Free EB-5 Project Evaluation

EB-5 Source of Funds – Best Practices for Indian and South American Nationals

Sam (00:00:07):
Hi everyone. This is Sam Silverman, managing partner at EB5 Affiliate Network. Thank you for taking time out of your afternoon to join us today. Today, we’re going to be covering source of funds for EB-5 investments, best practices for Indian and South American nationals. And today, I’m joined by my partner, Mike Schoenfeld, also managing partner at EB5 Affiliate Network, and three industry-leading EB-5 immigration attorneys who will introduce themselves shortly. So, as we go through the webinar today, I’m sure people will have individual questions. Please use the chat box that’s on your screen to type in and submit any questions during the webinar. And then, at the end of the webinar, during the Q&A session, then we’ll try and cover as many of those questions as possible.

Sam (00:00:58):
So, to start with, a quick kind of table-of-contents overview of what we’re going to be covering today—first, a little bit about our speakers and EB5 Affiliate Network. We’ll discuss what is source of funds as it relates to EB-5, what are some of the most common source-of-funds pitfalls that EB-5 investors face, some best practices specifically for Indian and South American nationals, and then we’ll walk through a specific case study and a template to give you an idea of what a real source-of-funds package looks like for an EB-5 investor. And then, we’ll wrap up with questions and answers at the end. So, first, to start with, a little bit about EB5 Affiliate Network. As I mentioned, I’m Sam Silverman. My partner, Mike Schoenfeld, is also with us, and I’ll let him jump in and quickly introduce himself.

Mike (00:01:52):
Hi everyone. Thanks a lot for taking the time this afternoon to dial in to the webinar. Let’s see… as mentioned, I’m Mike Schoenfeld, one of the managing partners of EB5 Affiliate Network. And as you can see on the screen, we’ve assembled a best-in-class team with backgrounds in finance, law, and also real estate development. And we’ve been working in the EB-5 space for about eight years at this time.

Sam (00:02:22):
And a little bit about EB5 Affiliate Network. We’re a national regional center operator. We own regional centers that cover more than 20 states around the country, and we sponsor projects throughout those 20 states under the regional center sponsorship model. Now we’ll hear a little bit from each of our three panelists, starting with Rohit, left to right.

Rohit (00:02:48):
Hi, thanks Sam. My name is Rohit Kapuria. I’m an attorney at the office of Saul Ewing Arnstein & Lehr. We have about 19 different offices spread around the country about 400+ attorneys. And my role is, I play both on the corporate securities component of it—so preparing offerings and notices to investors—as well as on the EB-5 investment component, on the immigration side, whether project immigration or investor immigration. My role today, obviously, is gonna be talking about source of funds, but one advantage I’ve had so far in this space, and great fortune, is I’ve represented a large number of Indian-born EB-5 investors from around the world, particularly in my specialty. And that’s what I’ll be discussing this afternoon.

Christian (00:03:38):
Hi everyone. My name is Christian Triantaphyllis. I’m a partner at Jackson Walker, LLP. We are, in all, 200, 400 attorneys—a full multi-practice law firm. I am based out of the Houston office, where I’m the chair of the investment immigration practice. I’ve worked with hundreds of foreign nationals navigating the EB-5 program over the years. Many of them have also been from India, others from all over the world, South America included. Along with my expertise in EB-5, I also am a full-service immigration attorney. So, I’ve had the privilege of assisting clients with their EB-5 process and any other immigration issues that come up along the way. Happy to be speaking with you.

Anahita (00:04:29):
Hi everyone. My name Anahita George from Just Immigration. We are a boutique law firm based out of Philadelphia. I am originally from India, so I have that advantage. I speak a couple of Indian languages and have filed over 100 EB-5 applications. And I also specialize in Indian source of funds for Indian investors across the globe. So happy to talk to you.

Sam (00:04:58):
Great, great. Thank you, everybody, for taking time to join us today. And we’ve got a diverse group of perspectives and experience, so we should have a fruitful discussion and have some different points of view shared. All right. So, to get started, we’re going to talk a little bit about just what is source of funds. I’m sure you’ve heard it mentioned in different places, but a lot of investors don’t really understand exactly, kind of, the background for it. Why is this needed, and what exactly is it, and how does it vary from one investor to the next? So, to start off that conversation, we’ll have Christian talk to us a little bit about, kind of, what it is and how it’s going to impact the filing of an EB-5 application.

