The EB-5 Immigrant Investor Program has been helping foreign nationals get a U.S. Green Card for decades. For success, it’s important for investors to follow the program’s requirements closely. Among these requirements, demonstrating a legitimate source of funds (SoF) is essential. When the EB-5 Reform and Integrity Act (RIA) was passed in 2022, it aimed to improve the program’s integrity and security for investors, and this included the program’s source-of-funds requirements.
This article will explore the changing requirements for proving a legitimate source of funds under the EB-5 program, and its impact on investors.
Understanding Source-of-Funds Requirements
Changes in SoF Requirements Under the RIA
The Importance of Seeking Professional Guidance
Understanding Source-of-Funds Requirements
Before discussing the recent changes, it’s important to know what’s involved with EB-5 source of funds, which refers to the requirement of investors to prove that their investment capital comes from lawful sources. This is to make sure that the investment funds are legitimate and not associated with illegal activities such as money laundering or tax evasion.
Investors need to provide documentation of where their investment money came from. It can include bank statements, tax returns, property sale records, or inheritance documents. This is to clearly show how the money moved from its original source to the actual investment, which is sometimes called a “path of funds.”
Changes in SoF Requirements Under the RIA
Before the RIA, the main focus of SoF requirements was on confirming that the funds were legally obtained. This would sometimes lead to situations where the funds were legal, but the documentation regarding the path of funds wasn’t as clear as it should have been.
Under the RIA, investors need to give a clearer and more detailed explanation of how their funds moved from the original source to the investment project. This change is part of a bigger move toward more transparency and integrity in the EB-5 program.
More Documentation Requirements
One of the changes under the RIA is the focus on more detailed documentation. Investors now have to provide more precise records to confirm the legality of their funds. This includes showing how the funds made their way to the EB-5 investment.
This change aims to heighten the transparency requirements involved in the SoF process. It also means that investors have to put more effort into gathering and presenting financial records.
Scrutiny of Gifted Funds
Gifted funds have been a common source of investment capital in the EB-5 program. But under the RIA, there is now increased scrutiny on where the gifted funds come from. Investors have to provide detailed documentation of the source of the gift, including the donor’s financial history and the legitimacy of the donor’s income. This is to make sure that all sources of investment capital follow the same standards as funds directly earned by the investors themselves.
Third-Party Verification
While not strictly a requirement, the RIA encourages using third-party services to verify that the source of funds is legitimate. Having independent financial institutions or certified professionals verify the documentation makes the process more reliable and less prone to fraud.
Currency Swaps
“Currency swaps” are meant to help investors from countries with restrictions on sending money abroad move their funds. This is when an investor gives local currency to a person or a business in their home country who has U.S. dollars abroad. That third party then transfers the equivalent amount in U.S. dollars to the investor’s U.S. account or directly to the EB-5 project.
In recent years, USCIS has started to scrutinize these transactions more closely. Now, investors have to provide detailed proof that the U.S. dollars used in the swap were sourced legally, that the currency swap was legal in their home country, and that they can trace how the funds moved through the accounts of the third-party currency exchange service handling the swap. Proper documentation is vital for proving that the funds were legally converted and that no illegal activities were performed during the process.
The Importance of Seeking Professional Guidance
With the new changes under the EB-5 Reform and Integrity Act of 2022, it’s more important than ever for investors to work with an experienced immigration lawyer. Handling the stricter source-of-funds requirements can be tricky, and any mistake in the paperwork could cause delays or even lead to the EB-5 petition being denied.
An experienced lawyer can help gather the right documents, make sure everything meets U.S. and international standards, and clearly present the source-of-funds package to USCIS. This kind of support can be crucial for handling the challenges of the EB-5 process and making sure everything is done right.
In addition to legal support, working with a trusted firm like EB5AN can make all the difference. EB5AN has helped more than 2,300 families from 60 countries relocate to the United States as lawful permanent residents.
If you need more information about the source-of-funds requirements under the EB-5 Reform and Integrity Act or would like assistance with your EB-5 petition, please book a one-on-one call with our expert team today.
