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PRXY Banking Partners and considering Escrow

This article provides an overview of EB-5 specialized Banks, PRXY Banking Partners, and things to consider as you set up your banking with or without escrow. 

Do I need a banking partner that specializes in EB-5?

Our answer is yes! Working with a banking partner experienced in EB-5 investments provides critical advantages for your project including enhanced trust, simplified fund processing, and protection against compliance risks. Here’s a short list of how a specialized banking partner can support:

  • Understanding USCIS requirements for documenting the lawful source and path of investment funds. They provide: individual investor sub-accounts for clear capital tracking, transaction-level documentation, and auditable fund flow records that support I-526E and I-829 petitions.
  • Maintaining Correct Subscription Protocols between the Issuer and Investors. Escrow banks add an additional layer of contract review to ensure that your investor’s Subscription package is properly executed and all subscription documents are collected, including any Side Letters/Waivers.. 
  • Establishing escrow account structures that hold investor capital until specific milestones and or release conditions are met (such as proof of I-526E filing). This protection increases investor confidence and strengthens your offering's credibility.
  • Providing tried-and-true processes to manage investors across different countries and timezones. 
  • Signaling legitimacy to potential investors by having a known industry partner by your side. 
  • Consolidating EB5 capital and administrative fees into a single wire transfer as opposed to requiring investors to split their wires into multiple amounts destined for different bank accounts. 
  • Expertise in OFAC clearances,  to ensure that you don’t admit a member of a terrorist group into your NCE, and to clear OFAC hits quickly in the event your investor has the same name as a member of a terrorist group.

Does PRXY have recommended banking partners?

Yes. We have a carefully selected list of banking partners that know the EB-5 ropes and have proven they are easy to work with – a huge benefit when you’re aiming to move funds quickly when the time comes. 

There’s also a big financial benefit to using a partner bank – PRXY Onboarding fees are discounted by 50% if you choose an in-network bank. See here for an overview: What does PRXY cost?

Current PRXY Banking partners are:

  • Customers Bank
  • Flagstar Bank
  • Metropolitan Commercial Bank
  • VeraBank

Want to talk through banking partners and get an intro? Find a time to chat with us here.

Should I use Escrow for my project?

In short, we recommend Escrow to our clients. An escrow account streamlines and protects your compliance efforts throughout the project’s fund lifecycle, keeping you on the right track the entire way. 

The last thing any developer wants to learn, is that one of their investors is legally ineligible to contribute to your project — especially if this is discovered after the money has already been received or even spent on the project.

Putting an EB-5 escrow bank in the process of receiving foreign investor contributions can help prevent this from happening, and it’s one of the reasons why PRXY highly recommends having this critical service in place.

Pros 

Cons 
  • Subscription Compliance
  • Added KYC/AML/OFAC due diligence
  • Good for “irregular” investment terms such as partial investment amounts, side letters, or other deal specific facts.
  • It’s easier for investors to wire their investment principal and administrative fee to a single account.
  • Escrow is an EB5 industry recognized standard and is commercially standard across private equity.
  • There is no cost to the project. 
  • An escrow agreement must be drafted, negotiated and signed, adding extra time to the initial process.
  • Having escrow adds an additional layer of communication and process when you want to move capital, although PRXY has streamlined this process with its Partner Banks. 
  • A few escrow functions can feel duplicative with a fund administrator. 

If you haven’t decided on an escrow bank, we’d be happy to introduce you to one of our specialized EB-5 banking partners, who have templates and processes in place to make using escrow easy and fast, taking into account the unique particulars of EB-5. Find a time to speak with us here

What process can I expect if I choose to use Escrow? How do I break Escrow?

If you have decided to use Escrow, add PRXY Fund Services as a cosigner on your account. Your bank will add PRXY to the escrow agreement, allowing us to add our co-signature when it’s time to release funds from escrow into the NCE EB-5 bank account. 

For more information on the process to move investor funds out of escrow and into the NCE, please see Breaking Escrow in advance of an EB-5 Draw.  

What can I expect if I choose not to use Escrow?

If you have decided not to use Escrow, you will still need to collect your Investor’s EB-5 funds in a “separate account” (as defined by the EB-5 Reform and Integrity Act).  You will need to add PRXY Fund Services as a cosigner on your NCE’s “separate” bank account. Your bank will add PRXY to the bank account documents, allowing us to approve disbursements when it’s time to release funds from the NCE’s separate bank account into the NCE’s operating bank account or to the JCE’s bank account. 

Note: Electing not to use an escrow account will not typically get funds into your project any faster. The typical escrow release conditions have been put in place to bolster investor confidence and are viewed as “industry standard” by investors and migration agents. In deals without escrow, the same or similar release conditions are usually woven into the NCE’s offering documents in other ways.

Additional Guidance

Reach out to us at Support@prxyco.com for any questions about escrow.