Christian (00:05:48):
Yeah, sure. So, thank you, Sam. I’d love to delve into this kind of kickoff topic, as it sets the tone for what we’ll be discussing otherwise. Whenever, you know, meeting or discussing the EB-5 program with a potential client, we always want to break down the I-526 petition into two different elements. One is the project set of documents, and the other is the investor set of documents. And within that investor set of documents, the most substantial portion of that is going to be the source-of-funds documentation showing how he or she has the $900,000 or $1.8 million investment amount, earned or gained through some way, shape, or form that we’ll discuss. So, source of funds is the process of documenting EB-5 investors’ source of funds for an EB-5 investment. And the government needs to be satisfied at, sort of, a preponderance of the evidence standard, “more likely than not.”

Christian (00:06:54):
This is not a “guilty until proven innocent” standard. So, it’s not something that cannot be overcome. We can certainly overcome it, but it does take an experienced immigration attorney. And it does take some patience working with that attorney to put together the approximate proper documentation. And that documentation, in a nutshell, will show that the investor has invested his or her own capital and that it is their funds, [earned] through a lawful source, and that the money has been invested in the EB-5 project. So, it’s a source-of-funds analysis and also a path of funds. That’s all well and good if we’ve documented where the funds come from to a very thorough degree, but we also need to demonstrate how the funds made it to the EB-5 project. They can’t just show up in the U.S. bank account without any kind of ties to where the funds came from. So, the path of funds is also a very key element in this process.

Christian (00:07:59):
So, when we are going to have the final package of documents prepared and filed with USCIS, it’s going to show that the investor source of funds have been met. It’s going to show that the path of funds are demonstrated. We’re going to show that the investor has joined as a member or a partner of the new commercial enterprise that is the EB-5 fund. We will show that the EB-5 project is going to create the required 10 number of jobs for the investor. And we’ll show that the investor is meeting the rest of the criteria—be irrevocably committed to the investment, properly active in the NCE as well. We put all those elements together, and that’s how we’ll file a successful I-526 immigration petition to start off the EB-5 process for the investor.

Christian (00:08:56):
It can take as little as three to four weeks to put together this amount of documentation. Sometimes it can take three to four months, depending on the complexity and the speed in which the investor is willing to work with the attorney on putting together the documentation. I’ve opened it up to anyone else who’d like to add comments to this part of the process, but I’m sure we’ll get into more details as well.

Rohit, Anahita, do you have anything you want to add before we move on?


Nothing from me.

Sam (00:09:41):
Okay, great. Okay. So, now we’re going to spend a few minutes diving into some more details on things to avoid and potential issues that come up for investors globally as they’re putting together their source of funds. And as Christian mentioned, this is a critical requirement because even if the investor has the money and the project meets the requirements, if you can’t trace and show exactly how those funds have been earned and how they’ve ended up into the project, then USCIS is not going to approve your application.

Rohit (00:10:17):
All right. So, here’s what we’re going to start with. We’ve got a breakdown of some of the typical sources. I’m going to take the first two elements, ordinary income and capital gains, and Anahita is going to take number three and number four, but as Christian was mentioning, a lot of this is based on the “preponderance of the evidence” standard. And the first thing that I always discuss with clients upfront is, A) how many sources do we potentially have, right? And then, B) do the sources actually make sense? The best way that I like to approach this is if it needs to be a story that gives the adjudicator, who is sitting in the cubicles, conceivably, or, well, in today’s world, working from home at his or her kitchen desk, and reviewing a large package with lots of bank statements or property documents, translated documents, and the story really needs to come across as genuine and really needs to make sure, convey a sense of confidence, that at the end of the day, it’s clear cut that this particular investor earned the capital, or acquired the capital, by lawful means.

Rohit (00:11:31):
So, the first part on ordinary income and how exactly we dissect ordinary income can play different roles. But if we assume that we’re dealing with an individual who earns W-2 income or has a business, and through that business actually earned capital distributions of some sort, the first part that we’re looking at is establishing that. So, the typical requirement that I go to is looking at tax returns. In most jurisdictions, we’re dealing with tax returns, but there are certain jurisdictions, such as in the Gulf area, where a non-resident, let’s say Indian or non-resident, lives there but doesn’t actually pay taxes. Now, they may pay some taxes on their income that’s based in India, but by and large, the majority of… let’s assume they’re based in Doha. It’s capital that they’re earning, and they’re not paying [taxes]—they’re earning 100%.

