the investor's overseas USD account. The investor then transfers this USD in their own name to the project's escrow bank to complete the investment. In essence, the EB-5 investor exchanges RMB for a third party's USD, obtaining the full amount of USD at once to complete the investment.
The current EB-5 act stipulates that investors must prove they are the legal owners of the investment funds and that the funds were obtained legally. Therefore, the final investment funds should be the same funds for which the investor has proven a legal source, and which have been invested into the overseas account through legal paths and processes. For example, in the common scenario where an investor uses multiple friends and relatives for currency exchange, it can be seen that the investor's legal funds are transferred into the RMB accounts of multiple individuals, and each person then exchanges USD within their own quota and remits it to the investor's overseas USD account. Finally, the investor transfers all the USD received in their overseas account into the EB-5 project escrow account to complete the investment. This method allows for the tracing of the final investment funds back to the investor's legal assets.
However, third-party currency exchange is essentially a method of substitution, where the final investment funds come from the intermediary's USD funds, which are not actually the same funds as the domestic funds legally obtained by the investor.
A few years ago, the USCIS strictly questioned application materials involving third-party currency exchange, but in recent years, it has been relatively lenient, often approving them without issue. Since the beginning of this year, we have learned from major partner law firms that the USCIS has returned to its old ways, issuing multiple RFE letters regarding this method of currency exchange. The key point of the RFE is precisely that the investment funds and the domestic RMB are not the same funds, thus requiring specific proof of the legality of the third-party funds.
Currently, the requirements in the RFE letters issued by the USCIS differ slightly depending on whether the third party is an individual or an organization. However, they all revolve around the focus of proving the legality of the source of funds, with the following two points requiring attention:
1) If the third party is an individual: This includes, but is not limited to, providing proof of income, tax payment certificates, bank statements, and other evidence that they have the ability to legally obtain the full amount of USD;
2) If the third party is an organization: Generally a corporate entity, this includes, but is not limited to, providing a business license, financial reports or audits, corporate tax payment certificates, a board resolution agreeing to the currency exchange, bank records, etc.
With the increasingly strict foreign exchange controls in mainland China today, the difficulty and time required to transfer large sums of money overseas are greater. On the surface, third-party currency exchange does indeed save significant costs and time. With the April 28th deadline for the act approaching, some intermediaries and even lawyers have encouraged investors to use this method to complete their investments. Little do they know, the risks are very high, and they face the challenge of being questioned and further investigated by the USCIS. Investors should consider this cautiously.