In a very apt review of American Kleptocracy, an e-book written by journalist Casey Michel, the Los Angeles Review of Books sums up the book’s message this way: “For years, one country has acted as the world’s largest offshore paradise, attracting billions of dollars. “dollars of illicit investments directly connected to corrupt regimes, extremist networks, and the worst the world has to offer. But it is not the sand-strewn Caribbean islands, or even the classic monetary havens like Switzerland or Panama, that have even controlled “dominating global offshoring. On the other hand, the country that benefits the most is also the one that still claims to be the ethical leader of the lax global economy and the one that claims to lead the fight against the corrupt and corrupt: the United States. “
The review talks about the book examining, “just how the United States’ implosion into a center of global offshoring took place: how states like Delaware and Nevada perfected the art of the anonymous shell company, and how post-9/11 reformers watched their success usher in a new flood of illicit finance directly into the U.S.; how African despots and post-Soviet oligarchs came to dominate American coastlines, American industries, and entire cities and small towns across the American Midwest; how Nazi-era lobbyists birthed an entire industry of spin-men whitewashing trans-national crooks and despots, and how dirty money has now begun infiltrating America’s universities and think tanks and cultural centers; and how those on the front-line are trying to restore America’s legacy of anti-corruption leadership—and finally end this reign of American kleptocracy.”
In numerous other books, such as Frank Vogl’s The Enablers: How the West supports Kleptocrats and Corruption and Endanger Democracy, and Bill Browder’s Freezing Order: A True Story of Russian Money Laundering, Murder and Surviving Vladimir Putin’s Wrath, we are told about trillions of dollars of illicit wealth sloshing around in bank accounts around the world and warned about their corrupting effect on us and our democracies. It seems almost an impossibility to establish some sort of control of this thievery and the devastation it is leaving behind in those countries who have fallen victim to it. Hopes of a post-cold war, post-apartheid better world have all but disappeared as we careened into this illicit world where oligarchs, gangsters, thieves and outright crooks seem to increasingly be involved in setting up the rules by which we live.
One of the main causes of American immigration where this sea of stolen wealth is a cause for fear is the immigration of EB-5 investors. Part of the impetus for the Integrity and Reform Act passed on March 15, 2022 was to close gaps in the fight against money laundering. The fundamental regulations are contained in the Bank Secrecy Act (BSA). The main fears are identifying original financing resources and routes, blocking tax evasion attempts and monitoring general participation in illicit activities related to financing.
U. S. Citizenship and Immigration Services (USCIS) opposes the allure of illegally received budget by requiring investors to identify a valid source and investment path for any and all dollars of their investment in an EB-5 project, whether $800,000 in the case of an EB-5 project. Regional Center projects or $1,050,000 in the case of EB-5 direct investment projects. This means that each and every dollar will not be combined with a budget that cannot be proven to be clean. In other words, a single dollar combined with ill-gotten profits and then added to an EB-5 investment will taint all other EB-5 investment budgets and make them ineligible for EB-5 approval.
But that’s not all. The program also requires investors to identify a smart religion throughout the budget that will be used to pay administrative fees beyond the minimum required EB-5 investment. While this is a welcome checkpoint, it’s not necessarily as strict as it could be. For example, what is not required is for the investor to prove that all other budgets they own were legally generated. It is that even if the budget invested in an EB-5 allowance is flawless and is shown to have been received in a smart religion, such as the budget generated by the sale of a home, the investor’s circle of relatives has maintained it for many years, another budget maintained through the investor would possibly not be as clean. It is that a gangster can also enter the United States through the EB-5 program by filing this way.
For that reason some other jurisdictions involved in investor immigration have required investors to divulge all the sources of all their wealth. The EU in recent years has been increasingly regulating the “golden visa” programs of member states in this direction. They explained that this area “poses security risks, money laundering, tax evasion, financing of terrorism, corruption and infiltration of organized crime and will be incompatible with EU norms.” This standard of scrutiny is substantially more demanding than the one currently employed in America’s EB-5 world.
As Vogl in his book The Enablers points out, oligarchs, gangsters and other miscreants seeking to legitimize their illicitly obtained funds turn to a virtual army of enablers who stand ready, willing, and able to help them clean up ill begotten gains. The enablers may be bankers, lawyers, accountants, or financial advisors who are prepared to help in exchange for substantial fees investors are happy to pay to clean their money. The challenge in the EB-5 world is to identify and prevent these enablers from promoting these illicit funds to keep the program free of any efforts to launder funds that have been siphoned out of countries illegally or outright been stolen. A key role will have to be played by EB-5 attorneys whose job is to establish the legitimacy of funds, but who ought to be on the lookout not only for what is being invested in an EB-5 project, but also considering what other sources of funds clients appear to have and are using. For example, this could include scrutiny of investor funds being used to pay attorney fees and expenses in making the EB-5 investment. It could also mean broader investigation into client finances for the sake of steering clear of trouble. If those working in the EB-5 program do not undertake these measures as part of their best practices they could one day face future regulations requiring them to do so.
This can be a daunting challenge for many attorneys working in the highly competitive world of EB-5 investing. The saying “show me your friends and I’ll tell you who you are” comes to mind in this regard. Illicit finance can be challenging, but it will allow those involved in the global EB-5 program to sleep peacefully at night without the worries that come with stolen money. It will also affect the long-term legitimacy of the EB-5 program for those who paint in it, as well as for the investors themselves.