Rohit (00:12:28):
And unless they’re actually investing it back in India and earning some sort of gains, they’re not going to be dealing with what’s happening, but we have to really explain that. And we have to explain to the adjudicator why this individual actually earned, let’s say, you know, a million dollars on an annual basis, took home a million dollars, and wasn’t paying 30, 40% in tax or tax cuts or anything of that nature. And showing where the capital actually went, to the extent [that if] we need to have translations, we will get the translations. But where it gets dicey is really being able to show the bank statements. And many times, if an individual’s earned capital over several years, they’ve accumulated it, but not just that—they have several different bank statements, they have their salary account. And let’s just assume it’s a husband and wife, a couple—they have two separate salary accounts between them.

Rohit (00:13:23):
They intake the salary, and then they disperse it into multiple other accounts, which is very common in the Gulf area, or actually even in India. Then, the whole, sort of, forensic analysis of tracing—that becomes really complicated. So, we always want to go to the source account. First, that’s always a barometer of how difficult or complicated this is going to be. Some cases are very clear-cut. Some are not. The other element I mentioned on the tax returns is this pre-tax income, post-tax income, to the extent we need to get letters from the employer. If they’ve been through several different employers, maybe we don’t have that. If we have employment agreements, we pick that up. If they’ve been discretionary bonuses, we have to deal with that. But by and large, the key question is what exactly is responsible for the $900,000, to the extent that project’s in a TEA, or the $1.8 million, to the extent the project is not an TEA. That’s what we’re here to prove. Sam, if we can move to the next slide… I don’t know if I have control of the slides here.

Rohit (00:14:28):
All right. So, one more—after this, we’ll jump into the next source, capital gains. Okay. So, on the capital gains element, this is interesting—it doesn’t apply to everybody. And some folks get capital gains from selling stocks, some folks get it from selling property. Sometimes it’s a combination thereof, but when we’re dealing with investors upfront, depending on how many sources, the first thing that I always tell clients is, let’s try and limit the sources. If an investor comes to me and says, I have 15 different sources… yes, I love a challenge, but is that something I necessarily want to put forward in front of an adjudicator who theoretically has eight, nine hours, to review this, and is that going to make their life so miserable that they wouldn’t want to deal with it, right? So, let’s keep things simple.

Rohit (00:15:20):
That’s always my governing mantra. If they’re selling the assets, if it’s stock returns, or if it’s an actual property asset, is it actually in their name? Are they the ones responsible for getting the gains, or is it in the name of somebody else? So, how far back are we going up the ladder? It it’s in Dad’s name, Dad sells it, and that’s who pays the taxes. Then, how is it being conveyed to child, who was actually investing in it? So, again, the litany of items, of translations, showing tax payments, showing it back to the key account—those are all things that we’re going to have to deal with. So, if we’re dealing with more than one source, and we’re dealing with capital gains and we’re dealing with also ordinary income, just understand that there’s going to be multiple sets of bank returns, bank statements, and there’ll be multiple sets of paths of funds, documentation showing where the capital is accumulated and then how it actually made its way down into the funding account for EB-5 purposes. The next two sources will be by my colleague, Anahita. So, I’ll turn it over to her.

Anahita (00:16:27):
Thanks, Rohit. I’ll be talking about gifts, and it is usually the first question I receive from Indian investors—“Can I just take a gift and show it as a gift and just transfer to the regional center?” The answer is yes and no. If you’re going to use a gift as a source of funds, you need to document how the donor, the person giving you the gift, acquired these funds. If the donor is unable to provide the documentation, I would say this is not a good source to use. A lot of the time, we get questions about the intent of the gift. Why would a friend gift you $900,000? How do you show that there’s actually an intent of gift and no repayment expectation? So, again, in order to document all this, you’d have to show that your friend is really a billionaire and $900,000 is a small chunk of his or her valuation.

Anahita (00:17:30):
Again, going back to the source of funds, as Rohit had said, how did your friend or family acquire this property? If, say, they’re gifting you proceeds from a sale of land, how did they acquire shares? If they’re gifting you proceeds from a sale of equity, you have to, again, go through the source of funds and the path of why or how were the funds transferred from your friend’s account or family’s account to your account, from your account to the regional center. Bank records are extremely important. If it is inheritance, you must have a will. If you do not have a will, you want to look at local rules of succession to see how the real property was inherited. Absolutely do include certified translations of documents. Your job is to make the adjudicator’s job easy.

