Questions? Call: (844) 754-9225
  • Home
  • EB-5 Source of Funds in EB-5 Investments

EB-5 Source of Funds in EB-5 Investments

The EB-5 Investor Portal Podcast – Episode #2

Video Version (below)

Contact Us

Introduction: Hello EB-5 investors. This is Floyd Mitchell with eb5eb5.com. Welcome to episode two of the EB-5 investor portal podcast, recording on Tuesday, June 27, 2017. Today’s episode is titled Origin of Funds and EB-5 Investments. Our guest is immigration attorney, Andrew Johnson, of law offices of Andrew P. Johnson in New York, New York. Mr. Johnson was a government prosecutor until he entered private practice in 1998. He has authored numerous articles on immigration and international litigation, some of which have been published by the American Bar Association and the American Immigration Lawyers Association. In addition, Mr. Johnson has been featured in the New York Times, quoted by the New York Daily News, and interviewed by CBS News on the topic of immigration. He has represented large corporations, nonprofits, and small companies in all aspects of immigration law. Mr. Johnson has spoken to business organizations in conferences around the world on the various strategies for immigrating and sending employees to the United States. Mr. Johnson practices immigration law exclusively and is an active member of the American Immigration Lawyers Association. Andrew is admitted into the United States Supreme Court first, seventh, ninth, and eleventh United States circuit court of appeals, New Jersey district court, and the State Bar of New Jersey. Today he will be sharing information about origin of funds in EB-5 transactions. Andrew, welcome to the show and thank you so much for joining us today.

A: My pleasure. Happy to talk about the most primary issue with a EB-5 applicant, which is the origin of funds.

Q: Can you share some insight about origin of funds and why issues or challenges tend to present themselves with this particular component in EB-5 investments?

A: Absolutely. There’s two issues with origin of funds. One, sometimes applicants think it’s no problem whatsoever and then they realize, after going into detail, there are some problems based on those country’s specific tax laws. Two, some clients think they absolutely cannot prove their origin of funds and realize once they talk to an attorney who’s done this for many years, there’s absolutely many avenues in which you can prove origin of funds. With that information, let me tell you about the basic requirements. Origin of funds simply means how to prove that the money was obtained legally for USCIS purposes. That’s the most important because a lot of people explain that in my country it was obtained legally and the government knows it’s obtained legally, however it might not be considered legal origin funds under USCIS regulations. The general rule about legal origin of funds is you have to come from an origin of which it was earned or legally obtained, and let me give you some examples. An easy one would be real estate. A house was sold and the proceeds of that money is used to show USCIS the legal origin of where the money came from. You also can do it from inheritance, just simple savings, investments, business profits or business salary, gifts from relatives or friends, and also you can use all types of variations. People don’t understand that you might have 10% come from inheritance, 10% come from business profits, 10% come from savings all the way through. You don’t have to have it come from one source. There is one other issue that often people don’t fully understand. They simply say, “Okay, I’m selling a house I owned for two years and therefore that’s the profit and I’ll show that and prove that as my origin of funds.” Because it’s a recent sale of a house, USCIS will want to know where that money came from to purchase the house two years ago. If it’s a home 20 years old the requirement for documentation showing how that money was earned is much less and can be usually drawn from affidavits or statements by the applicant.

Q: In your experience how would one go about showing detail for the origin of funds on a transaction that dates back 20 or 30 years or more? Can you tell us how secondary evidence may be helpful in situations where the origin of funds date back so long and the investor may have a difficult time producing the proper detail to satisfy USCIS requirements?

A: First of all, we, in our ideal world, if it’s 20 years, try to show all the lay and actually how the money was earned 20 years ago. You would have to show how the money was earned, even if the house is owned 30 years or 40 years. The issue is it’s just easier, usually you can show, “Okay, this money was earned by salary and here’s …My father worked for a company and he made roughly $20,000 a year over 10 years and then bought the house in 1992.” It usually can be established that way, so you always still want to establish it. It becomes, I guess the best way to explain it is if it’s two years ago clearly you should be able to find where the money came from two years ago. If it’s 15 or 20 you can do it with what they call secondary evidence, in other words not directly from bank accounts where the money was transferred over because people might not be able to have records of that bank account.
I apologize, it’s not an exact answer. We want to do our best to approve the money from a direct source as best we can, it’s just USCIS usually accepts what’s reasonable. It’s reasonable to show by affidavits and statements how the money was earned 30 years ago to purchase the house. It’s also reasonable that the house was bought two years ago to actually show where it came from out of bank accounts.

Q: I’d like to clarify for our audience, are origin of funds and EB-5 investments an item that only immigration attorneys work on? Or do other players get involved in this area at all?

A: Very good question. In fact, it’s our primary role. The other parts that we have to do are quite easy. It’s just identification documents and so forth. No, the investment banker, the regional center, they specifically don’t want to go into that issue because it’s a legal issue and requirement by USCIS. That is absolutely … That’s the most important job for the immigration attorney. As I had mentioned before, if the applicant can prove origin of funds there really is almost no other issue to make them ineligible to file for the EB-5 program.

Q: What are some of the common problems or misconceptions clients have with origin of money?

A: Most clients naturally earn money … Let me give you an example. If they earn money through business income and it goes into their business account and they move it over to their personal account. Then they take that money, obviously, and most people don’t keep $500,000 or $300,000 into their personal account and let it sit there. The money will either be spent on cars and jewelry and living expenses or the money will be invested in stocks. Then the money is used to purchase stocks or investments, and then someone might cash out on that investment and then spend it on something else. Now, often clients say to us, “I’ve made $750,000 over the last two years. I can prove that.” The problem is they can prove it from their business account to their personal account, but then if the money has been used, or sent out, or spent, they have to be able to show how they can bring that money back into their personal account to USCIS. In other words it has to be fully tracked back. The reason why it is as difficulty as it is, especially with things that you expense, that’s sometimes very difficult. A lot of clients have money from sources that we can’t use for USCIS, where they want to refill their personal account back up. They can say, “Okay, I can put $750,000 back into my personal account.” The problem is they can’t show where that money came from, they’re just refilling, in a sense, the personal account. Often, after we have those discussions, it’s easier for the applicant to almost do another business deal in order to get the money back into the business account moved over to the personal account, and have it stay there. With a lot of businessmen that’s actually quite easy. That issue, obviously, is what I had mentioned before. Some clients say, “Oh, well I make $500,000 a year, this should be no problem, it goes from my business account to my personal account, I have it invested and so forth.” They have to be able to legally show how that money is properly brought back into their business account without being replenished by money that’s from, in a sense, an ineligible source or an untraceable source. I know that gets a little complex but that’s what they really have to be worried about if they want to use money that they have saved or earned in the past. Where it went to and where it needs to go back. We have to draw it up in a sense where we actually track it and write up exactly the pathways, and sometimes even graph it up on a computer to make sure we can show the legality of it. Then we usually circle the sections or the amounts of money that would be considered questionable. Then with that we might say, “Okay, we have $75,000 that’s going to be untraceable, let’s try to find another source in order to prove that money,” which is often quite easy to do.

Q: Can an investor sell stock or other assets to come up with the investment required?

A: Absolutely. I don’t want to make it sound too difficult. If, for example, they earn income through salary or the business they own, they move it to their personal account, and then they purchase stock, then they sell that stock, it goes back to the personal account, we have legal origin of money, no problem whatsoever. The problem is, as I mentioned earlier, is often that money gets moved from stock, three years later it’s sold and goes to another stock, or then sometimes money is pulled out and expensed, that’s what I’m saying. When it has three or four multiple transfers you have to bring it back through all three of those transfers… Or trace it back from all three of those transfers to show the legality of it.

