In the context of international finance, the movement of funds across borders is often subject to stringent regulations, particularly regarding foreign currency control. This issue becomes particularly pertinent for EB-5 visa investors from countries such as China, India and Vietnam, where laws governing the transfer of funds can vary significantly.
A key concern arises when these investors consider utilizing third-party exchangers for their transactions. This practice raises questions about potential violations of local regulations and the legality of informal value transfer systems( IVTS). As these petitioners navigate the complexities of compliance, understanding the implications of their chosen methods for fund transfers is crucial for their EB-5 application.
TRADITIONAL ISSUES OF SWAP TRANSFER Most EB-5 investors originate from China, India, and Vietnam, collectively accounting for approximately 88 % of all EB-5 visas issued in Fiscal Year 2024, according to the data published by the U. S. Department of State. These three countries impose strict currency exchange or remittance controls that significantly restrict the movement of foreign currency into and out of their jurisdictions. As a result, EB-5 investors from these regions frequently face substantial challenges in transferring the required investment funds to the United States.
In China, the State Administration of Foreign Exchange( SAFE) limits everyone to an annual remittance cap of USD $ 50,000. In India, under the Liberalized Remittance Scheme( LRS), resident individuals may remit up to $ 250,000 per fiscal year, defined as April 1 through March 31. In Vietnam, similar regulatory restrictions apply, creating comparable difficulties for EB-5 participants. Due to these constraints, many EB-5 investors from these countries are compelled to use alternative methods to transfer their investment capital abroad. One of the most employed strategies is the use of“ currency swap” arrangements, which means funds are exchanged domestically while simultaneously receiving equivalent amounts in U. S. dollars offshore.
The use of“ swap transfers” inevitably disrupts the documented path of funds
( POF), which is a critical requirement in EB-5 adjudications. In a typical swap transfer, the investor deposits funds in their local currency into a bank account designated by a third party, which may be an individual, company, or licensed money service business. The third party then remits from his overseas account an equivalent amount in U. S. dollars to the investor’ s foreign account, often outside the investor’ s country of origin. Nevertheless, under EB-5 regulations and long-standing USCIS precedent decisions— particularly Matter of Soffici and Matter of Izummi— investors must clearly demonstrate both a lawful source of funds and a documented path of funds. Petitioners must provide a complete and traceable documentation trail showing how the funds moved from the investor to the U. S. investment.
Swap transfer has created two significant challenges: Break in POFs and lawful source of thirdparty’ s funds( SOF). The US Citizenship and Immigration Services( USCIS) frequently issues Requests for Evidence( RFEs) or Notices of Intent to Deny( NOIDs) to question the lawful source of the U. S. dollars provided by the third-party exchanger. However, recent decisions from the Federal District Courts— including Battineni v. Mayorkas, Zhou v. Noem, and Sun v. USCIS— have provided a glimmer of hope for EB-5 petitioners facing challenges related to documenting the lawful source of funds when third-party exchangers are involved.
These three countries impose strict currency exchange or remittance controls that significantly restrict the movement of foreign currency into and out of their jurisdictions
The use of“ swap transfers” inevitably disrupts the documented path of funds( POF), which is a critical requirement in EB-5 adjudications
DOES SWAP TRANSFER VIOLATE FOREIGN LAW? EB-5 petitioners should still be cautious and avoid becoming overly optimistic because of these recent court cases. Recently, USCIS has raised another new issue frequently in RFEs: whether the thirdparty exchanger and the holder of the designated account have acted in violation of foreign currency control regulations imposed by the EB-5 investor’ s home country. In this context, the U. S. immigration agency increasingly views currency swaps as a form of an“ informal value transfer system”( IVTS). This classification signals that the agency may scrutinize such transactions more closely, focusing not only on the lawful source and path of funds but also on whether the methods used to transfer the funds comply with applicable foreign exchange control laws.
In its most recent RFEs, USCIS questions whether the use of a swap transfer by EB-5 investors may have violated foreign exchange regulations in their home countries. In India, the RFEs state that there is potential noncompliance with the Foreign Exchange Management Act( FEMA), 1999, and LRS. In China, there is a possible violation of Article 255 of China’ s Criminal Law, which governs unauthorized foreign exchange activities. USCIS does not have jurisdiction over foreign laws. The agency only cites
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