In the EB-5 Immigrant Investor Program, escrow is commonly used as a financial safeguard to protect both investors and project developers during the initial stages of the immigration process. An escrow account holds an investor’s funds with a neutral third party, most often a bank or licensed escrow agent, until specific conditions are met.
In EB-5, these conditions usually relate to the investor’s I-526E petition being filed or approved, or certain project milestones being satisfied. Although the EB-5 regulations do not mandate escrow in every situation, the practice has become a standard risk-management tool in many regional center projects because it promotes transparency and accountability.
Is Escrow Required in EB-5?
Escrow is not legally required under EB-5 Reform and Integrity Act (RIA) or USCIS regulations. Instead, it is an optional structure that projects may use to give investors additional assurance that their funds will be managed properly. Historically, many EB-5 projects used a “release upon I-526 approval” escrow model, meaning the investor’s capital was not released to the project until USCIS approved the investor’s petition. However, in recent years, USCIS has emphasized that EB-5 projects must show “actual capital at risk,” which has influenced many projects to release funds earlier, often upon I-526E filing rather than approval.
Even with these changes, escrow remains a common mechanism as long as the release conditions do not prevent the investment from being placed at risk in accordance with EB-5 rules. Therefore, escrow is widely used but not universally required, and its structure must align with the specific needs of the project and immigration requirements.
How Escrow Protects EB-5 Investors
Escrow offers several layers of protection to EB-5 investors. First, it prevents premature or unauthorized use of investor capital by ensuring that the funds are not released until predetermined, verifiable conditions are met. This reduces the risk of fraud or misappropriation, particularly in complex development projects where oversight is critical.
Second, escrow provides clarity because investors know exactly when and why their funds will be released, which enhances trust and transparency. Third, escrow can shield investors financially if their immigration petitions are denied. Finally, escrow contributes to overall compliance by ensuring proper handling of funds, which can support both the investor’s case and the integrity of the project.
Investors considering an EB-5 project will want to make sure that project utilizes an escrow account and will want to make sure that they clearly understand the terms of the terms of the escrow agreement.