Q: In essence, USCIS wants to know where the funds came from, they want to know that they were obtained legally, and a large part of your role as an immigration attorney representing the investor is to assist them with this critical aspect of the EB-5 process.

A: Absolutely. What we do is we explain what we can explain right here, but also the client would tell us, “Okay, this is my portfolio which I think I can use.” They would then tell us where and how they got certain sets of money. Then between us we would choose the easiest route, we believe, that they could take which would have the least amount of tax consequences to them in their own country. Remember, USCIS doesn’t evaluate tax consequences in foreign countries. They don’t know the tax law, they don’t want to go into that. Everything is done outside. We give the applicants the best few options we believe and then they choose which option they want to with the least amount of tax consequences in their country.

Q: Does an immigration attorney help an EB-5 investor optimize or reduce their tax obligation in some cases?

A: In some sense. Our clients will know their tax laws from their country much better than we. We have a general idea of what it is. We just want to make sure there’s no tax problems within the US and the simple … We don’t do anything special, we just say don’t do the transaction or the gift transfer in the United States. Once that occurs, then they usually pick the route of how they want to do it in their own country. For example, if there’s three or four pathways we can choose, and let’s say if it’s in India, they get hit with high real estate taxes, they might want to avoid a high real estate tax sale to show that much profit. That’s just an example but we defer to the clients on their tax laws.

Q: Can you share with us some of your solutions where the applicant experienced difficulty showing how the money was legally earned or they just could not produce the necessary paperwork?

A: Absolutely. What I said earlier, when we would just say, “Lay out your portfolio,” and that’s probably a business term. “Lay out all where your money is right now, then we go over every possible option.” Then even if, let’s say, there’s an extreme difficulty with everything they told us we often go, “Okay, you’re often wealthy or have wealthy relatives and wealthy friends. It might be easier for a wealthy friend or relative to simply gift you the money.” We had a case where it was very difficult to show any tracking. As I mentioned, the money was earned but it was transferred out in so many variations and been out and resent to different places over the years. The person said, “Well I have a friend who is a salaried employee that owns his own business but is also salaried by a company based out of Singapore.” Our client was Bangladeshi. That friend, who had some control over the business he was getting salary payment, simply told his boss, “I run this operation in Bangladesh. Advance me $300,000.” He already had $250,000 saved. His boss, like I said, who he had an excellent relationship with, just advanced him and just said, “We wrote a letter from that business saying we are advancing our employee 200 or $300,000,” and that was it. In fact he wanted the money to be wired out of Singapore and not wired out of Bangladesh, which is often common. The nicest thing about that is that money that we used we didn’t even have to try to move out of Bangladesh. The money in transaction was wired into a Singapore account and to our client’s friend. He, then, just gifted it to his friend in another Singapore account and the person wired it to the regional center. That was one way to deal with it. Although that might sound fact-specific to that case you would be surprised how many people in the wealthy field who can afford $550,000 have friends or relatives who have a much better way to show how they legally earned their money because it might have been some recent real estate sale by a relative or a friend, or a friend might have a business that does import/export, that might easily earn $700,000 on a business deal. We would just show the contract on that deal, show the $700,000 earned, that friend puts it into his business account, moves it to his personal account, and then gifts it to our client. If our client has an international business where they buy and sell, or they have a friend with an international business buy and sell, and they don’t want to deal with the money inside their country they can set up deals where they have a transfer. They can do the transfer where the farm equipment goes to a country which our applicant lives at, or applicant’s friend lives, whether it’s Bangladesh or India or Pakistan or whatever country. The money can go to a place where they want it to go. The money could be transferred to a Kuwait bank account and we just show the contract, it says, “This import was from a farm equipment deal between an Indian client and another person from whatever country,” because that’s the seller. Once that transfer occurs we want the money to go into this Kuwait bank account. If that’s in the initial contract then they actually can keep the money out of the country, which some countries, Vietnam was another example, really don’t want money coming in if they’re going to do that transfer. USCIS does not care if the person is Vietnamese, Bangladeshi, Indian, or Pakistani, and a business deal occurs where the money is transferred to their account or to their friend’s account in Kuwait. Then moved from Kuwait into the US government regional center. That’s another way where people can avoid taxes, or, which we might deal with in another podcast, restrictions on how to transfer money out of that country. It sometimes solves two separate problems.

Q: If the funds are gifted to your client from a friend or family member, or in some cases multiple friends and family members, and let’s say one family member owns gold and sells their gold to get the funds, and maybe a brother of the investor sells a house and gives the investor a couple hundred-thousand dollars. Through a few sources this investor puts together the money required to make the investment. Do you have to prove the origin of funds from those original family members and friendsthat are gifting their money to the investor? Do you have to produce some sort of diagram or flowchart with supporting statements or affidavits?

A: You’re exactly right. For everybody, as I mentioned before, let’s say the applicant can’t prove his legal origin of money. He’s just going to work off gifts from relatives and from friends. You were right, each relative or friend has to prove their origin of money. I think one case we had close to 18 different sources and we had to prove origin of money from 18 different sources. When that relative says to you, “I’m gifting to you $50,000 for this,” we have to show how that relative earned the money. Often it’s not that hard, it might be salary. “I receive a salary, it’s wired into my account. Here’s my last year wiring it. Here’s $7,000 a month from that savings. I am giving them $50,000.” That might be an example. Or what you had stated, a relative has gold. They said, “I earned this gold,” or, “This gold was transferred through my family for this many years.” We would have an affidavit or a statement proving that and then we would show that as that original transfer. Each one, in a sense, would be, for legal terms, an exhibit. Exhibit A, $50,000 transferred to applicant. Then we’d have on the top of that exhibit the gift, it’s a simple gift letter, it’s nothing involved. The gift letter goes, “I’m giving $50,000 to my friend or relative in order for him to apply for the EB-5 program.” Underneath that would be proof of how that person earned that $50,000.

Q: What do you say to the investor listening today who has the necessary funds to invest in EB-5 but may think that they just can’t prove their origin of funds and may feel that they never will get approved and thus just never apply?

A: We’ve had people in the past who have told me just that. “Mr. Thompson there’s no way. I’ve looked through things and I can trace it, just my country doesn’t allow it or it just doesn’t work that way.” First we obviously go to the option, as I mentioned before, we go, “Well talk to our wealthy friends and family members and see if that’s an option.” That, like I said, usually clears up the problem because if you’re wealthy, like I said, you have wealthy relatives or friends.” The second option is, if they don’t have anything and they are wealthy and they have this, we simply tell them, “You can go ahead and sell property or you can go ahead and create, in a sense, a new business deal,” if they are import/exporters and everything goes through their business account. This is very challenging, especially people who have accounts in Kuwait. In other countries they don’t have personal account. They do everything out of their business account, which is completely legal within that country. They say, “Look, nothing comes from me, from my business or personal.” We would tell them, “Okay. It’s time to start gathering and putting our deals together and collecting them, any business account, new deals. Once you have 550,000 based on new deals into your business account I want you to open up for the first day a personal account and move that money into your personal account.” USCIS has to have that occur, although it sometimes seems silly to some of our clients or unnecessary. Even if they open up a personal account one day before they wire the money to the regional center. They have to do it. It’s just a sign the money came from their personal assets rather than their business. As you stated before, we usually can find a way, even if the applicant doesn’t believe there is a way, to prove the legality of the money.

Q: What are some examples of secondary evidence that can be used in providing origin of funds detail?

