EB-5 Fund Administration: A Service that Aligns with the Reform and Integrity Act of 2022 and More

03.21.24 | Education

EB-5 Fund Administration: A Service that Aligns with the Reform and Integrity Act of 2022 and More

By Chris LeBeau | Manager – EB-5 Fund Administration, Baker Tilly

Regional Center Business Journal Spring 2024 Edition Sneak Peak

The EB-5 Immigrant Investor Program, administered by the United States Citizenship and Immigration Services (“USCIS”), offers foreign investors a pathway to obtain a U.S. Green Card by investing in job-creating projects. Historically, an absence of oversight has created an opportunity for some projects to misuse funds, leading to fraud, financial losses, and failure to achieve immigration goals. Now that the Reform and Integrity Act of 2022 (“RIA”) has mandated fund administration or independent audits, investors exploring opportunities within the EB-5 program are presented with a variety of fund oversight arrangements. Many of these do not provide the full benefit that experienced fund administrators can provide in ensuring compliance, transparency, and effective management. This article delves into the specifics of EB-5 fund administration, outlining key considerations and the role fund administrators can play in supporting successful EB-5 projects in addition to compliance with the RIA. It will also describe best practices based on my extensive experience in fund administration.

Fund Administrator Functions: Navigating the Landscape of Investment Services

While relatively new to EB-5, fund administrators have long provided independent outsourced services to investment funds. Outsourcing fund administration provides a scalable solution, which accommodates changes in fund size and complexity, allowing fund managers to focus on core investment activities while leaving administrative tasks to professionals. As the keeper of official books and records, fund administrators play a crucial role in the financial ecosystem, providing essential services to investment funds, asset managers, and other financial institutions. Fund administration involves a range of services that support the efficient operation and compliance of investment funds. These services include valuation, financial reporting, compliance and regulatory support, transfer agency services, and risk management.

The accurate valuation of assets in a fund is vital for regulatory compliance and for investors so that they are aware of the current value of their investment. Regular and transparent financial reporting is crucial for investors and regulatory bodies. Fund administrators will prepare financial statements and reports that provide a comprehensive overview of a fund’s performance. These reports provide data that is used to make informed decisions and aid in optimizing project outcomes.

Compliance and regulatory support requires expertise with ever-changing regulations and is a complex task. However, fund administrators can assist with navigating the regulatory landscape, ensuring funds adhere to all relevant rules and requirements.

Transfer agency services consist of maintaining an investor’s financial records and tracking each investor’s account balance. Therefore, the administrator will handle investor transactions such as subscriptions and redemptions. The administrator will also assist with managing communication with investors and maintaining accurate records; one such record being the shareholder register.

Risk management is provided in multiple ways, and it is vital to identify and mitigate potential risks to protect investors and maintain fund stability. Implementing robust risk management frameworks and controls helps to mitigate risk. One such control is to screen investors and service providers both when onboarding the fund to the administrator’s platform and on an ongoing basis. Another way to mitigate risk is to file suspicious activity reports as they assist in the prevention of fraud perpetrated by bad actors. With third-party fund administrators in place, in addition to other controls and safeguards, fraud has a better chance of being detected, if not fully prevented.

Administrators also have views into best operational practices, having the luxury of seeing many funds operate, and may be able to provide some guidance, if needed, to the fund’s management regarding any decisions needed to be made on behalf of the fund. When considering risk management in specific EB-5 terms, like any investment, EB-5 projects face risks that can impact investor returns and immigration outcomes. It is key that a fund’s chosen EB-5 fund administrator employs robust risk management strategies to identify, assess, and mitigate potential challenges.

Statutory Compliance: Meeting EB-5 Fund Administration Requirements as Outlined in the RIA

EB-5 investors invest in a “new commercial enterprise” or NCE, which is typically organized as a fund that pools investors’ contributions and reinvests them in debt or equity of a “job-creating entity” or JCE. Traditionally, EB-5 funds have used fund administrators only occasionally and only in response to investors’ desires to have an independent party in place to monitor, account for, and report on their investment. However, the RIA now requires an EB-5 fund to use a fund administrator, unless it engages an independent auditor to conduct annual financial audits in accordance with Generally Accepted Auditing Standards and provides the audit results to the Secretary of the Department of Homeland Security (parent agency of USCIS) and all fund investors. The RIA specifically requires the administrator to be independent of the new commercial enterprise, the regional center, the job creating entity, and the manager of the NCE, as well as needing to be licensed, active and in good standing as a CPA, attorney, or broker-dealer [1].

This article will not discuss the RIA’s provision of an independent audit as an alternative to fund administration, other than to note that audits by their nature can only detect misuse of funds after the fact. Audits cannot prevent fraud and may not even detect fraud when conducted by concerted efforts of skillful perpetrators. This article focuses on fund administration as an oversight regime that is likely to be effective in preventing fraud and provides a broader range of compliance and support services than an audit can.

