Co-Authored by: Christian Triantaphyllis – Partner at Jackson Walker & Dinesh Goel – Managing Director (Advisory Services) at LCR Capital Partners
The EB-5 regulations require investors to prove that the investment funds were “obtained through lawful means.” The goal is to thoroughly and credibly document the investor’s source of funds to the satisfaction of the USCIS officer. When analyzing source of funds documentation, the officer follows the preponderance of the evidence standard, which means determining that it is “more likely than not” that the claims in the immigrant petition are true. Therefore, under the USCIS regulations the evidentiary burden is on investor to demonstrate that the funds come from a lawful source.
In practice, USCIS requests a substantial amount of documentation to prove lawful source of funds. The process of demonstrating an investor’s lawful source of fund is complex, as the investment often consists of merging funds from various bank accounts, salaries, and investment products to complete the EB-5 investment. USCIS has also requested investors to prove lawful source of the administrative fees collected by projects. Although current EB-5 regulations do not extend the lawful source of funds requirement to the administrative fee, USCIS nonetheless requires such documentation.
In essence, the linchpin of an I-526 petition is both documenting the source of the investor’s funds, as well as the path of the funds being invested in the EB-5 project. The path of funds is the method used to document that the investor has possession of the funds and transferred the money to the project escrow in the United States. USCIS requires investors to properly document the path of funds to show that the funds arrived in the project escrow by lawful means and that the funds invested are indeed the funds documented as the source of the investment.
Because every investor is a unique individual, the way the investor accumulated his or her investment funds will be unique. Moreover, some investors have assets in excess of the investment funds, however, when documenting the EB-5 investment, it is helpful to focus on specific events that help pinpoint where the EB-5 investment comes from rather than provide evidence of all the funds ever earned.
Thus, there are myriad ways by which an investor may prove lawful source of funds for the specific amount being transferred to the project escrow account. An application must be accompanied by documentation to show the movement of funds from their origin with the investor to their current position and from the current position into escrow. The funds must be traced back to the original source. This may require multiple layers of documentation.
Because USCIS officers impose a high level of scrutiny to verify the lawfulness of investors’ source and path of funds, investors and attorneys must understand that they have to be prepared and willing to devote a substantial amount of time and effort to prepare source and path of funds documentation. These documents must be accompanied by accurate and word for word translations into English, by a professional translator, in the event the document is in a language other than English.
What is the importance of Source of Funds exercise?
The source of funds component of an EB-5 petition can turn into a giant headache for investors if they do not dedicate adequate time to compiling the documentation necessary. Not doing a thorough job of compiling evidence can cause an investor to face delays, or worse yet, a denial of their I-526 petition. If an investor receives a request from USCIS for further evidence, this can delay the whole process and can significantly push back an investor’s timeline from becoming a lawful permanent resident. Therefore, it is important for the investor to work with an immigration attorney who can assess the investor’s source of funds background before moving forward with investing the funds.
What are the various sources of funds recognised by USCIS?
The USCIS recognises several sources of funds and also recognises international, local, and cultural business and professional practices as long as the transactions are legitimate and through proper banking and financial channels. Some accepted sources of funds include:
• Employment earnings and bonuses
• Earnings from investor’s business
• Sale of business assets
• Retirement funds
• Proceeds from a real estate transaction
• Home equity loan
• Loan obtained from the investor’s business
• Loan obtained through a financial institution
• Loan obtained from a friend or family
Note: It is a best practice for an investor to receive a secured loan with personally owned collateral that is at least the value of the loan. The investor will have to document and explain the lawful source of the funds used to acquire the assets used as collateral for the loan. The money from the lender must also be from a lawful source and must be documented.
Each of these categories would be accompanied by a specific list of documents.
Can multiple sources be used for one investor application?
An EB-5 investor can have multiple sources for the EB-5 investment requirement. However, each source and transfer has to be legal and must be authenticated. If you use a lot of sources, you are giving the USCIS officer a lot of work and potentially creating more opportunities for misunderstandings and delays in documenting the lawful sources. This could be complicated, time consuming, and cumbersome. Try to keep it simple!
For this reason, once the investor has accumulated his investment amount into one account, a one or two wire transfers to make the EB-5 investment, rather than multiple wire transfers of smaller amounts from many bank accounts, can be more straightforward from a documentation standpoint.
What is LCR’s SOF Advisory Team’s Role in this process?
The role of LCR’s SOF Advisory Team is to help its clients identify simpler, easier and efficient ways of documenting the final source of funds that they may finally utilise. The goal of LCR’s SOF Advisory Team is to help the client get a head start in the Source of Funds document collection process. LCR’s SOF Advisory Team is NOT a replacement for an immigration attorney, and all EB-5 petitioners must seek the advice of a competent Immigration Attorney.