A: Let’s use a direct example of that. I’m just using gold for the reasons of this example. There’s other issues. For example, if someone has a house that’s 30 years old that cannot prove at all how they purchased the house 30 years ago, I always speak about Vietnam because their documents are very limited. In other words, there’s no real estate contract. Often things were written in scrap paper or there was no documents whatsoever. Secondary evidence is literally an affidavit from the person who bought the house, the relative who bought the house or the applicant themselves saying, “30 years ago I purchased a house for this amount of money. I paid it on collecting my salary because I worked as a professor at a university. We didn’t keep our money in banks at the time because our country didn’t have banks,” or, especially with Russian cases, a lot of the banks in the ’90s had closed so they cannot pull any evidence whatsoever for that reason. They often give an explanation. There was no banking system in Vietnam in the 1980s, in the Russian case they would say most of the banks closed in the 1990s, there was no records kept. Then they provide statements from themselves or whoever actually had the transaction. Another example is we had someone who had gold from their … They actually owned it but it was from their parents. The father had passed away in, I think it was, late 1988 or something. They had never put the gold anywhere. They kept the gold at home. The father had written a note in Vietnamese that stated, “I am giving my gold that I have to my oldest son.” It’s simple, on a scrap piece of paper, just a handwritten note. We use that plus a statement by the son, the applicant, who is now 50 years old, saying, “My father gave me through inheritance gold which I, three years ago, deposited and it was worth …” When I say deposited or cashed out, “It was worth $240,000 and here’s the best records I have from that direct deposit.” Whether it was receipt by the … The gold business might have given them a receipt or sometimes they can even get a letter from the people that they sold the gold to. Even if they can’t they often, a letter themselves, writing what happened can be what we call secondary evidence.

Q: Just to clarify, when you use the term statement you literally mean it could be a pen or pencil written on a piece of paper. Am I correct in assuming that? It doesn’t have to be some official document or form to be accepted by the USCIS?

A: Absolutely. I have always told my clients, what USCIS requires, documentation of evidence which is reasonable. If housing transactions occurred in the ’80s and ’90s in Vietnam, where they literally just transfer and give each other money on it, and maybe, like I said, get a deed at least from the government or some documentation. That’s all the evidence that’s available, that’s all the evidence USCIS can expect. When you said scrap, a piece of paper and pencil, absolutely right.
We do like to give the background of the situation in Vietnam. We have country conditions that talks about the banking system in Vietnam, how it was rarely used, no one trusted the banks, banks didn’t even exist in the 1980s. We can provide a newspaper article, roughly, that explains how sales were done in the ’80s and ’90s in real estate, whether it’s in India or Bangladesh or Pakistan or some of those countries.
Once again, if we’re talking about Germany … Now Germany, the expectation would be to have a paper trail if you’re dealing with in 1992, to have some type of document. Even if those banks were closed, let’s say someone, even in Germany, used a bank but can’t get records from that bank in 1992, they’re going to have real estate documents at least showing the sale. That, probably, would be expected. A lot of countries, and I would say the majority of countries that do EB-5, those type of direct documents are not expected if they’re 15 or 20 years old.

Q: Do experienced EB-5 immigration attorneys assist clients in producing historical documents that may support their origin of fund detail such as old newspaper clippings, as you’ve mentioned, or official statements from their respective governments?

A: Yes, absolutely. The nice thing is we’ve done so many that we already have the documents. We use the previous documents, we have articles explaining the banking system of that country at the time if need be and the country of course. All of that is quite simple to get the background because if it’s a national program or national issue there’s clearly been reports written about it.
I also wanted to mention that often people say, “Okay, I earn the money, my father earned this money to purchase the house because he worked 20 years as a janitor from 1970 to 1990.” The father can write, if the father is alive, he can literally write, “I worked as a janitor for this school at this time.” If they can get a letter from the school that would be also great, but the school could’ve closed down. In a sense he’s saying, “I can’t even prove anything whatsoever where I got my money, but I worked at this job and I’m writing a statement, this is how I earned my money. This was my salary per month and this is the money I used to purchase a real estate house.” Salary statements are also very valuable when you want to have to prove secondary evidence.

Q: Can applicants use money sources in countries other than their citizenship?

A: Absolutely. It’s, I would say, pretty common. Often clients from these countries have bank accounts already in foreign countries. It’s already there to do the transaction. The reason they’re usually doing that is it’s just a little more difficult to move money out of their country. As I spoke before, people in some of those countries use a transfer agent to move it out if they don’t have accounts in other countries. One, they could have an account in Singapore, they can have an account in Kuwait. The money coming from those countries to USCIS is not an issue whatsoever. They also can open up a brand new account in Kuwait and Singapore and USCIS does not have a problem with it. They don’t say, “Wait a minute, why did you suddenly open an account?”
USCIS knows there’s absolutely restrictions for countries moving money out of that country and they expect the applicant to go ahead, as I stated before, to sometimes use either their transfer agents, which have to move the money outside the country, or to actually use accounts outside the country. For example, standard Chinese cases are where they loan or gift $50,000 to 10 friends or relatives within China, and then that money is often moved, that 50,000 is then gifted back to the applicant in a Hong Kong or Singapore account. The money is then moved to a US regional center. That’s, I would say, extremely common and Chinese are probably 50% of all applications. That’s nothing that raises red flags within USCIS regulations. They actually expect that.

Q: Can investors take loans out, either personal or commercial, to invest in EB-5?

A: Very good question. Once you said loan I have to give you the recent regulation. USCIS allows loans. First I want to state that. Generally US immigration attorneys say, “Let’s avoid loans in every possible way.” For this reason: the case law has tried to delineate or clarify, and … The best way to explain it is USCIS requires, for someone tried to take a loan, based on collateral, it has to be based on collateral, and that loan has to be paid off within two years. As an immigration attorney, USCIS is going to give a request for evidence and just delay the case we believe, or sometimes, to wait until that loan is paid off. We do everything we can. We usually can work around it to avoid any loans. A loan is a red flag, not as an illegality, but it’s for USCIS to challenge it. What you said, can they sell off a piece of their factory, that’s great. If they go into a bank on a mortgage too, a lot of people want to just not sell the home but take a mortgage out on the home, absolutely. Legal but problematic because they eventually have to pay off the loan within two years. The cases actually run a year to a year and a half. They’re going to essentially have to go and pay it off. It’s just, like I said, it definitely stops from a clean approval and we do everything we can to avoid a loan. If it has to be paid off in two years we’re just adding an extra problem to our application.

Q: What advice do you have for investors out there that know very little about EB-5, they just know that they have the funds and they want to become an American citizen, they want their childrento go to better schools, they want to have access to better healthcare, they want to participate in the American dream but they know nothing about this process. Where do they begin, Andrew?

A: If you can’t prove origin of money it doesn’t matter what regional center you like or what your plans are. You first have to prove origin of money. Once you prove origin of money then all it becomes is what regional center you want to choose. Absolutely it comes from … Also, I know this is a side issue, but it’s related to everything, is often some very rich are worried about tax consequences. Sometimes they have their wife do the EB-5 program because, just what you said, they want to bring their children over and go to US schools, get all the benefits with that, but they, themselves, don’t want to be taxed as a green card holder.
What they do is they do everything we had spoken about and their wife does the EB-5 program because all the money the father earns, he just gifts to his wife and then she just wires … Then they both wire the money to the regional center. There’s no extra transfer needed when the wife just wants to do it. The whole family sometimes becomes green card holders and the father, then, just comes back and forth on a visa. Sometimes they like to do that for a temporary time because the family is going to become US citizens eventually. Once they become US citizens they can bring their father over as US citizens, as a green card through family, immediate relatives.
Sometimes the father is like, “I don’t want to be taxed for the next five years as a green card holder, I want to construct my assets in a way to once I become a green card holder there’ll be no tax consequences or limited tax consequences.” That’s another angle which is quite easy for us to do.

Q: What do you recommend an investor not do with their funds as they prepare to apply for their visa through the EB-5 program? Are there any recommendations you give to the majority of your EB-5 clients to help them improve their chances of an approval?

