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The Triple Trustee Transfer: A Potential Solution to Prevent the Illegal Diversion of EB-5 Investments

NES Financial offers a series of articles written by industry experts addressing current key issues in the EB-5 industry. This article by Mariza McKee and Kamille CuryloThe Triple Trustee Transfer: A Potential Solution to Prevent the Illegal Diversion of EB-5 Investments, offers a third-party approach in addressing the evolving EB-5 transactional market.

In recent years, the EB-5 industry has been plagued by high-profile cases of fraud and the illegal diversion of investments. Some in the industry have proactively self-regulated and adopted best practices such as using independent third party trustees. Those that don’t might find themselves compelled to by previously proposed legislative bills.

One example, Section (P) of H.R. 5992, introduced in early October 2016 in the House of Representatives, includes provisions that would require each new commercial enterprise to create separate accounts to hold EB-5 investments at third-party banks or other financial institutions. From there, only independent authorized signatories located at the banks and financial institutions would need to provide written consent prior to the transfer of EB-5 investment funds.

The Triple Trustee Transfer: A Potential Solution to Prevent the Illegal Diversion of EB-5 Investments provides a “triple trustee transfer” mechanism that highlights three critical stages in the EB-5 process in which the use of independent banks or financial institutions would be judicious. It also discusses:

  • Important provisions from previous EB-5 legislative proposals
  • Context on the looming risk of illegal diversions of EB-5 funds
  • Analysis of a novel “triple trustee transfer” solution
  • An in-depth hypothetical of the three-pronged mechanism in the EB-5 lifecycle

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To read The Triple Trustee Transfer: A Potential Solution to Prevent the Illegal Diversion of EB-5 Investments, download the full eBook, Insights from Experts: Medallion Partners Cover Hot Industry Topics.

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