EB5 Investors Magazine Volume 1 Issue 1 | Page 31

X 2b
1 potential for use as a money laundering tool . Some have gone as far as to call the system “ financial terrorism .” This has obscured the reality of the system ’ s practical and efficient uses . In some regions , hawala is the only method of transfer available and it would be inaccurate to label hawala brokers as financial terrorists . A World Bank report on hawala in Afghanistan praises the systems self-regulation and reported that over $ 200 million of transfers were made to Afghanistan from NGOs at the outset of the war with the Taliban , without which these organizations efforts would have been crippled . The U . S . Treasury has frequently stated hawala in itself is not illegal . In fact , without hawala there can be no EB-5 investors from Iran , or outward money transfers made for any purpose . The act of laundering money is not akin to the method or system of moving money ; it is the intent of the parties involved that makes it money laundering . For EB-5 purposes , practitioners should view hawala in the same light as a wire transfer . Clients should be advised to obtain details of the value of funds being transferred , the originating bank , recipient bank and the facilitators in between . Such documentation is accepted by USCIS as supporting evidence for the lawful source of funds and money trail .
“ Practitioners should stay abreast of current affairs in the Middle East so they can collect supporting articles for gaps in the money trail , should they exist .”
Political instability is rarely lonely and is almost always accompanied by financial instability . Currency fluctuations in these new beacons of democracy , as well as those being affected by sanctions , has resulted in a rise in demand for both dollars and gold in the Middle East . Iran has certainly felt the sting of sanctions over the past 24 months . Its currency , the rial , has seen a 75 % drop in value against the U . S . dollar . Consequently , many investors have sought to hedge against further losses by buying dollars and gold . With government crackdowns on “ dollar hoarders ,” most have resorted to storing large amounts of cash or gold in safe deposit boxes in their homes . This source of funds fiasco is a reality that EB-5 practitioners must face when dealing with Iranian investors . There are many news articles that document the economic instability in the region . Practitioners should stay abreast of current affairs in the Middle East so they can collect supporting articles for gaps in the money trail , should they exist . In the case of Iran , international news outlets have reported on the currency devaluation , government crackdown on hawala brokers and rush on the banks . As long as a reasonable legal nexus exists between the funds and the investor , then there exists a lawful source of funds .
The figure shows how hawala works : ( 1 ) A customer ( A , left-hand side ) approaches a hawala broker ( X ) in one city and gives a sum of money ( red arrow ) that is to be transferred to a recipient ( B , right-hand side ) in another , usually foreign , city . Along with the money , he usually specifies something like a password that will lead to the money being paid out ( blue arrows ). ( 2b ) The hawala broker X calls another hawala broker M in the recipient ’ s city , and informs M about the agreed password , or gives other disposition instructions of the funds . Then , the intended recipient ( B ), who also has been informed by A about the password ( 2a ), now approaches M and tells him the agreed password ( 3a ). If the password is correct , then M releases the transferred sum to B ( 3b ), usually minus a small commission . X now basically owes M the money that M had paid out to B ; thus M has to trust X ’ s promise to settle the debt at a later date .
By the nature of the program , EB-5 investors hail from countries with some sort of instability , whether economic , political or social . There are no “ easy ” EB-5s . The Arab Spring has turned the Middle East into a burgeoning new market for EB-5 stakeholders . Developing a channel for EB-5 investments from the Middle East will mitigate the inherent risk of relying on a single pool of investors . Growth opportunities for the EB-5 Program must come from responding to markets that show a demand for the EB-5 visa . Therefore , becoming familiar with the foreign export controls of the Middle East ( the hawala financial system , U . S . sanctions and OFAC regulations ) will ensure the success of EB-5 stakeholders as they respond to this growing demand and access the new market that is the Middle East .
Reza Rahbaran is the managing attorney at the Law Offices of Rahbaran & Associates . Reza ’ s main area of practice is business immigration under the EB-5 Program and the related U . S . trade sanctions . He has advised Regional Centers on developing new projects that qualify for EB-5 investments in multiple industries , including the creation of new Regional Centers and existing Regional Centers . He has implemented internal compliance practices for Regional Centers that address ongoing immigration and sanctions regulations . He also advises foreign nationals on immigration under the EB-5 Regional Center Program with particular focus on countries that fall under U . S . trade sanctions regulations and currency restrictions . Reza has been featured regularly on television networks as an EB-5 and U . S . sanctions expert and has written articles on the sanctions and the EB-5 Program , as well as serving on the D . C . Bar faculty .
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