A: Absolutely. The first advice is … You can’t imagine how often people ignore me on this. Do not move your money or transfer your money anywhere if you’re thinking about this EB-5 program until you talk to an immigration attorney. I can’t tell you how many times clients have moved money to, let’s say, a Kuwait account from their home country and say, “Okay, I have this money in Kuwait, I’m all ready to go.” After I ask them don’t move the money. Then we trace it back and they didn’t properly prove the origin of money. We either have to move all the money back, or reconstruct a whole other situation, and the whole point is, as I stated before, to reduce their problems. The talk to attorney and then the attorney helps plan them out of how they want to deal with transfers and prove origin of money. Sometimes it becomes a giant headache on their side because they have to move all the money they tried to transfer to different places and so forth back to the origin to redo everything. That’s the biggest no-no, and I can’t tell you how often that has happened, is do not move money … Or even, I apologize, or do a transaction for the EB-5 process until you discussthat with an attorney. The attorney has to go first, “That’s a good way to go ahead and prove the origin of money,” or, “We can go that route.” Second, I make sure, I go, “If you do that route can you get these documents to support this transaction or this sale?” If it’s yes and yes, and the route is correct, we can go ahead and go forward. There’s a lot of those things that you speak to an immigration attorney, where we actually help them plan it out. Once it’s planned out then they can execute the plan. To try to do it in the middle is disastrous.

Q: I think you’ll agree that a lot of the negative press that the EB-5 industry sees stems from unlicensed brokers and agents who are misguiding these investors. The investors should instead call an immigration attorney. Is it safe to say that the investors should not rely on any information they’ve heard from unlicensed brokers or immigration agents? My understanding is that a lot of these investors are just wiring $500,000plus into regional centers without having an investment banker or a licensed broker-dealer review the offering. Can you speak for a moment about safeguards and the proper way for the investor to go about this?

A: Absolutely, and you’re right. I’ve heard stories to that effect. When money has always been wired into the US, which it’s just shocking to me without any map or routes or instructions by an attorney, and like you said, there’s some shady middleman that I don’t even know, I barely can grasp their job title. There are some really bad situations. An attorney who does this a lot, when the client tries to ask prices on, and what do they charge, and so forth, we stop them. We go, “Wait a minute. We’re not taking your case unless we can prove origin of money,” because most attorneys who actually specialize in this field obviously get referrals based on approvals. When clients would jump over that step it’s worrisome. First of all, they shouldn’t do it at all until they can prove origin of money. The prove origin of money at the first step and then from that step, as you said, do not deal with anybody unless they’re a licensed broker. They first can walk around saying, “Okay, I’ve spoken to my immigration attorney. I now can prove the origin of money. My next step is to choose a regional center.” It definitely should be in that order. If it’s not, like I said, there can be a lot of problems and a lot of unnecessary problems. The person could have a legal way to prove the money just with an easy route but they would want to first make sure that’s set in order before they take any other steps.

Q: What is your advice, Andrew, for an investor who may have already wired the funds into a project before hiring you or an immigration attorney? Maybe they’ve gotten the cart before the horse so to speak? What do you do in those situations?

A: No, if the money is moved over we backtrack it. We go, “First of all, where did the money come from?” They explain it and then if we can piece it together the best we can … First of all, as I had mentioned before, sometimes we make our clients wire the money back. If there’s no way to prove it we would call the regional center and say … Like I said, the case is going to be denied. We explain that to the regional center and most likely a respectful regional center is going to be very willing to move the money out with the hopefully expectation that they clean it up. When I say clean it up means money goes out and then they find a different way to either use different money or to show how that money correctly came in a better route. Most regional centers will return the money back to let them redo it. This is hoping we’re not dealing with a deadline. Sometimes USCIS acts like they’re going to raise it 300,000 and then does not. For two years they had promised that for every September 30. We have a lot of rushed time. That last two months will be stressful because we have to hit that deadline and then USCIS says they’re not going to do it. Once again, the same issue is this year. We’re not sure if they’re going to raise it but they have explained they will. If the client says, back to your question, “Okay, I have 600,000. I am not moving it back to my home country. I’m going to go forward with this.” We would look at it and if there is less than, I would say, 60% chance of success we probably won’t take the case. We would just tell them, “It’s just ridiculous, why would you do this to you?” Hopefully it’s not utterly disastrous. You would think they would have some way … Like I said, we would sit there and go, “Okay, we’re going to try to piece this together. We think your chance of success is 60%, 65%.” Then we’d go forward on the case. With our other cases we at least explain to our clients, when they ask the percentage of success, we can tell them, “With respect to origin of money we can tell you that issue is 100%.” If they ask our opinion of that and that’s how we can construct most cases. We give them that assurety because we’ve done so many cases, we know what immigrational challenge and what they accept. We can really tell them … Or we can tell them, “Look, there are some issues here. There’s a high percentage you might get a request for evidence on that and then we’ll come back with more supporting documentation,” if they’re worried about this part of the origin of funds. We can do a lot of predictionson that issue. Once again, if they follow our instructions from the onset, and our pathway, usually there’s no issue whatsoever.

Q: Andrew, thank you for this great information and your time today in helping our investor audience understand the importance of origin of funds. What can you say to the investor listening who may feel overwhelmed by this information or who may feel as though none of these examples apply to them?

A: I guess the best explanation is they shouldn’t give up, even when they see me talk about all these examples, heard me talk about all these examples because I’m worried that the applicant is like, “I don’t fit into any of those, I have no chance for EB-5.” I’m not going to go over the hundreds of cases, each individual case and provide examples. There’s hundreds of thousands of ways you can prove origin of money. You just have to look at that individual situation and there is a extremely high chance that we can figure out a way to prove the origin of money. I don’t want people to go, “All his examples I don’t fit into therefore I’m not eligible for the EB-5 program,” I just don’t want to give that impression. It’s probably the exact opposite. If you have that type of money there’s a good chance that we can prove origin of money.

Q: Even in the most complex situation there is hope in the possibility of an approval for investors who follow the right path and guidance of an experienced EB-5 immigration attorney like yourself.

A: Exactly. We’ve seen so many situations and prepared cases that were very complex with complex transactions or numerous origins of funds from different locations and different sources that were comfortable in setting up a plan that we have seen be successful, already sent to immigration and already been approved. We believe we can go ahead and give them, like I said, a game plan or a map of how to go about it to prove their origin of fund.

Summary/Ending: Well we’ve reached our time limit for today’s episode but I’d like to quickly recap what we’ve learned about origin of funds. In preparing to make an EB-5 investment it’s really important to not start moving your funds around until you speak to an immigration attorney who can assist you in coming up with a plan and outline. Although loans are allowed, US immigration attorneys advise against them for EB-5 investments as they may delay or complicate the process. Even when you think you may not be able to prove origin of funds there are options, such as secondary evidence that may be used to help you with your case. You may receive the funds necessary to invest in the form of gifts from friends and family members. With the proper guidance and counsel of an EB-5 immigration attorney you’ll greatly improve our chances of an approval. Please note, these are generic instructions and hypotheticals as every EB-5 applicant’s case is different. Every potential EB-5 applicant’s origin of funds needs to be analyzed by a qualified attorney who has experience specifically in the EB-5 field. This podcast information should not be considered as legal advice and does not create an attorney/client relationship. More on Andrew Johnson may be seen at lawapj.com. It is imperative for investors to have talented immigration counsel but also strongly consider only looking at EB-5 investments which are also represented by a securities firm to be in compliance with US laws. It’s great to have them on the team and at no extra cost. Please visit eb-5eb-5.com to learn more about the EB-5 investor portal and how we may help you in the EB-5 application process. Andrew, thank you so much for joining us today. We look forward to having you on the show again real soon.

