A primary requirement for the EB-5 program is an initial investment in a new commercial enterprise. The investment amount should be $800,000 in a Targeted Employment Area (TEA) or $1,050,000 in a non-TEA area. According to the regulations of the United States Citizenship and Immigration Services (USCIS), investors must provide proper documentation in their I-526 petition to demonstrate that the capital for their EB-5 investment has been obtained or earned through lawful means. It is common for EB-5 investors to have income from various sources. For example, an individual may have a job at a corporation and own income-generating assets such as patents or stocks. The funds for the investment can come from bank account deposits or other securities. Regardless of the source, it is important that all investment funds can be traced back to their origin. USCIS takes anti-money laundering (AML) seriously and thoroughly verifies the source of an investor's funds. Therefore, it is crucial for investors and their immigration lawyers to make strategic decisions about which sources to use. It is vital to ensure that all verifying documentation is available, valid, and accurately shows where the EB-5 investment capital originated from. Investors from non-English speaking countries should pay special attention to officially translating their documents. In addition to the source of funds, there should also be a lawful path of funds. This requires documentation showing how the investor acquired the funds and transferred the money to the New Commercial Enterprise (NCE) in the United States for the investment.Lawful Source of Funds
Lawful Path of Funds
Immigrant investors in countries that restrict the outflow of money may face difficulties, and multiple transactions may be necessary to transfer the full investment amount to the NCE.
Source of administration fees
While the EB-5 program only requires proof of the source of funds for the investment capital, USCIS goes further by verifying the lawful source of the administrative fees paid by investors to projects. These fees cover the project’s operational and marketing expenses.
While the petitioner invests $800,000 or $1,050,000 into a NCE, there is usually an additional $50,000 to $80,000 in administrative fees.
Standard of Proof
Petitioners must meet the standard requirement of providing a "preponderance of the evidence" for the source and path of funds. Under this standard, the USCIS official must conclude that it is “more likely than not” that the documents provided are current. However, it is advisable for petitioners and their immigration lawyers to strive for higher standards of proof.
Although USCIS officers officially use the "preponderance of the evidence" standard, they often consider higher standards such as "clear and convincing" or "beyond a reasonable doubt." Therefore, it is beneficial to meet these higher standards when submitting documentation.
Documentation requirements & eligible sources of funds
Investors must provide various documents as part of the EB-5 visa application. These include individual and corporate/partnership tax returns filed in any jurisdiction for the past five years. All financial statements should undergo an audit. If the previous years' tax returns show higher income, petitioners should also submit tax returns reflecting the three years of their highest income levels.
Some eligible sources of funds and the corresponding verifying documentation for an EB-5 visa are as follows:
Bank statements
- Petitioners should include bank statements for up to three years for all bank accounts
- Statements should show records of funds being withdrawn from one account and deposited into another
- Transfers must be supported by letters from the bank confirming the transaction
Real estate assets
- Petitioner must provide appraisals for all real estate pledged
- Deeds and mortgage documents for all owned properties, along with documentation of all purchases and sales
- Lease documents for all properties that lease/rental income
Business Ventures
- Petitioners must provide documentation proving ownership or officership, as well as business registration records
- An accountant's appraisal of all businesses in which the individual has a controlling or substantial interest should be included. This applies to businesses both inside and outside the United States
Investments
- Investors must provide documents such as stock certificates showing all owned investments or securities accounts for the past three years
- Supporting documentation is required if significant capital gains were made on investments prior to the preceding three years
Other valid sources of funds for EB-5 Capital
- Employment: Proof and confirmation of employment, employment contracts, or professional licenses if applicable
- Inheritance: All documents pertaining to any received inheritances, including estate settlements of the deceased
- Gifts: All documents related to the receipt of gifts. The requirement includes registering the gift with tax authorities or providing reports about the source of income of the gift giver
- Divorce and legal proceedings: All documents regarding funds obtained through divorce settlements or earnings from civil lawsuits, accompanied by official court judgments
Loans: Secured and Unsecured
If an EB-5 investor obtains funds from a third-party source, such as a bank or financial institution loan, the source of these funds must also be documented.
Since 2015, USCIS had not been approving EB-5 petitions using unsecured loans as a source of funds. However, after a legal battle in the Zhang vs. USCIS case, a federal court ruled in favor of the investor, stating that unsecured loans are valid for EB-5. USCIS appealed the decision, but a D.C. circuit court upheld the ruling in October 2020.
In April 2021, USCIS approved the Zhang petition. This approval indicates that USCIS may not appeal the decision further. It also sets a precedent for future EB-5 investors who choose to use an unsecured loan for their investment.
Missing Documents
In some cases, an investor may be unable to obtain certain documents to prove the source of funds for an EB-5 investment project. In such situations, the investor can file a declaration explaining why they cannot obtain the required documentation. USCIS officers have been known to accept such declarations of missing documents as long as valid and detailed reasons are provided. However, it is best to avoid using declarations whenever possible and only resort to them as a last option.Anti-Money Laundering (AML) Rules and Best Practices
Compliance with Anti-Money Laundering (AML) rules is crucial for individuals investing in the United States. The primary U.S. Anti-Money Laundering law is the Bank Secrecy Act (BSA).
Money laundering is defined by U.S. Federal Regulators as transactions that intend to:
- Hide the source of the investing funds
- Evade paying income and other applicable taxes
- Cover up audit trails to create the impression that the investment funds have been obtained through lawful means
Money laundering involves covering up the source and ownership of illicit funds obtained through criminal activity. Criminals exploit loopholes in the financial system to mix illegal funds with legally obtained money, often through fraudulent companies and falsified transactions.
To ensure compliance, a robust anti-money laundering process is essential for EB-5 investments. Here are some best practices:
Delegation:
Investors can delegate the implementation of their AML program to external entities, but these entities must agree to inspection and examination by federal examiners. This is especially important for investors working with regional centers, which operate under a multi-entity structure that can raise suspicions of fund laundering.
Appointing a Chief Compliance Officer (CCO):
The CCO is responsible for monitoring the AML program, implementing internal controls, and preventing policy violations. They should have extensive knowledge of the Bank Secrecy Act requirements, AML risks, and issues. The CCO should be authorized to develop systems and enforce practices throughout each project's life cycle.
Currency Transaction Report (CTR):
The Bank Secrecy Act mandates reporting any cash received more than $10,000 in one transaction or multiple related transactions on the IRS Form 8300. Investors should avoid dealing with cash or cash equivalents as much as possible. If necessary, they should follow written procedures to accurately document and report cash transactions as required by law.