Anahita (00:18:29):
Definitely, you document as much as possible. Go to the next slide. Loans. This is, I would say, the second-most used source of funds. I just want to go back to the Reverse Bank of India regulations, which do not allow you to transfer construction loans. A lot of the time, the Mumbai embassy has caught up investors and said, “Hey, this is a violation of RBI rules, and you’re not allowed to borrow money from an Indian bank and then transfer it to regional centers.” So, in that case, I’ve had clients who borrowed money from friends and families. You need to understand that all loans need to be collateralized, and you need to demonstrate that the value of the collateralized asset is actually $900,000 or more. And you also need to demonstrate that the person that’s lending you the money has the ability to foreclose in case of non-payment. Source of funds, again, extremely important—the collateral property needs to be documented. How did you make money to buy the collateralized property? Was it through employment? Was it through your business? Tell a story.

Sam (00:19:57):
And some of the key questions that come up, particularly that an investor and the attorney want to be thinking about, are highlighted here at the bottom, right? So, you know, how did the investor, you know, obtain ownership of the asset? Where did they get the money to purchase it? Who’s the lender, you know—is it a bank, or is it, more likely, a friend or a family member? What are the terms of the loan? Is it an arm’s length loan, right? You’re not going to get a loan for $900,000 at 0% interest for 10 years, right? So, is it a real loan? Is the loan secured against a real piece of property or some kind of asset that’s objectively worth more than the $900,000? So, do you have a third-party appraisal saying that at the time of the loan, the asset securing the loan is worth more than $900,000?

And then, you know, how do you show, you know, the timing—that at the time you made the loan, the value was actually there and that the loan happened as a result of the collateral being secured? And one question that I think a lot of people listening probably have is, which of these methods is the most common to use for source of funds? Is it a combination of them? Is it one specific one? And what have you seen as being the easiest in terms of coming up with the most likely approval for the investors? If you want to give your quick thoughts on that, that’d be great.

Anahita (00:21:38):
This is Anahita. I’d like to jump in and say, in terms of loans, what I have noticed often is because adjudication is taking three to four years, I have noticed the officer coming back and asking for source of funds for loan repayment, which just eventually increases the work that goes into documenting source and funds.

Christian (00:21:57):
Yeah. And this is Christian—I’ve seen that as well. You know, typically a loan is not the simplest form of source of funds when compared to a gift, for instance. You know, there can… loans, some loan cases are simpler or more straightforward than others in terms of documentation required, depending on if you’re getting it from a bank versus an individual, what that collateral is for the loan. But I should say that when a client asks, “Where should my funds come from? What’s the easiest?” It really takes—and Anahita spoke to this earlier—it really takes understanding where your client is coming from, what their financial background looks like. And I know there was this mentioning of, kind of, how to be prepared to tell the story, you know—once any experienced EB-5 attorney hears about someone’s general background, he or she should be able to then develop the source of funds and what is the most approvable and perhaps simplest way amongst the options. So, it really takes learning more about the investor. But, you know, there are… some of these sources do require much more documentation than others. That’s for sure.

Rohit (00:23:23):
I’ll add to that. So, bouncing off of what Christian says, if the investor comes to me, typically within 15, 20 minutes, I can, you know, pull out the story, understand and gauge how difficult it’s going to be, but if I can Google the gift donor or the actual investor, and, you know, get a general idea that this person’s pretty much a very high-level professional at XYZ, a major bank, earns very high-level income, the story starts to make sense. If the person has no social media—which, by the way, you know, be aware that USCIS is combing social media. They’re looking at all of this stuff. They’re sitting at Google and looking up everything. But if they can’t genuinely make heads nor tails about how the investor came up with the capital, then it does sow a little bit of, a seed of, doubt. So, we should never be in a position where an—and I have had investors who’ve tried to convince me of one way or another. And, you know, I look at it this way: I’ve got this money, and this person has it. Why don’t we argue this way, this way? You should generally rely on counsel to really guide you because at the end of the day, when counsel is really asking probing questions and trying to get to the heart of it, they’re not being the enemy.

Rohit (00:24:42):
They’re just thinking from a basis of the number of RFEs that they’ve seen, which is really how we’ve learned to do our job, in a sense—we’re guided by the moving target, which is USCIS and what they’re coming up with. And so, the more our fees you’ve seen, the more you generally understand where USCS policy tends to be going and the current head of USCIS—or, sorry, not USCIS, but the IPO, the Investor Program Office, has an anti-fraud background. So, there does seem to be quite a bit of a shift in dynamics of really trying to determine whether or not the particular individual coming to United States is representing properly where the capital has come from and how it would have come into their possession.