Introduction: Hello EB-5 investors. This is Floyd Mitchell with eb5eb5.com. Welcome to episode two of the EB-5 investor portal podcast, recording on Tuesday, June 27, 2017. Today’s episode is titled Origin of Funds and EB-5 Investments. Our guest is immigration attorney, Andrew Johnson, of law offices of Andrew P. Johnson in New York, New York. Mr. Johnson was a government prosecutor until he entered private practice in 1998. He has authored numerous articles on immigration and international litigation, some of which have been published by the American Bar Association and the American Immigration Lawyers Association. In addition, Mr. Johnson has been featured in the New York Times, quoted by the New York Daily News, and interviewed by CBS News on the topic of immigration. He has represented large corporations, nonprofits, and small companies in all aspects of immigration law. Mr. Johnson has spoken to business organizations in conferences around the world on the various strategies for immigrating and sending employees to the United States. Mr. Johnson practices immigration law exclusively and is an active member of the American Immigration Lawyers Association. Andrew is admitted into the United States Supreme Court first, seventh, ninth, and eleventh United States circuit court of appeals, New Jersey district court, and the State Bar of New Jersey. Today he will be sharing information about origin of funds in EB-5 transactions. Andrew, welcome to the show and thank you so much for joining us today.

A: My pleasure. Happy to talk about the most primary issue with a EB-5 applicant, which is the origin of funds.

Q: Can you share some insight about origin of funds and why issues or challenges tend to present themselves with this particular component in EB-5 investments?

A: Absolutely. There’s two issues with origin of funds. One, sometimes applicants think it’s no problem whatsoever and then they realize, after going into detail, there are some problems based on those country’s specific tax laws. Two, some clients think they absolutely cannot prove their origin of funds and realize once they talk to an attorney who’s done this for many years, there’s absolutely many avenues in which you can prove origin of funds. With that information, let me tell you about the basic requirements. Origin of funds simply means how to prove that the money was obtained legally for USCIS purposes. That’s the most important because a lot of people explain that in my country it was obtained legally and the government knows it’s obtained legally, however it might not be considered legal origin funds under USCIS regulations. The general rule about legal origin of funds is you have to come from an origin of which it was earned or legally obtained, and let me give you some examples. An easy one would be real estate. A house was sold and the proceeds of that money is used to show USCIS the legal origin of where the money came from. You also can do it from inheritance, just simple savings, investments, business profits or business salary, gifts from relatives or friends, and also you can use all types of variations. People don’t understand that you might have 10% come from inheritance, 10% come from business profits, 10% come from savings all the way through. You don’t have to have it come from one source. There is one other issue that often people don’t fully understand. They simply say, “Okay, I’m selling a house I owned for two years and therefore that’s the profit and I’ll show that and prove that as my origin of funds.” Because it’s a recent sale of a house, USCIS will want to know where that money came from to purchase the house two years ago. If it’s a home 20 years old the requirement for documentation showing how that money was earned is much less and can be usually drawn from affidavits or statements by the applicant.

Q: In your experience how would one go about showing detail for the origin of funds on a transaction that dates back 20 or 30 years or more? Can you tell us how secondary evidence may be helpful in situations where the origin of funds date back so long and the investor may have a difficult time producing the proper detail to satisfy USCIS requirements?

A: First of all, we, in our ideal world, if it’s 20 years, try to show all the lay and actually how the money was earned 20 years ago. You would have to show how the money was earned, even if the house is owned 30 years or 40 years. The issue is it’s just easier, usually you can show, “Okay, this money was earned by salary and here’s …My father worked for a company and he made roughly $20,000 a year over 10 years and then bought the house in 1992.” It usually can be established that way, so you always still want to establish it. It becomes, I guess the best way to explain it is if it’s two years ago clearly you should be able to find where the money came from two years ago. If it’s 15 or 20 you can do it with what they call secondary evidence, in other words not directly from bank accounts where the money was transferred over because people might not be able to have records of that bank account.
I apologize, it’s not an exact answer. We want to do our best to approve the money from a direct source as best we can, it’s just USCIS usually accepts what’s reasonable. It’s reasonable to show by affidavits and statements how the money was earned 30 years ago to purchase the house. It’s also reasonable that the house was bought two years ago to actually show where it came from out of bank accounts.

Q: I’d like to clarify for our audience, are origin of funds and EB-5 investments an item that only immigration attorneys work on? Or do other players get involved in this area at all?

A: Very good question. In fact, it’s our primary role. The other parts that we have to do are quite easy. It’s just identification documents and so forth. No, the investment banker, the regional center, they specifically don’t want to go into that issue because it’s a legal issue and requirement by USCIS. That is absolutely … That’s the most important job for the immigration attorney. As I had mentioned before, if the applicant can prove origin of funds there really is almost no other issue to make them ineligible to file for the EB-5 program.

Q: What are some of the common problems or misconceptions clients have with origin of money?

A: Most clients naturally earn money … Let me give you an example. If they earn money through business income and it goes into their business account and they move it over to their personal account. Then they take that money, obviously, and most people don’t keep $500,000 or $300,000 into their personal account and let it sit there. The money will either be spent on cars and jewelry and living expenses or the money will be invested in stocks. Then the money is used to purchase stocks or investments, and then someone might cash out on that investment and then spend it on something else. Now, often clients say to us, “I’ve made $750,000 over the last two years. I can prove that.” The problem is they can prove it from their business account to their personal account, but then if the money has been used, or sent out, or spent, they have to be able to show how they can bring that money back into their personal account to USCIS. In other words it has to be fully tracked back. The reason why it is as difficulty as it is, especially with things that you expense, that’s sometimes very difficult. A lot of clients have money from sources that we can’t use for USCIS, where they want to refill their personal account back up. They can say, “Okay, I can put $750,000 back into my personal account.” The problem is they can’t show where that money came from, they’re just refilling, in a sense, the personal account. Often, after we have those discussions, it’s easier for the applicant to almost do another business deal in order to get the money back into the business account moved over to the personal account, and have it stay there. With a lot of businessmen that’s actually quite easy. That issue, obviously, is what I had mentioned before. Some clients say, “Oh, well I make $500,000 a year, this should be no problem, it goes from my business account to my personal account, I have it invested and so forth.” They have to be able to legally show how that money is properly brought back into their business account without being replenished by money that’s from, in a sense, an ineligible source or an untraceable source. I know that gets a little complex but that’s what they really have to be worried about if they want to use money that they have saved or earned in the past. Where it went to and where it needs to go back. We have to draw it up in a sense where we actually track it and write up exactly the pathways, and sometimes even graph it up on a computer to make sure we can show the legality of it. Then we usually circle the sections or the amounts of money that would be considered questionable. Then with that we might say, “Okay, we have $75,000 that’s going to be untraceable, let’s try to find another source in order to prove that money,” which is often quite easy to do.

Q: Can an investor sell stock or other assets to come up with the investment required?

A: Absolutely. I don’t want to make it sound too difficult. If, for example, they earn income through salary or the business they own, they move it to their personal account, and then they purchase stock, then they sell that stock, it goes back to the personal account, we have legal origin of money, no problem whatsoever. The problem is, as I mentioned earlier, is often that money gets moved from stock, three years later it’s sold and goes to another stock, or then sometimes money is pulled out and expensed, that’s what I’m saying. When it has three or four multiple transfers you have to bring it back through all three of those transfers… Or trace it back from all three of those transfers to show the legality of it.

Q: In essence, USCIS wants to know where the funds came from, they want to know that they were obtained legally, and a large part of your role as an immigration attorney representing the investor is to assist them with this critical aspect of the EB-5 process.

