EB5 INVESTORS MAGAZINE EB5INVESTORS . COM
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Another problematic situation may be created when the attorney accepts clients ’ investment funds into the trust account for the purchase of a business , transfer to the investment enterprise , or to be held to cover the Regional Center ’ s fees . The language of the commentary on the amended MR 1.16 indicates the lawyer ’ s obligation to inquire into the source of the wire and conduct due diligence to exclude the facilitation of money laundering using the IOLTA account .
The heightened requirements for the attorney ’ s due diligence suggest that the simple intake questionnaire may no longer be sufficient to address the AML concerns at the assessment of the legality of funds stage . Comment 2 to MR 1.16 provides basic guidance on “ red flags ” that the attorney should be able to detect during representation . Attorneys are advised to analyze the following factors :
· the identity of the client ( and if the client is an entity , who are the beneficiaries );
· the lawyer ’ s experience and familiarity with the client
· the nature of the requested legal services
· whether the funds come from a jurisdiction that is considered at high risk for money laundering or terrorist financing
· the identities of those depositing into or receiving funds from the lawyer ’ s client trust account , or any other accounts in which client funds are held . vi
Apparently , analyzing the suggested factors takes attorneys ’ efforts outside the scope of plain fact-gathering and evokes a need for substantive legal analysis . Subsequently , this means longer document-gathering time and more extensive evidentiary support than typical EB-5 cases would require prior to the Amendment .
How to Reduce Professional Liability Exposure ?
The amendment to MR 1.16 suggests that immigration lawyers most likely apply the first round of due diligence efforts at the commencement of representation . This probably means that the EB-5 practitioners routinely handling clients ’ funds or documenting the source of capital coming from abroad might need to establish internal
Know Your Client ( KYC ) protocols for their offices , including verifying the client ’ s identity and understanding the client ’ s background .
Besides the approach as simple as putting the client ’ s name into a search engine and reviewing the results produced by the open sources , multiple resources that are not necessarily a standard tool in the practice of immigration law are available to EB-5 attorneys willing to conduct proper due diligence . For example , the U . S . Department of Treasury ’ s Specially Designated Nationals and Blocked Persons List is a helpful resource to assist lawyers in conducting their inquiry and assessment , which is comprised of “ individuals and companies owned or controlled by , or acting for or on behalf of , targeted countries .” It also lists individuals , groups , and entities , such as terrorists and narcotics traffickers designated under programs that are not country-specific .” vii
In addition , the U . S . Department of Treasury issued a guidance viii on detecting money laundering activities that discusses signs of involvement of “ black market ” currency exchangers , shell companies , and
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