A licensed, active, CPA can provide multiple benefits by acting as an administrator. CPAs are highly trained professionals with a deep understanding of accounting principles, tax laws, and financial regulations. CPAs stay up to date with the latest changes in the financial landscape, ensuring that you receive accurate and timely advice to assist with making informed decisions. Outsourcing financial tasks to a CPA allows individuals and businesses to focus on their core activities, thereby saving time and resources while ensuring financial matters are handled by a qualified professional.

CPAs can help analyze financial statements, providing a clear understanding of the fund’s financial health, which can be crucial for businesses in making strategic decisions, securing financing, or attracting investors. CPAs can perform compilations of financial statements, which is essential for EB-5 funds that need to provide financial information to investors or regulatory authorities. CPAs help identify financial risks and implement risk management strategies, which is crucial for funds aiming to protect their assets and ensure financial stability.

Lastly, and not to be overlooked, CPAs are bound by a strict code of professional ethics. This ensures that they maintain the highest standards of integrity, objectivity, and confidentiality when handling your financial matters. In summary, working with a CPA can provide expertise, financial guidance, risk mitigation, and peace of mind for both the fund and its investors.

The RIA also requires the administrator to provide investors with periodic reporting on the history of their investment, specifically noting a minimum 5-year period beginning on the last day of the fiscal year in which any transactions occurred – essentially for the life of the fund, which would be typical practice for any type of fund under fund administration. To quote the RIA, the fund administrator “shall periodically provide each alien investor with information about the activity of the account in which the investor’s capital investment is held, including— (aa) the name and location of the bank or financial institution at which the account is maintained; ‘(bb) the history of the account; and (cc) any additional information required by the Secretary; and (VII) shall make and preserve, during the 5-year period beginning on the last day of the Federal fiscal year in which any transactions occurred, books, ledgers, records, and other documentation necessary to comply with this clause, which shall be provided to the Secretary upon request.” [2]

EB-5 Fund Administration Best Practices: Avoid Limited Services and Ensure Ongoing Due Diligence

To properly align with the RIA, administrators should avoid providing limited services, such as ending administration services upon the completion of the final draw request or its final disbursement to the Job Creating Entity, essentially taking the singular role of co-signatory. This limited service doesn’t appear to align with the RIA’s requirement for periodic reporting and would not fit into classification of typical fund administration. What this limited service does do, is give EB-5 investors a false sense of protection from potential fraud. Fund administration is typically carried out from the launch of the fund until the formal windup/liquidation of the fund – the entire life cycle. To end services prior to the completion of the fund’s life cycle creates risk for the investors as the independent party is now removed from the accounting and reporting aspect of their investment. To paint a clearer picture, if a fund administrator was to back away from the fund upon the completion of the final draw request, who are the investors then relying on to perform the ongoing accounting, provide them with the financial reporting related to their investment, to monitor bank accounts and transactions, to co-sign payments, to appropriately calculate and distribute interest payments, and to complete payments related to return of capital? If the independent fund administrator is removed prior to the orderly windup of the fund, an opportunity is then created for any potential bad actors to fraudulently move money to accounts unrelated to the investors or the project.

A critical duty for a fund administrator is to carry out initial and ongoing due diligence on investors and service providers to the fund. Despite an extensive source of funds exercise being completed prior to onboarding investors, there is still a need to complete ongoing screenings to assist the manager with mitigating any risk associated with investors, or service providers, that may turn up on a sanctions list during the life of the fund. The intention here is to prevent returning funds to an individual noted on a sanctions list.

The RIA specifically allows the Secretary of Homeland Security (and by extension USCIS) to expand the fund administrator’s reporting responsibility to “any information required by the Secretary.” This opens the door to further regulation that could require additional oversight by the fund administrator.

Meeting Compliance Requirements: Document Management in EB-5 Fund Administration

As the RIA requires fund administrators to preserve books and records (document storage) for a minimum of five years, it is crucial that the administrator securely stores all fund-related documents in an orderly fashion, which will allow them the ability to respond in a timely manner should a regulator request documentation from the fund. As an example, when USCIS audits regional centers, having an organized and comprehensive set of documents related to all NCE transactions will provide assurance to USCIS officials that the funds are being monitored according to best practices. These records will also be crucial to investors’ I-829 applications for unconditional U.S. residency at the end of the investment cycle.

Handling the documentation and record-keeping for each EB-5 investor is a complex task. Fund administrators must maintain accurate records of investors’ capital contributions, immigration documentation, and compliance-related materials. Utilizing digital platforms for document storage and management enhances efficiency and accessibility. Secure, cloud-based systems facilitate streamlined communication and collaboration among project stakeholders. For fund administrators, it is key to have a secure, online portal that can be used to safely share and store documentation.

Administering Separate Accounts in Accordance with the RIA for EB-5 Projects

The RIA notes that the fund administrator “shall monitor and track any transfer of amounts from the separate account; shall serve as a cosignatory on all separate accounts; before any transfer of amounts from a separate account, shall—verify that the transfer complies with all governing documents, including organizational, operational, and investment documents; and approve such transfer with a written or electronic signature.” [3] As this cosignatory function is critical for EB-5 projects, administrators need to carefully oversee the proper release of funds based on predetermined milestones, ensuring compliance with USCIS regulations. Administrators should work closely with client banks to ensure all parties adhere to escrow agreements that may be in place and ensure that the release of funds are processed correctly and efficiently, in addition to storing all supporting documentation for reporting purposes.