Sam (00:25:32):
Thanks. Thank you, Rohit. One other just short example I want to share just to kind of give a compare-and-contrast with a real example would be, you know… a simple source of funds case could be, you know, husband, wife, they’re both professionals, one’s a doctor, one’s an attorney, they’re in the US, they’ve been on H-1B for a number of years. You know, they’re both earning $200,000–$300,000. And basically, their source of funds is going to be the last five years of joint tax returns showing, you know, they earned the money, they paid tax on it. They’re already in the US. USCIS is obviously going to be familiar with, you know, a U.S. 1040 tax filing. And, you know, that’s going to be a very simple, you know, source of funds, right? On the more complicated spectrum is going to be, you know, an investor not in the US—currently, let’s say they’re in Brazil or Argentina or India, and they’ve got five different sources of the money.

Sam (00:26:28):
They’ve got a friend loaning them some money. So, you’ve got to show where the friend got the money that’s being loaned. They inherited some money. You’ve got to show, you know, where they got the money from grandma. And then, you’ve got some earnings that they earned. Maybe they have some dividends from a company in India. Maybe they have some assets in another company as well that’s not an India. And so, it just gets a lot more complicated when you’ve got many different sources, particularly those involving translation and those involving other individuals and other companies that aren’t directly controlled by the I-526 applicant themselves.

Sam (00:27:10):
All right. So, now we’ll shift gears and get into some more of the details on some of the best practices that we’ve seen, that our panelists have seen, from USCIS—RFEs dealing with both the Indian and South American investors.

Christian (00:27:30):
Yeah. So, I can start us off by going over through more of the main methods of documenting source of funds, source of EB-5 investment. I know we’ll get into more detail within each of these groups, but just to sort of set the table—and, of course, we’re thinking of Indian and South American nationals involved. One is ordinary income. And one of the things you need to think about when approaching this method of source of funds is whether this ordinary income is coming through an employer or a self-employment or a business that you own as the investor. That’s going to change the amount of documentation and some of the type of documentation that you’re going to need to submit to USCIS to get the government comfortable with this ordinary income being suitable for EB-5 purposes.

Christian (00:28:30):
And we’ll get into more detail about that. Two, capital gains we’ll discuss as well. And really, when thinking of capital gains, we need to be thinking about capital gains on what type of asset are we talking about—real property, equity in a company, for instance, fixed deposit—depending on what that asset is, it’s going to dictate what type of documentation you’re going to be turning over to your attorney and USCIS. In addition, you’ve got to think about what’s taxable, what’s not, how are those taxes reported in your home country versus maybe how the United States would expect them to be reported, et cetera. So, we’ll get into more about that as well. Three, gifts or inheritance from family or friends. Now, this also is going to depend on where you are in the world in terms of what kind of documentation you might be required to, or even be able to, provide.

Christian (00:29:32):
So, whether the gift is from a family member or a friend will probably determine whether a gift tax needs to be paid on that gift or not. A lot of times, India, Mexico, for instance, you know, if it’s a family member, we’re not seeing gift taxes—however, is it a family member in the United States made to an Indian national, well, we have to look to whether that individual in the US needs to pay gift tax on that. So, that’s another aspect of it. And we want to look at the inheritance documents, of course, too. So, you’d need to demonstrate that in order to get a gift or inheritance EB-5 source of funds–qualified. Number four, loans from family or friends or companies. And this is an exhaustive list of the types of loans that we do see, of course.

Christian (00:30:28):
Financial institutions—typically, it’s going to have a sort of loan agreement with collateral listed that the investor owns. That collateral needs to be at least the value of the amount of the loan. We’re going to demonstrate how the individual, how the borrower, has money to have obtained that collateral and asset that’s used as security for the loan. If the loan is not coming from a financial institution—perhaps it’s coming from a family member or friend or someone’s company—we do need to get into how that lender has enough money on hand to make such a loan. It all goes back to the U.S. government feeling comfortable with the source of that money, how it’s been acquired, obtained, and how it’s been handed over or deployed to the EB-5 investor, who then makes his or her investment. Of course, the root of it is from a bank versus an individual—you can see how the analysis will change on that aspect of it.

Christian (00:31:28):
Let’s move to the next slide as we get into more detailed scenarios of each of these four different categories. Looking at ordinary income a step further. So, again, whether this ordinary income is made through self-employment or from an employer of the EB-5 investor is going to dictate what it is we’re turning over to the government. So, think of yourself as working for a large company in India or a medium-sized company in Brazil, something along those lines, or even a smaller company, you know. I’ve worked with a handful of smaller companies in various South American countries, where all of this information is available. And the government, USCIS, has grown accustomed to receiving it. So, we’ve mentioned the Form 16, Form 16A, income tax acknowledgement along with computation of income. This is just a way of saying, have the taxes been properly paid in your home country for receiving your salary?