A: Absolutely. What we do is we explain what we can explain right here, but also the client would tell us, “Okay, this is my portfolio which I think I can use.” They would then tell us where and how they got certain sets of money. Then between us we would choose the easiest route, we believe, that they could take which would have the least amount of tax consequences to them in their own country. Remember, USCIS doesn’t evaluate tax consequences in foreign countries. They don’t know the tax law, they don’t want to go into that. Everything is done outside. We give the applicants the best few options we believe and then they choose which option they want to with the least amount of tax consequences in their country.

Q: Does an immigration attorney help an EB-5 investor optimize or reduce their tax obligation in some cases?

A: In some sense. Our clients will know their tax laws from their country much better than we. We have a general idea of what it is. We just want to make sure there’s no tax problems within the US and the simple … We don’t do anything special, we just say don’t do the transaction or the gift transfer in the United States. Once that occurs, then they usually pick the route of how they want to do it in their own country. For example, if there’s three or four pathways we can choose, and let’s say if it’s in India, they get hit with high real estate taxes, they might want to avoid a high real estate tax sale to show that much profit. That’s just an example but we defer to the clients on their tax laws.

Q: Can you share with us some of your solutions where the applicant experienced difficulty showing how the money was legally earned or they just could not produce the necessary paperwork?

A: Absolutely. What I said earlier, when we would just say, “Lay out your portfolio,” and that’s probably a business term. “Lay out all where your money is right now, then we go over every possible option.” Then even if, let’s say, there’s an extreme difficulty with everything they told us we often go, “Okay, you’re often wealthy or have wealthy relatives and wealthy friends. It might be easier for a wealthy friend or relative to simply gift you the money.” We had a case where it was very difficult to show any tracking. As I mentioned, the money was earned but it was transferred out in so many variations and been out and resent to different places over the years. The person said, “Well I have a friend who is a salaried employee that owns his own business but is also salaried by a company based out of Singapore.” Our client was Bangladeshi. That friend, who had some control over the business he was getting salary payment, simply told his boss, “I run this operation in Bangladesh. Advance me $300,000.” He already had $250,000 saved. His boss, like I said, who he had an excellent relationship with, just advanced him and just said, “We wrote a letter from that business saying we are advancing our employee 200 or $300,000,” and that was it. In fact he wanted the money to be wired out of Singapore and not wired out of Bangladesh, which is often common. The nicest thing about that is that money that we used we didn’t even have to try to move out of Bangladesh. The money in transaction was wired into a Singapore account and to our client’s friend. He, then, just gifted it to his friend in another Singapore account and the person wired it to the regional center. That was one way to deal with it. Although that might sound fact-specific to that case you would be surprised how many people in the wealthy field who can afford $550,000 have friends or relatives who have a much better way to show how they legally earned their money because it might have been some recent real estate sale by a relative or a friend, or a friend might have a business that does import/export, that might easily earn $700,000 on a business deal. We would just show the contract on that deal, show the $700,000 earned, that friend puts it into his business account, moves it to his personal account, and then gifts it to our client. If our client has an international business where they buy and sell, or they have a friend with an international business buy and sell, and they don’t want to deal with the money inside their country they can set up deals where they have a transfer. They can do the transfer where the farm equipment goes to a country which our applicant lives at, or applicant’s friend lives, whether it’s Bangladesh or India or Pakistan or whatever country. The money can go to a place where they want it to go. The money could be transferred to a Kuwait bank account and we just show the contract, it says, “This import was from a farm equipment deal between an Indian client and another person from whatever country,” because that’s the seller. Once that transfer occurs we want the money to go into this Kuwait bank account. If that’s in the initial contract then they actually can keep the money out of the country, which some countries, Vietnam was another example, really don’t want money coming in if they’re going to do that transfer. USCIS does not care if the person is Vietnamese, Bangladeshi, Indian, or Pakistani, and a business deal occurs where the money is transferred to their account or to their friend’s account in Kuwait. Then moved from Kuwait into the US government regional center. That’s another way where people can avoid taxes, or, which we might deal with in another podcast, restrictions on how to transfer money out of that country. It sometimes solves two separate problems.

Q: If the funds are gifted to your client from a friend or family member, or in some cases multiple friends and family members, and let’s say one family member owns gold and sells their gold to get the funds, and maybe a brother of the investor sells a house and gives the investor a couple hundred-thousand dollars. Through a few sources this investor puts together the money required to make the investment. Do you have to prove the origin of funds from those original family members and friendsthat are gifting their money to the investor? Do you have to produce some sort of diagram or flowchart with supporting statements or affidavits?

A: You’re exactly right. For everybody, as I mentioned before, let’s say the applicant can’t prove his legal origin of money. He’s just going to work off gifts from relatives and from friends. You were right, each relative or friend has to prove their origin of money. I think one case we had close to 18 different sources and we had to prove origin of money from 18 different sources. When that relative says to you, “I’m gifting to you $50,000 for this,” we have to show how that relative earned the money. Often it’s not that hard, it might be salary. “I receive a salary, it’s wired into my account. Here’s my last year wiring it. Here’s $7,000 a month from that savings. I am giving them $50,000.” That might be an example. Or what you had stated, a relative has gold. They said, “I earned this gold,” or, “This gold was transferred through my family for this many years.” We would have an affidavit or a statement proving that and then we would show that as that original transfer. Each one, in a sense, would be, for legal terms, an exhibit. Exhibit A, $50,000 transferred to applicant. Then we’d have on the top of that exhibit the gift, it’s a simple gift letter, it’s nothing involved. The gift letter goes, “I’m giving $50,000 to my friend or relative in order for him to apply for the EB-5 program.” Underneath that would be proof of how that person earned that $50,000.

Q: What do you say to the investor listening today who has the necessary funds to invest in EB-5 but may think that they just can’t prove their origin of funds and may feel that they never will get approved and thus just never apply?

A: We’ve had people in the past who have told me just that. “Mr. Thompson there’s no way. I’ve looked through things and I can trace it, just my country doesn’t allow it or it just doesn’t work that way.” First we obviously go to the option, as I mentioned before, we go, “Well talk to our wealthy friends and family members and see if that’s an option.” That, like I said, usually clears up the problem because if you’re wealthy, like I said, you have wealthy relatives or friends.” The second option is, if they don’t have anything and they are wealthy and they have this, we simply tell them, “You can go ahead and sell property or you can go ahead and create, in a sense, a new business deal,” if they are import/exporters and everything goes through their business account. This is very challenging, especially people who have accounts in Kuwait. In other countries they don’t have personal account. They do everything out of their business account, which is completely legal within that country. They say, “Look, nothing comes from me, from my business or personal.” We would tell them, “Okay. It’s time to start gathering and putting our deals together and collecting them, any business account, new deals. Once you have 550,000 based on new deals into your business account I want you to open up for the first day a personal account and move that money into your personal account.” USCIS has to have that occur, although it sometimes seems silly to some of our clients or unnecessary. Even if they open up a personal account one day before they wire the money to the regional center. They have to do it. It’s just a sign the money came from their personal assets rather than their business. As you stated before, we usually can find a way, even if the applicant doesn’t believe there is a way, to prove the legality of the money.

Q: What are some examples of secondary evidence that can be used in providing origin of funds detail?