What is an Immigration Attorney’s role related to Source of Funds?
The role of an EB-5 attorney as it relates to the immigrant investors is of vital importance. An attorney is the only individual on whom an investor should rely in determining whether a source of funds or a combination of source of funds along with its accompanying documentation will be sufficient to satisfy the USCIS officer. The immigration attorney will put all the elements of an application together, including the source of funds, in compliance with the USCIS guidelines.
Documents in each source of funds scenario can vary depending on where the investor is located. For example, USCIS Regulations list that the EB-5 investor should provide the USCIS with copies of their personal income tax returns for the last five years to prove that the investor’s funds were lawfully obtained. This obligation varies according to the income tax rules of the investor’s country of tax residency, and while USCIS tends to understand that the tax rules of each country are different, it is important that the immigration attorney describe whether documents are available in investor’s specific country of residence.
Can the Immigration Attorney ask for documentation beyond what LCR’s SOF Advisory Team recommends?
Absolutely. LCR’s SOF Advisory Team is only providing preliminary help. It’s the immigration attorney who actually puts the documentation together and prepare the petition for you, and may ask for many more documents to satisfy the USCIS guidelines. They will be responsible for tracing each transaction as part of the application process.
What are the outcomes from USCIS if some of the documents are not available, unclear or the investor’s documents are unable to establish a structured path? What if some of the documents are not available or too old or complicated to obtain?
While the source of funds documentation should show an unbroken chain tracing investment funds back to the original source, investors should understand that their I-526 petition will not necessarily be denied if they cannot obtain some of the requested documentation. Where documentation is lacking, declarations may be used to detail the required information and explain why documentation cannot be obtained.
The investor or others who can credibly attest to the stated information may prepare declarations. USCIS officers often accept declarations to supplement missing documentation if the declarations are credible, especially when the source of funds go back years ago. For example, if an investor cannot provide specific bank statements because their bank does not keep bank statement records from years ago, then a declaration the investor’s financial advisor stating so may be considered as sufficient documentation.
Although declarations provide a useful alternative to explain missing documentation, they should only be used as a last resort. They should not be used to replace required documents. Please note that documents for submission to USCIS MUST be accompanied by a full, word for word translation into English, where applicable.
Any guidance provided by LCR regarding a prospective EB-5 investor’s source of funds services are strictly business services and are not to be construed as legal advice. All information provided by LCR is general information based upon USCIS guidance and standards. Each prospective EB-5 investor must consult with, and rely solely upon an experienced EB-5 immigration attorney to obtain individualized advice and guidance about any decision in related to the preparation and filing of an immigration petition.
On November 21st, 2019, the new regulations came into force, which includes the increase in the minimum investment amount to be $900,000 for TEA approved projects and $1.8 Mn for Non-TEA projects. Please consult your immigration attorney or LCR Commercial Representative for further information.
Christian A. Triantaphyllis is an immigration and real estate attorney with first-hand experience representing foreign nationals and immigrant investors in cross-border and business immigration matters, usually dealing with regional centers and direct investments.
Christian has become particularly experienced assisting foreign nationals from around the world through the EB-5 visa program, preparing and filing I-526 petitions and I-829 petitions for regional centers and direct investors. Christian takes pride in easing the process for his clients to work through the demanding EB-5 immigrant investor process by employing an approach to meeting the immigration goals that is thorough, knowledgeable, and enthusiastic.
Further, Christian advises foreign nationals on immigration law compliance matters in accordance with U.S. Citizenship and Immigration Services, U.S. Customs and Border Protection, and the U.S. Department of State.
Christian cut his teeth as a global citizen serving in the United States Peace Corps as a health sector volunteer, and went on to intern with the International Criminal Tribunal for the Former Yugoslavia in the Netherlands. Christian is a conversational speaker of Spanish and Chichewa (Malawi).
Dinesh is a Managing Director at LCR Capital Partners. Dinesh is the global lead for LCR’s Advisory Services business which includes new project due diligence, financial operations, digital marketing, source of funds advisory and working with partners, clients and stakeholders to develop future product offerings.
Dinesh is a second-generation entrepreneur with current interests in finance, real estate, textiles, and education businesses. He launched and exited two start ups, one in the Food & Beverage industry and the other in the new media technology & crowdsourcing.
Dinesh was named by Businessweek Asia in the “Top 20 Upcoming Young Entrepreneurs of Asia under the age of 25 for 2006.” He also sits on the Board of Mentors at YourNest Angel Fund, Board of Directors at ILS Wealth and is a Trustee of the Sarvodaya Charity Trust.