Enhanced Reporting Standards: Providing Accurate I-956G Annual Statements in EB-5 Fund Administration

While the RIA does not require fund administrators to track ongoing job creation, analyzing and reporting on ongoing job creation can provide significant advantages. EB-5 job creation is typically derived through input-output economic modeling reports prepared by experienced EB-5 economists. As the project progresses, the fund administrator can collect construction draw requests and project expense ledgers for use in calculating to-date jobs analysis. Working directly with the fund administrator, the economist can properly line up expenditures to their proper industry code multipliers and then apply the appropriate deflation calculation to determine jobs. This collaboration between the fund administrator and economist provides added benefit to the NCE manager and investors that job creation milestones are being met. Many EB-5 funds continue to bring in investors after job creation has commenced through early investors and bridge financing. An independent report on jobs already created would provide important information to potential investors. Also, the regional center benefits from this real time job creation analysis as annual I-956G reporting requires to-date job creation analysis. The fund administrator can store these frequent jobs updates and provide them as needed by all parties.

Adapting to Regulatory Changes: Ensuring Compliance and Meeting Future Demands in EB-5 Fund Administration

Users of financing through the EB-5 program must adhere to strict regulatory requirements to maintain eligibility for investors seeking permanent residency. Changes to these requirements in recent years have affected project structures and compliance requirements, and there is a good chance that further regulatory changes will come. As fund administrators play a pivotal role in ensuring compliance with USCIS regulations, regional center requirements, and securities laws, they must stay abreast of regulatory updates and guide projects through any necessary adjustments. While the industry waits for USCIS to provide more specific guidance on their interpretation of RIA and its impacts on EB-5 funds, it is critical for NCE managers and regional centers to work with a fund administrator that is able to keep up with regulatory changes, not only to provide ongoing guidance but also to be prepared to meet increased fund oversight that USCIS policy or future action by Congress may impose. For example, a potential update to policy could include a requirement that both a fund administrator as well as an independent audit are necessary for compliance, which is commonplace in typical investment funds. Working with a fund administrator that has extensive experience with audits would provide an advantage to staying in compliance with this potential change.

EB-5 Success: Compliance, Transparency, Future-Readiness

In the complex landscape of the EB-5 Immigrant Investor Program, effective fund administration is paramount for the success of projects and the satisfaction of investors. With their expertise in compliance, transparency, and leveraging technology, EB-5 fund administrators will contribute significantly to the overall integrity and success of the program, fostering investor confidence and supporting economic development initiatives in the United States. They can also play a role in affording EB‑5 investors the type of safeguards private fund investors outside of EB-5 have long demanded. Investors and managers in the EB-5 space should evaluate the service level being offered by fund administrators not only to ensure that service levels satisfy the RIA, but also minimize risks, inspire investor confidence, maintain good investor relations and help “future proof” the project against the likelihood of even stricter regulatory requirements.


[1]        See the EB-5 Reform and Integrity Act of 2022, Div. BB of the Consolidated Appropriations Act of 2022, Pub. L. 117-103, 136 Stat. 49 (March 15, 2022), Q, iv, I-II https://www.govinfo.gov/content/pkg/PLAW-117publ103/pdf/PLAW-117publ103.pdf

[2]        See the EB-5 Reform and Integrity Act of 2022, Div. BB of the Consolidated Appropriations Act of 2022, Pub. L. 117-103, 136 Stat. 49 (March 15, 2022), Q, iv, VI https://www.govinfo.gov/content/pkg/PLAW-117publ103/pdf/PLAW-117publ103.pdf

[3]        See the EB-5 Reform and Integrity Act of 2022, Div. BB of the Consolidated Appropriations Act of 2022, Pub. L. 117-103, 136 Stat. 49 (March 15, 2022), Q, iv, III-V https://www.govinfo.gov/content/pkg/PLAW-117publ103/pdf/PLAW-117publ103.pdf

This is a member insight and the views of the author(s) are their own and do not necessarily reflect the views or position of IIUSA.

Chris LeBeau is originally from Springfield, Massachusetts and is a manager on Baker Tilly’s Development and Community Advisory’s Capital Formation team. He manages the EB-5 fund administration team.

Chris has over 20 years of experience in the financial services industry including time previously spent at firms such as Goldman Sachs, BNY Mellon, Maples Group, Barings and Apex Group. Most recently, Chris served as the Head of Funds (USA) for Bolder Group.

Chris held increasingly senior positions throughout his career, consisting of roles within investor services, fund accounting and fund governance. Chris, while previously a resident of the Cayman Islands, served as an independent director for several years on a wide range of investment funds, including multi-manager funds, hedge funds, private equity funds, unit trusts and segregated portfolio companies.

Chris is an active CPA with a Master of Business Administration from the University of Massachusetts and a Bachelor of Science in Business Administration from Western New England University. In addition, Chris holds the Accredited Director designation granted by the Institute of Chartered Secretaries of Canada and is a member of the AICPA.


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