A: Let’s use a direct example of that. I’m just using gold for the reasons of this example. There’s other issues. For example, if someone has a house that’s 30 years old that cannot prove at all how they purchased the house 30 years ago, I always speak about Vietnam because their documents are very limited. In other words, there’s no real estate contract. Often things were written in scrap paper or there was no documents whatsoever. Secondary evidence is literally an affidavit from the person who bought the house, the relative who bought the house or the applicant themselves saying, “30 years ago I purchased a house for this amount of money. I paid it on collecting my salary because I worked as a professor at a university. We didn’t keep our money in banks at the time because our country didn’t have banks,” or, especially with Russian cases, a lot of the banks in the ’90s had closed so they cannot pull any evidence whatsoever for that reason. They often give an explanation. There was no banking system in Vietnam in the 1980s, in the Russian case they would say most of the banks closed in the 1990s, there was no records kept. Then they provide statements from themselves or whoever actually had the transaction. Another example is we had someone who had gold from their … They actually owned it but it was from their parents. The father had passed away in, I think it was, late 1988 or something. They had never put the gold anywhere. They kept the gold at home. The father had written a note in Vietnamese that stated, “I am giving my gold that I have to my oldest son.” It’s simple, on a scrap piece of paper, just a handwritten note. We use that plus a statement by the son, the applicant, who is now 50 years old, saying, “My father gave me through inheritance gold which I, three years ago, deposited and it was worth …” When I say deposited or cashed out, “It was worth $240,000 and here’s the best records I have from that direct deposit.” Whether it was receipt by the … The gold business might have given them a receipt or sometimes they can even get a letter from the people that they sold the gold to. Even if they can’t they often, a letter themselves, writing what happened can be what we call secondary evidence.

Q: Just to clarify, when you use the term statement you literally mean it could be a pen or pencil written on a piece of paper. Am I correct in assuming that? It doesn’t have to be some official document or form to be accepted by the USCIS?

A: Absolutely. I have always told my clients, what USCIS requires, documentation of evidence which is reasonable. If housing transactions occurred in the ’80s and ’90s in Vietnam, where they literally just transfer and give each other money on it, and maybe, like I said, get a deed at least from the government or some documentation. That’s all the evidence that’s available, that’s all the evidence USCIS can expect. When you said scrap, a piece of paper and pencil, absolutely right.
We do like to give the background of the situation in Vietnam. We have country conditions that talks about the banking system in Vietnam, how it was rarely used, no one trusted the banks, banks didn’t even exist in the 1980s. We can provide a newspaper article, roughly, that explains how sales were done in the ’80s and ’90s in real estate, whether it’s in India or Bangladesh or Pakistan or some of those countries.
Once again, if we’re talking about Germany … Now Germany, the expectation would be to have a paper trail if you’re dealing with in 1992, to have some type of document. Even if those banks were closed, let’s say someone, even in Germany, used a bank but can’t get records from that bank in 1992, they’re going to have real estate documents at least showing the sale. That, probably, would be expected. A lot of countries, and I would say the majority of countries that do EB-5, those type of direct documents are not expected if they’re 15 or 20 years old.

Q: Do experienced EB-5 immigration attorneys assist clients in producing historical documents that may support their origin of fund detail such as old newspaper clippings, as you’ve mentioned, or official statements from their respective governments?

A: Yes, absolutely. The nice thing is we’ve done so many that we already have the documents. We use the previous documents, we have articles explaining the banking system of that country at the time if need be and the country of course. All of that is quite simple to get the background because if it’s a national program or national issue there’s clearly been reports written about it. I also wanted to mention that often people say, “Okay, I earn the money, my father earned this money to purchase the house because he worked 20 years as a janitor from 1970 to 1990.” The father can write, if the father is alive, he can literally write, “I worked as a janitor for this school at this time.” If they can get a letter from the school that would be also great, but the school could’ve closed down. In a sense he’s saying, “I can’t even prove anything whatsoever where I got my money, but I worked at this job and I’m writing a statement, this is how I earned my money. This was my salary per month and this is the money I used to purchase a real estate house.” Salary statements are also very valuable when you want to have to prove secondary evidence.

Q: Can applicants use money sources in countries other than their citizenship?

A: Absolutely. It’s, I would say, pretty common. Often clients from these countries have bank accounts already in foreign countries. It’s already there to do the transaction. The reason they’re usually doing that is it’s just a little more difficult to move money out of their country. As I spoke before, people in some of those countries use a transfer agent to move it out if they don’t have accounts in other countries. One, they could have an account in Singapore, they can have an account in Kuwait. The money coming from those countries to USCIS is not an issue whatsoever. They also can open up a brand new account in Kuwait and Singapore and USCIS does not have a problem with it. They don’t say, “Wait a minute, why did you suddenly open an account?” USCIS knows there’s absolutely restrictions for countries moving money out of that country and they expect the applicant to go ahead, as I stated before, to sometimes use either their transfer agents, which have to move the money outside the country, or to actually use accounts outside the country. For example, standard Chinese cases are where they loan or gift $50,000 to 10 friends or relatives within China, and then that money is often moved, that 50,000 is then gifted back to the applicant in a Hong Kong or Singapore account. The money is then moved to a US regional center. That’s, I would say, extremely common and Chinese are probably 50% of all applications. That’s nothing that raises red flags within USCIS regulations. They actually expect that.

Q: Can investors take loans out, either personal or commercial, to invest in EB-5?

A: Very good question. Once you said loan I have to give you the recent regulation. USCIS allows loans. First I want to state that. Generally US immigration attorneys say, “Let’s avoid loans in every possible way.” For this reason: the case law has tried to delineate or clarify, and … The best way to explain it is USCIS requires, for someone tried to take a loan, based on collateral, it has to be based on collateral, and that loan has to be paid off within two years. As an immigration attorney, USCIS is going to give a request for evidence and just delay the case we believe, or sometimes, to wait until that loan is paid off. We do everything we can. We usually can work around it to avoid any loans. A loan is a red flag, not as an illegality, but it’s for USCIS to challenge it. What you said, can they sell off a piece of their factory, that’s great. If they go into a bank on a mortgage too, a lot of people want to just not sell the home but take a mortgage out on the home, absolutely. Legal but problematic because they eventually have to pay off the loan within two years. The cases actually run a year to a year and a half. They’re going to essentially have to go and pay it off. It’s just, like I said, it definitely stops from a clean approval and we do everything we can to avoid a loan. If it has to be paid off in two years we’re just adding an extra problem to our application.

Q: What advice do you have for investors out there that know very little about EB-5, they just know that they have the funds and they want to become an American citizen, they want their childrento go to better schools, they want to have access to better healthcare, they want to participate in the American dream but they know nothing about this process. Where do they begin, Andrew?

A: If you can’t prove origin of money it doesn’t matter what regional center you like or what your plans are. You first have to prove origin of money. Once you prove origin of money then all it becomes is what regional center you want to choose. Absolutely it comes from … Also, I know this is a side issue, but it’s related to everything, is often some very rich are worried about tax consequences. Sometimes they have their wife do the EB-5 program because, just what you said, they want to bring their children over and go to US schools, get all the benefits with that, but they, themselves, don’t want to be taxed as a green card holder.
What they do is they do everything we had spoken about and their wife does the EB-5 program because all the money the father earns, he just gifts to his wife and then she just wires … Then they both wire the money to the regional center. There’s no extra transfer needed when the wife just wants to do it. The whole family sometimes becomes green card holders and the father, then, just comes back and forth on a visa. Sometimes they like to do that for a temporary time because the family is going to become US citizens eventually. Once they become US citizens they can bring their father over as US citizens, as a green card through family, immediate relatives.
Sometimes the father is like, “I don’t want to be taxed for the next five years as a green card holder, I want to construct my assets in a way to once I become a green card holder there’ll be no tax consequences or limited tax consequences.” That’s another angle which is quite easy for us to do.

Q: What do you recommend an investor not do with their funds as they prepare to apply for their visa through the EB-5 program? Are there any recommendations you give to the majority of your EB-5 clients to help them improve their chances of an approval?

