By Staff
Reid Thomas, the Chief Strategy Officer (CSO) at Ampersand Incorporated, a U.S. financial services firm, explains the role that bank deposit management plays in the pre-application process for EB-5 investors seeking a green card.
As a firm supporter of the EB-5 visa program and the Reform and Integrity Act of 2022 (RIA), Thomas emphasizes the importance of investors understanding what happens to their funds once they are wired to a U.S. bank to be invested in an EB-5 project.
“Many investors may not be familiar with the bank they send their money to. Therefore, they should learn more about the process and the institutions involved,” he says.
His dedication to legal immigration in the U.S. is deeply rooted in his own experience as an immigrant from Canada to the United States.
“I don’t have a hard-luck story like many others but I came to the U.S. as an EB-1C visa holder, being part of the executive transfer visa category under the NAFTA free trade agreement between Canada and the U.S.,” he said. “However, I share the dreams and aspirations that many U.S. immigrants and investors have. I firmly believe in legal immigration and view the EB-5 program as a great opportunity. My passion lies in helping EB-5 investors successfully obtain their green cards, create jobs, and contribute to the growth of this country. I believe in legal immigration and that the EB-5 program should be expanded.”
That’s why Thomas emphasizes the critical role that Ampersand and other deposit management providers have in ensuring fund safety for EB-5.
“We approach EB-5 banking by helping banks feel confident in accepting EB-5 deposits, which, in turn, protects EB-5 investors.”
What must EB-5 investors understand about how their funds are managed when investing in this visa?
EB-5 investors should pay attention to the banking system in the United States because it is very different from how banks work in their home countries. Most countries have relatively few banks. When you compare it to the U.S., most of those banks are state- or government-controlled institutions. However, there are no state-controlled or government-owned banks in the U.S. The government regulates how it operates and dictates procedures and standards to ensure that depositors are ultimately protected, but the government or the regulators do not operate the banks. They can have state or federal charters. As a result, there are many banks in the country.
Currently, about 8,700 depository banks, including banks and credit unions, are in the U.S. Seventy-five percent of deposits are concentrated in the top 15 banks, and the remaining 8,685 are small.
So, EB-5 investors must understand that the banks they’re dealing with in EB-5 are small and sometimes fail. However, there is a structure in the U.S. where the government will protect an investor’s funds in case of bank failures by the Federal Deposit Insurance Corporation (FDIC) by backing deposits up to a limit of $250,000 for an individual depositor.
Investors should understand this and ask their projects and regional centers about how they are protecting investors’ funds.
Are EB-5 investors aware that the U.S. government protects funds up to $250,000?
More education needs to happen. Before RIA, this was something that nobody talked about, but there were many bank failures. Fortunately, no banks in the EB-5 business until then had failed. But that changed recently with the failure of Signature Bank, a well-known bank in EB-5. When Signature failed, it set off alarms for many people. Regional centers are certainly aware of the importance of protecting their investors’ funds. However, EB-5 investors should ask the projects they’re considering investing in how their funds are protected.
Do EB-5 investors understand what happens with their money when they transfer to a U.S. bank?
The reality is that EB-5 banking in the U.S. is difficult. EB-5 touches, in many respects, all the hot buttons that a regulator would deal with. That said, EB-5 overall is relatively small. There are only 10,000 visas a year. And so, for a bank like JP Morgan or Citibank, that’s a very small opportunity for all the complexity it entails. It’s hard for them to consider entering this space. Before RIA, there were some bad actors in the EB-5 space, making many banks nervous. As a result, very few banks will accept EB-5 funds. Of the 8,700, there might be three or four who will consistently do it with any regularity, and those banks are all small.
What must the EB-5 services industry understand about the role of deposit management?
The point to all of my colleagues in regional centers and law firms is that when a bank changes its policies, it dramatically impacts the project and the legal documents created and puts the investors at risk. In EB-5, when money moves, how it moves, and where it goes is critically important from a timing and audit perspective. Changing what has been cast in stone in the original structure can be difficult and risky for investors. But there are solutions that provides flexibility to deal with changes that banks make without adversely affecting the project status, the audit trail, or other things.
ENSURING FUNDS ARE PROTECTED IN COMPLIANCE WITH FEDERAL BANKING AND EB-5 REGULATION
What is Ampersand and how does it approach the current EB-5 banking landscape?
Ampersand focuses on deposit management and aligns what depositors are looking for with what banks can offer, be it a great interest rate, safety, and protection of their deposits, or increasingly aligning with a depositor’s value. We can act as an escrow agent, which helps investors protect their funds while subscribing to projects. We also de-risk the EB-5 deposits from the banks. If banks change their policies or minds about being in EB-5, we can be flexible without negatively impacting investors or projects.
What makes Ampersand stand apart from the competition?
We separate the deposit administration from the banks themselves. We have built a network of banks or a syndicate of banks. Unlike others, who might be a single bank trying to take EB-5 deposits, we have relationships with hundreds of banks in our network. We separate ourselves by being an escrow agent, taking investor funds, and deploying them across that network.
We divide the deposits into $250,000 increments and spread them across the bank network so that the funds are always safe because the complete protection of the U.S. government backs them. We deposit $250,000 for each investor in a bank, and depending on the size of the deposit, we will use three, four, or more banks to ensure its perfect protection.
How is Ampersand helping their clients answer the fund question for the EB-5 investor?
We provide full transparency to the investor and the NCE of exactly where their funds are at all times. We have an online portal should the investor wish to log in and see that, but that continues beyond there. Once the funds are in the NCE, they must move to the Job-Creating Entity (JCE), where we can be the dual control co-signatory on the movement of the funds, which the RIA requires. Many people don’t remember that a lot of redeployment is still ongoing. With the new rules, there will be less of this, but historically, there have been many redeployments of funds from a project to a bank and then needing to be redeployed again. So, whatever funds are at a bank, we can ensure that they are protected and provide the necessary transparency and reporting.
Is there a difference between escrowing for a full EB-5 investment vs. a partial investment?
We administer the funds, whether they come in partial investment amounts or total investment amounts. It only determines how many banks we would need to spread deposits across. For us, it’s just part of our standard administration, so it doesn’t make it harder either way. Partial payment is happening increasingly. Where many investors are investing, it’s coming in partially until they accumulate the total amount. There’s no issue there; it’s compliant and OK.
Would you like to point out anything particular about the compliance required by the EB-5 visa program?
I was very involved in the design and implementation of the RIA rules. Getting this program back on a great trajectory has been fundamental. I love EB-5 because I’m an immigrant myself. What EB-5 does for families of investors around the world is to provide a great opportunity. The program should not be subject to bad actors, but it should work in the way it’s intended: keeping it safe for investors to benefit everybody. I’m very happy to see how the RIA works.