Why source of funds is vital to a successful petition
EB-5 requirements mandate that an investor prove that the capital funding of their investment is of a legal origin. Anti-money-laundering as well as national security are both critical issues with the U.S. Citizenship and Immigration Services (USCIS), and thus it will scrutinize an investor’s source of funds documentation. A failure to prove a legal source for an investor will result in a petition denial.
USCIS will also review the source of the petitioner’s funds used to pay administrative fees to the regional center.
A legal path of funds is required too
USCIS will also review an I-526 petition to verify a legal path of funds as well: the details of the passage of investment capital from when the investor obtained it to when it was placed into the investment project.
An immigration lawyer’s primary responsibility
Proving a legal source and path of funds is one of the primary responsibilities of an EB-5 immigration lawyer. Building a case that the investment funds are eligible, according to USCIS standards, is often the most time-consuming duty of a lawyer. When options are available, the investor and their lawyer should make strategic decisions on which funds to use for their investment and thus cite in their EB-5 petition.
What sources of funds are acceptable
A wide variety of fund sources may qualify as eligible sources of funds including but not limited to:
- funds from income-generating assets such as stocks or patents
- funds from non-income generating securities
- divorce or other legal settlements
EB-5 regulations require an investor to provide a “preponderance of evidence” of the legality of the source and path of their funds. USCIS adjudicators will often, unofficially, employ even higher legal standards in verifying the source of funds; they may look for evidence that is “clear and convincing” or even “beyond a reasonable doubt.” This should therefore be the standard that a petitioner and their lawyer strive for.
The following are considered eligible types of documentation in establishing eligible source of funds:
1. Banking records Up to three years of bank statements for all investor’s accounts. Documents showing the withdrawal and deposit of funds from one account into another. Letters from the bank that confirm transfers.
2. Employment Proof of employment, contracts, and professional licenses (if applicable).
3. Businesses Proof of ownership/officership and business registration records. An accountant’s appraisal of all businesses (anywhere in the world) in which the petitioner has a substantial interest.
4. Real estate assets An appraisal of any property pledged. Deeds and mortgage documents, and sale documents for all owned real estate. Documents for income-generating properties.
5. Investments Stock certificates or similar documents related to all owned investments for the previous three years.
6. Gifts Receipt of gifts and registration of gift with tax authorities. Source of income of the gift giver.
7. Inheritance Documents related to the inheritance and estate settlements of the deceased.
8. Loans Documentation of any collateral for the loan.
Unsecured loans approved by courts for use as EB-5 source of funds — and in 2021, USCIS agrees
While unsecured loans were historically eligible to fund EB-5 investments, as of 2015 USCIS decided to no longer approve petitions with unsecured loans as a source of funds.
The issue was legally contested by investors in the prominent Zhang Vs. USCIS case. In 2018, a federal court ruled in favor of the investors that unsecured loans could be used to fund investments. The Immigration Service appealed the decision but in October, 2020, a D.C. circuit court upheld the earlier decision.
Providing a landmark adjudication, on April 14, 2021, USCIS approved the Zhang I-526 petition it had previously contested in court. This approval suggests the agency will concede the point, providing a precedent for future investors who wish to use unsecured loans to fund their investment.
What if an investor is missing documentation for their source of funds?
It is possible to file a Declaration of Missing Documents with a detailed rationale of why the petitioner is missing required documentation. With a valid explanation, USCIS has approved petitions in the past. However, this practice should be avoided whenever possible.