An escrow account is used to give the investor the peace of mind that a neutral party will hold the funds pending a certain outcome that is positive for the investor. This outcome may be the investor's I-526 approval. You do not need to transfer the capital into an escrow account when evaluating the investor's assets. Certifications of assets in current accounts in a local bank will not work. It is best to place capital on escrow or in the NCE's bank account.
In order to qualify for EB-5, to be considered as having invested or in the process of investing, the capital must be committed to the new commercial enterprise. One acceptable way to show this is to transfer the funds to the NCE''s bank account. Another acceptable way is for the investor to deposit the funds into an escrow account under the terms of an escrow agreement. The terms of the agreement must include an automatic transfer provision such that when the I-526 petition is approved, the funds automatically are transferred from the escrow account to the NCE''s bank account to be used in the investment. There really is no other way to do this. Certifications of assets in a local bank account will not work, unless it is an escrow account with a clear escrow agreement for EB-5 purposes.
Philip H Teplen
Clearly escrow accounts are best, both for business and immigration.
Placing investment funds in an escrow account provides investors with a "wait and see" time period in which, if the investor''s I-526 petition is denied, or if the project fails, or if the government steps in, as in the Chicago Convention Center case, the investor can receive his or her $500,000 principal investment directly from the bank or firm managing the escrow account, and usually within a matter of days or weeks, rather than waiting for the EB-5 project manager to return capital that may have been already been invested in the project. If investor''s principal is placed in the project prior to I-526 approval, the subscription agreement usually requires the project manager only to return investor principal according to "commercially reasonable methods", or upon finding a replacement investor, and this process can take months. Unfortunately, due to the uncharacteristically long USCIS I-526 processing times in recent months, often exceeding one year, most EB-5 projects simply cannot afford to escrow funds. If they did, the business deal would likely already be stale by the time the money exits the escrow account. Direct investment projects, however, still often offer escrow account protection to investors. This is because direct investment projects are usually approved in 6 months or less.
There are numerous benefits to using an escrow account in the EB-5 context. For example, it allows all sides some comfort knowing that a neutral party will hold the funds until an agreed upon time when it is released into the project. In many cases, the developer is anxious to have the funds released right away since it would help the EB-5 project to move along. In this case, having no escrow would be beneficial to the developer. On the other hand, a non-escrow deal is hard to market to investors. Generally, investors tend to prefer that the funds are first transferred into escrow and that the release mechanism is contingent upon the approval of the investor''s I-526 application. As relates to the issue of where the funds should reside while evaluating the investor''s source and path of funds, ideally, no funds should be transferred into a U.S. escrow account until the evaluation is complete. This may strategically be difficult to follow in some cases where the investor''s country of origin has annual transfer restrictions.
Usually, escrow account is used to give the investors a peace of mind of the security of their invested capital before they obtain their I-526 approval. If you are only at the stage of evaluating the eligibility of an investor, or trying to trace back his/her source of funds, the investor even does not need to move his/her funds to the escrow. Tracing source of funds can involve tremendous work. Though I am not clear why you need to provide the certification of assets from a local bank, the certification/bank statements alone may not suffice in order to prove the investor''s legal source of funds. Your questions indicate that you may have not known the basic procedures and legal requirements of EB-5, I would suggest you contact an EB-5 attorney in order to proceed correctly.
The benefit is all about a good practice. It all depends on how you have structured your project and the subscription agreement. Usually, the investment fund is not really yours until the I-526 Petition is approved. Then, it makes sense to keep it in escrow until the Petition is approved. It would make it easier and more practical to refund the investor''s money if I-526 is not approved.