A: Absolutely. The first advice is … You can’t imagine how often people ignore me on this. Do not move your money or transfer your money anywhere if you’re thinking about this EB-5 program until you talk to an immigration attorney. I can’t tell you how many times clients have moved money to, let’s say, a Kuwait account from their home country and say, “Okay, I have this money in Kuwait, I’m all ready to go.” After I ask them don’t move the money. Then we trace it back and they didn’t properly prove the origin of money. We either have to move all the money back, or reconstruct a whole other situation, and the whole point is, as I stated before, to reduce their problems. The talk to attorney and then the attorney helps plan them out of how they want to deal with transfers and prove origin of money. Sometimes it becomes a giant headache on their side because they have to move all the money they tried to transfer to different places and so forth back to the origin to redo everything. That’s the biggest no-no, and I can’t tell you how often that has happened, is do not move money … Or even, I apologize, or do a transaction for the EB-5 process until you discussthat with an attorney. The attorney has to go first, “That’s a good way to go ahead and prove the origin of money,” or, “We can go that route.” Second, I make sure, I go, “If you do that route can you get these documents to support this transaction or this sale?” If it’s yes and yes, and the route is correct, we can go ahead and go forward. There’s a lot of those things that you speak to an immigration attorney, where we actually help them plan it out. Once it’s planned out then they can execute the plan. To try to do it in the middle is disastrous.

Q: I think you’ll agree that a lot of the negative press that the EB-5 industry sees stems from unlicensed brokers and agents who are misguiding these investors. The investors should instead call an immigration attorney. Is it safe to say that the investors should not rely on any information they’ve heard from unlicensed brokers or immigration agents? My understanding is that a lot of these investors are just wiring $500,000plus into regional centers without having an investment banker or a licensed broker-dealer review the offering. Can you speak for a moment about safeguards and the proper way for the investor to go about this?

A: Absolutely, and you’re right. I’ve heard stories to that effect. When money has always been wired into the US, which it’s just shocking to me without any map or routes or instructions by an attorney, and like you said, there’s some shady middleman that I don’t even know, I barely can grasp their job title. There are some really bad situations. An attorney who does this a lot, when the client tries to ask prices on, and what do they charge, and so forth, we stop them. We go, “Wait a minute. We’re not taking your case unless we can prove origin of money,” because most attorneys who actually specialize in this field obviously get referrals based on approvals. When clients would jump over that step it’s worrisome. First of all, they shouldn’t do it at all until they can prove origin of money. The prove origin of money at the first step and then from that step, as you said, do not deal with anybody unless they’re a licensed broker. They first can walk around saying, “Okay, I’ve spoken to my immigration attorney. I now can prove the origin of money. My next step is to choose a regional center.” It definitely should be in that order. If it’s not, like I said, there can be a lot of problems and a lot of unnecessary problems. The person could have a legal way to prove the money just with an easy route but they would want to first make sure that’s set in order before they take any other steps.

Q: What is your advice, Andrew, for an investor who may have already wired the funds into a project before hiring you or an immigration attorney? Maybe they’ve gotten the cart before the horse so to speak? What do you do in those situations?

A: No, if the money is moved over we backtrack it. We go, “First of all, where did the money come from?” They explain it and then if we can piece it together the best we can … First of all, as I had mentioned before, sometimes we make our clients wire the money back. If there’s no way to prove it we would call the regional center and say … Like I said, the case is going to be denied. We explain that to the regional center and most likely a respectful regional center is going to be very willing to move the money out with the hopefully expectation that they clean it up. When I say clean it up means money goes out and then they find a different way to either use different money or to show how that money correctly came in a better route. Most regional centers will return the money back to let them redo it. This is hoping we’re not dealing with a deadline. Sometimes USCIS acts like they’re going to raise it 300,000 and then does not. For two years they had promised that for every September 30. We have a lot of rushed time. That last two months will be stressful because we have to hit that deadline and then USCIS says they’re not going to do it. Once again, the same issue is this year. We’re not sure if they’re going to raise it but they have explained they will. If the client says, back to your question, “Okay, I have 600,000. I am not moving it back to my home country. I’m going to go forward with this.” We would look at it and if there is less than, I would say, 60% chance of success we probably won’t take the case. We would just tell them, “It’s just ridiculous, why would you do this to you?” Hopefully it’s not utterly disastrous. You would think they would have some way … Like I said, we would sit there and go, “Okay, we’re going to try to piece this together. We think your chance of success is 60%, 65%.” Then we’d go forward on the case. With our other cases we at least explain to our clients, when they ask the percentage of success, we can tell them, “With respect to origin of money we can tell you that issue is 100%.” If they ask our opinion of that and that’s how we can construct most cases. We give them that assurety because we’ve done so many cases, we know what immigrational challenge and what they accept. We can really tell them … Or we can tell them, “Look, there are some issues here. There’s a high percentage you might get a request for evidence on that and then we’ll come back with more supporting documentation,” if they’re worried about this part of the origin of funds. We can do a lot of predictionson that issue. Once again, if they follow our instructions from the onset, and our pathway, usually there’s no issue whatsoever.

Q: Andrew, thank you for this great information and your time today in helping our investor audience understand the importance of origin of funds. What can you say to the investor listening who may feel overwhelmed by this information or who may feel as though none of these examples apply to them?

A: I guess the best explanation is they shouldn’t give up, even when they see me talk about all these examples, heard me talk about all these examples because I’m worried that the applicant is like, “I don’t fit into any of those, I have no chance for EB-5.” I’m not going to go over the hundreds of cases, each individual case and provide examples. There’s hundreds of thousands of ways you can prove origin of money. You just have to look at that individual situation and there is a extremely high chance that we can figure out a way to prove the origin of money. I don’t want people to go, “All his examples I don’t fit into therefore I’m not eligible for the EB-5 program,” I just don’t want to give that impression. It’s probably the exact opposite. If you have that type of money there’s a good chance that we can prove origin of money.

Q: Even in the most complex situation there is hope in the possibility of an approval for investors who follow the right path and guidance of an experienced EB-5 immigration attorney like yourself.

A: Exactly. We’ve seen so many situations and prepared cases that were very complex with complex transactions or numerous origins of funds from different locations and different sources that were comfortable in setting up a plan that we have seen be successful, already sent to immigration and already been approved. We believe we can go ahead and give them, like I said, a game plan or a map of how to go about it to prove their origin of fund.

Summary/Ending: Well we’ve reached our time limit for today’s episode but I’d like to quickly recap what we’ve learned about origin of funds. In preparing to make an EB-5 investment it’s really important to not start moving your funds around until you speak to an immigration attorney who can assist you in coming up with a plan and outline. Although loans are allowed, US immigration attorneys advise against them for EB-5 investments as they may delay or complicate the process. Even when you think you may not be able to prove origin of funds there are options, such as secondary evidence that may be used to help you with your case. You may receive the funds necessary to invest in the form of gifts from friends and family members. With the proper guidance and counsel of an EB-5 immigration attorney you’ll greatly improve our chances of an approval. Please note, these are generic instructions and hypotheticals as every EB-5 applicant’s case is different. Every potential EB-5 applicant’s origin of funds needs to be analyzed by a qualified attorney who has experience specifically in the EB-5 field. This podcast information should not be considered as legal advice and does not create an attorney/client relationship. More on Andrew Johnson may be seen at lawapj.com. It is imperative for investors to have talented immigration counsel but also strongly consider only looking at EB-5 investments which are also represented by a securities firm to be in compliance with US laws. It’s great to have them on the team and at no extra cost. Please visit eb5eb5.com to learn more about the EB-5 investor portal and how we may help you in the EB-5 application process. Andrew, thank you so much for joining us today. We look forward to having you on the show again real soon.

 

Leave a Reply

Your email address will not be published. Required fields are marked *


www.EB5EB5.com has been reviewed by FINRA


Copyright © 2018 EB-5 Investor Portal, LLC. All rights reserved.

%d bloggers like this: