UNDERSTANDING THE LAWFUL SOUCE OF FUNDS REQUIREMENT

Transcription

1 UNDERSTANDING THE LAWFUL SOUCE OF FUNDS REQUIREMENT A critical part of every EB-5 Investor Visa petition requires that the Applicant collect and present clear and convincing records that satisfy two key issues: The lawful source of funds The Path of the funds If the petition does not clearly demonstrate documents to prove both of these requirements then the case will be denied by the U.S. Citizenship and Immigration Service (CIS). This memo provides GENERAL guidance on the expectations of the CIS and what types of documents should be collected to meet this burden. Specific advice on meeting these requirements should be given by the Applicant s personal attorney. What Exactly Are the CIS Rules On Lawful Source of Funds Under the rules, the investor is required to demonstrate that has invested the full amount of his capital into the new commercial enterprise and that these funds were gained from a lawful source. Specifically, Section 204.6(j) of the rules provides: A petition submitted for classification as an alien entrepreneur must be accompanied by evidence that the alien has invested or is lawfully in the process of investing lawfully obtained capital in a new commercial enterprise in the United States which will create full-time positions for not fewer than 10 qualifying employees. Furthermore, the law requires the investor must: (3) To show that the petitioner has invested, or is actively in the process of investing, capital obtained through lawful means, the petition must be accompanied, as applicable, by: (i) Foreign business registration records; (ii) Corporate, partnership, and personal tax returns including income, franchise, property (whether real, personal, or intangible), or any other tax returns of any kind filed within five years, with any taxing jurisdiction in or outside the United States by or on behalf of the petitioner; (iii) Evidence identifying any other source(s) of capital; or (iv) Certified copies of any judgments or evidence of all pending governmental civil or criminal actions, governmental administrative proceedings, and any private civil actions (pending or otherwise) involving monetary judgments against the petitioner from any court in or outside the United States within the past fifteen years. 1

2 Additionally, before EB5 America can file the petition for the investor with the CIS, we will also need to provide evidence to show that the $550,000 of capital is actually received in the Escrow Account. Specifically, the rules provide as follows: (2) To show that the petitioner has invested or is actively in the process of investing the required capital, the petition must be accompanied by evidence that the petitioner has placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk. [Sic] Such evidence may include, but need not be limited to: (i) Bank statement(s) showing the amount(s) deposited in the United States business account(s) for the enterprise; But more then showing mere receipt of these funds into the Partnership s Escrow Account, the CIS requires that we carefully document the exact the PATH of the invested funds as the flow from the investor s personal bank accounts to the Escrow Account. On this issue, the CIS has stated: A petitioner cannot establish the lawful source of funds merely by submitting bank letters or statements documenting the deposit of funds. Matter of Ho, 22 I&N Dec. 206, 211 (Comm. 1998); Matter of Izummi. Without documentation of the path of the funds, the petitioner cannot meet his burden of establishing that the funds are his own funds. Id. Simply going on record without supporting documentary evidence is not sufficient for the purpose of meeting the burden of proof in these proceedings. To meet this burden, therefore, investors to the EB5 America program will need to provide detailed banking and wire transfer records that prove the path of the funds, as well as the lawful source of the funds. Documenting the Lawful Source of Funds & Path Under the EB5 rules, the investor s funds can come from many different legal sources. For example, the funds can come from business ownership, sale of property, sale of stocks and securities, inheritance, gift, loan, or other sources. So we must use common sense when considering the myriad potential sources of an EB-5 petitioner s investment income. But we must be careful when considering how we can document the lawful source of funds. Where funds are inherited, a will or trust forms are instructive. Where funds are earned from income on an investment, stock certificates, dividend letters, and account statements are vital. Where funds were earned from income on a previous business investment, the corporate tax returns for the business, complete with evidence of payouts to the owners, should be included. Below find some guidance that may be helpful in documenting the lawful source of funds and the path of funds for some of the most common situations. WARNING: The text and content of this report is only for general educational purposes. This information is NOT legal advice which can only be given by a qualified lawyer after consultation. We specifically disclaim all responsibility of any errors contained within the web site or related supporting information materials. EB5 Ports Baltimore LP and Ports Partners I, LLC and its staff, shall not be liable for any loss however caused, whether due to negligence or otherwise, arising from reliance on the general information derived from our web site. 2

3 Business Ownership As Source of Funds If the lawful source of funds are derived from business ownership, the Applicant must provide the following types of documents: Company articles of incorporation or registration Company balance sheets for past several years Company tax returns for past several years Copy of company marketing materials or brochures on products or services Letter from Company (on official letterhead) or the Company s Accountant verifying the amount of income earned by the investor over past several years Personal Tax Returns filed by the Investor for past five (05) years. Personal statement by Investor describing his employment history, education, salary history, title and job duties. Copy of the Investor s personal bank statements (one or more accounts) for the month of January for each of the past three years showing Investor s consistent assets exceeding $600,000 or more. Shows the investor s ownership interest and date company created Shows the company is a legal business and has produced profits to owners Shows the company is a legal business and has produced profits to owners Shows the credibility of the company to the CIS Shows the company is a legal business and has produced profits to owners Shows reported legal income received by Investor - Shows pattern of Investor s income and net worth that can support the EB5 investment. January 2006 January 2005 January 2004 $550,000 to the EB5 Escrow Account. (This must be from the same account you will send the wire from) Copy of the $550,000 wire transfer order stamped by the bank that sends your funds from Investor s personal bank account to the EB5 Escrow Account. (The wire transfer document must show your account number, your name and name of escrow) Copy of the bank statement for the Escrow Account showing our receipt of the Investor s $550,000 of funds into his named sub-account in the escrow account by UBS bank. 3

4 Gift As Source of Funds If the lawful source of funds are derived from gift, the Applicant must provide the following types of documents relating to (1) the gift of the funds, and (2) the source of funds from the person who gave the gift to the investor. Signed letter from donor to investor verifying: Date of gift Amount of gift Relationship of parties Special conditions of gift Address of donor Copy of bank account of Donor showing the date the funds transfer occurred from his account to the investors account Copy of the bank account of the Investor for the month showing the actual date the funds were received into his account from the gift Document lawful source of funds for Donor - Follow directions as described in Business Ownership, Inheritance, property sale, and the like from this memo. the Investor s receipt. Shows the Donor is the actual source of the investor s funds. Shows the Investor actually received the funds from the Donor. Shows the lawful source of funds for the Donor this is CRITICAL. Personal statement by Investor describing his employment history, education, salary history, title and job duties. Personal Tax Returns filed by the Investor for past five (05) years. $550,000 to the EB5 Escrow Account. (This must be from the same account you will send the wire from) Copy of the $550,000 wire transfer order stamped by the bank that sends your funds from Investor s personal bank account to the EB5 Escrow Account. (The wire transfer document must show your account number, your name and name of escrow as EB5 Escrow Account ) Shows reported legal income received by Investor - 4

5 LETTER HEAD OF PERSON GIVING GIFT Name (first and last) Address (street, city, country, zip code) Phone & Add Current Date U.S. Citizenship & Immigration Service California Service Center Dear Officer: RE: Confirmation of Unconditional Gift of $550,000 This letter confirms that I have unconditionally gifted the amount of USD $550,000 to (add name of investor) on (add date of gift) and that these funds from my personal bank account were gained from lawful sources. In support of the gift, I attest as follows: 1. My name is (Donor s full name) and I was born on (date)_ in (city, country). 2. I currently live at the following primary address: (insert Donor s current address). 3. As for my business background, I graduated from (university) in _(year) and since that time have worked for several companies in various positions. I currently work for (name of current employer/country) serving as the (job title). Prior to this employment, I worked for (list several past employer/company names and countries). 4. The funds in my personal bank account have been earned through lawful activities, and specifically by (provide a short description of how the Donor s funds were earned such as business ownership, inheritance, sale of real estate, other). 5. I agree to provide documents and financial records demonstrating that I have gained my assets by lawful sources and activities. 6. The EB5 Investor/Applicant is related to me as my (son/daughter, brother/sister, cousin, mother/father, partner, close friend, other). 7. I confirm that I have unconditionally gifted to him the amount of USD $550, On (date), I wired the USD $550,000 gift from my personal bank account held at (name of Donor s bank) to his personal bank account held at (insert name of investor s personal bank account). 9. I understand that he will invest these gifted funds into the EB5 immigrant investor program with the goal of obtaining permanent resident status in the United States. I affirm the above statements are true and accurate to the best of my knowledge: Signed: Printed Name: Date: Notarized: 5

6 Inheritance, Will or Trust As Source of Funds If the lawful source of funds are derived from inheritance, the Applicant must provide the following types of documents relating to estate and inheritance transactions as follows: Full copy of the will or trust identifying the investor as a beneficiary Copy of bank account of Donor showing the date the funds transfer occurred from his account to the investors account. Copy of the bank account of the Investor for the month showing the date the funds were received into his account from the gift. Letter from lawyer, accountant or administrator who managed the will or trust confirming the key terms of the transaction to include: Shows the source of the funds and the value of the funds received. Shows the Donor is the actual source of the investor s funds. Shows the Investor actually received the funds from the Donor. the Investor s receipt. Date of transfer Amount of transfer Relationship of parties Special conditions of transfer Address of investor Brief description of the lawful source of funds from the Donor Personal statement by Investor describing his employment history, education, salary history, title and job duties. Personal Tax Returns filed by the Investor for past five (05) years. $550,000 to the EB5 Escrow Account. (This must be from the same account you will send the wire from) Copy of the $550,000 wire transfer order stamped by the bank that sends your funds from Investor s personal bank account to the EB5 Escrow Account. (The wire transfer document must show your account number, your name and name of escrow as EB5 Escrow Account ) Shows reported legal income received by Investor - 6

7 Loan As Source of Funds If the lawful source of funds are derived from loan, the Applicant must provide the following types of documents relating to (1) the terms of the loan, and (2) the source of funds from the person who gave the loan to the investor. Signed letter from Lender to investor verifying: Date of loan Amount of loan Relationship of parties Special conditions of loan Address of lender What security or collateral, if any, was given as basis for loan. Copy of bank account of Lender showing the date the funds transfer occurred from his account to the investors account Copy of the bank account of the Investor for the month showing the date the funds were received into his account Copy of actual, complete loan document If Lender is a private person (NOT a bank) then provide all documents establishing Lender s lawful sources of funds as described in this Memo. (How did the Lender get his lawful source of funds?) Personal statement by Investor describing his employment history, education, salary history, title and job duties. Personal Tax Returns filed by the Investor for past five (05) years. $550,000 to the EB5 Escrow Account. (This must be from the same account you will send the wire from) Copy of the $550,000 wire transfer order stamped by the bank that sends your funds from Investor s personal bank account to the EB5 Escrow Account. (The wire transfer document must show your account number, your name and name of escrow as EB5 Escrow Account ) the Investor s receipt. Shows the Lender is the actual source of the investor s funds. Shows the Investor actually received the funds from the Lender. the Investor s receipt. Serves as back-up to the letter above. Shows the source of the funds of Lender. Shows reported legal income received by Investor- 7

8 Sale of Property As Source of Funds If the lawful source of funds are derived from the sale of property, the Applicant must provide the following types of documents relating to original purchase and the subsequent sale of the property, as follows. Letter from lawyer, accountant, closing agent or bank who managed sale of the property confirming the key terms of the transaction to include: the Investor s receipt. Date of transfer Location of property Amount of sale Special conditions of transfer Address of investor Copy of certified check or wire of Buyer showing the date and amount of the funds transfer for the purchase Copy of the bank account of the Investor for the month showing the date the funds were received into his account Copy of actual, complete property sales contract or document signed by all parties Personal statement by Investor describing his employment history, education, salary history, title and job duties. Personal Tax Returns filed by the Investor for past five (05) years. $550,000 to the EB5 Escrow Account. (This must be from the same account you will send the wire from) Copy of the $550,000 wire transfer order stamped by the bank that sends your funds from Investor s personal bank account to the EB5 Escrow Account. (The wire transfer document must show your account number, your name and name of escrow as EB5 Escrow Account ) Shows the Buyer and sales transaction is the actual source of the investor s funds. Shows the Investor actually received the funds from the Lender. the Investor s receipt. Serves as required back-up to the letter above. Shows if the Investor had a mortgage on the property that reduces his net profit from sale. Shows reported legal income received by Investor - 8

9 Sample Personal Statement from Investor Dear Sir This personal statement provides you with summary of my professional work history, educational achievements and family background. I was born in London in 1962 and was raised there for a majority of my life. When I was 18 years old, I entered the University of London and graduated with a degree in business in I then attended the London School of Economics and graduated with a MBA in After school I worked for almost ten years as an investment analyst for Bear Sterns in their London and Hong Kong offices. In 1993, I started my own manufacturing business called ABC Company in Taiwan. For the past 15 years, I have served as the President of this company and grew our annual sales grew from zero in 1993 to about $30 million in My company, which makes computer parts, employs approximately 90 workers. As requested, I have provided the following supporting documents: Articles of Incorporation showing I am the sole owner of the company; Copy of the 2004, 2005 and 2006 Annual Financial Report for the company prepared by our accountants; Copy of marketing materials about the company and our product lines; Copy of my MBA diploma. For the last five years, I have earned an annual salary of about $600,000 per year from my business. As requested, I have provided the following support documents: Letter from the company accountant certifying my salary for past five years; Copy of my personal tax returns for 2002, 2003, 2004, 2005 and 2006 showing my annual reported income. During the past many years, I have been fortunate to invest my salary and other income into various income producing assets. With my wife, I own our home and several other rental properties in Taiwan and London. My investment portfolio with HSBC Bank has a current balance exceeding $5 million (USD) that holds various stocks, securities and cash. I will be wiring my $550,000 of investment funds for the EB5 visa program from my personal HSBC Bank account. As requested, I have provided the following support documents: Copy of my HSBC bank statement for January 2004, 2005 and 2006 Copy of my HSBC bank statement for June 2007 Copy of the wire funds order (dated June 15, 2007) presented to my bank for $550,000 sending the funds into the EB5 Escrow Account. BY: Date: 9