Christian (00:32:28):
Also, we have an employment confirmation letter. This can come in various forms. Either we have a current letter that’s signed saying, “Yes, this individual works here and has worked here for the past handful of years.” You typically want that to be signed by someone in HR or someone in a leadership position. Sometimes individuals don’t feel comfortable with going and getting such a document, so we go back to their original offer or letter, or perhaps letters that show promotions along the way, to demonstrate an individual’s initial employment and ongoing employment over the years. Bank statements are also called upon to show that salary has been received, or other forms of income—bonuses, stipends, whatever it is that you receive from your employer. And we’re not looking for all of the money you’ve ever made. We’re not interested in that. We’re looking at demonstrating an accumulation of income that we can document that demonstrates the ability to make the $900,000 investment.

Christian (00:33:27):
So, we’d start by looking at a certain set, a timeframe, of bank statements that show that you’ve accumulated enough money but also maintained that money up to making the point of the EB-5 investment. If you’ve accumulated, let’s say, a million dollars in your local currency, and then you go and deploy it and send it out to make investments in other real estate or other investment opportunities and your maintenance within the bank statement or the amount within the bank statement dips well below that amount, we’ve got to demonstrate how the money came back in. So, we really want to show that you’ve maintained that large amount of income, a large amount of money, in your bank statement prior to making the EB-5 investment. Now, the self-employment differs because we’re also getting into not just probative evidence that you can receive from your third-party employer, but this is evidence that, you know, the government knows that you’re, kind of, you’re able to produce yourself, right?

Christian (00:34:25):
So, and perhaps manipulate a bit. So, they want to start to see other forms of evidence come in, too, to substantiate what you’re saying. So, this is when we call upon audit reports from an accountant or chartered accountant or a CPA to demonstrate the financial statements and the financial background of the company. This has become extremely important in EB-5 cases lately for people who are self-employed. USCIS also wants to know how an individual had funds to start the business up in the first place. So, we do have to get into a little bit of someone’s, sort of, business history in order to help the government feel comfortable with how the business was set up. We do get into the lawful means of doing business. And what I mean by that is we like to collect sample invoices and or contracts, certificates, and licenses that demonstrate the business’s ability to do what it does in its home country.

Christian (00:35:27):
So, this sometimes leads into more complex, complicated, or probative questions on behalf of the attorneys when working with the client. Sometimes businesses were set up long ago. How can we have documentation of the money that was used to set up that business? How can we expect to have that all, you know, in hand and ready to send over to the government? Well, we start to look to older types of evidence as well—show us photos of the old business when it started out, put us in contact with anyone who may have been a legal advisor or, again, an accountant involved with the business dealings back then. Perhaps there’s business licenses, perhaps there’s a death certificate and inheritance document in which someone has taken over ownership of the business as a result. Oftentimes, those documents will discuss some history of that business, but ultimately, USCIS does have some understanding.

Christian (00:36:25):
And this is, again, keeping up with that moving target that USCIS likes to have on EB-5 cases. But USCIS does have an understanding of, “Look, if this was all started five years ago, there’s going to be a lot more documentation available as compared to 50 years ago or even 15 years ago.” And so, we’ll work with what we can get if the businesses have been set up long ago, but we do have to provide just enough, whether it’s personal declarations, statements from a third party, articles from a newspaper. I mean, this is when we really have to start getting creative to demonstrate just enough information as to how the business was able to start up and now grew to being enough for someone to make enough money to make a $900,000 investment. Tax returns alone won’t do it. Tax returns are just a part of it in terms of providing the business, the corporate, tax returns and the individual tax returns. That’s a part of demonstrating a lawful source of funds—that everything’s being done to keep up with tax authorities. But we also have to show that the business itself is doing, is performing, lawful business. And that’s where the rest of the information that I discussed comes into play.

Sam (00:37:37):
Thanks. Thanks, Christian. One other thing I want to highlight that you covered briefly is demonstrating invoices and purchase contracts. So, you know, just being able to say that, you know, the business generated, you know, a million dollars in income and showing that million dollars did actually come into the business is not enough. You actually have to show that, you know, that money just wasn’t deposited there from some other company you owned or, you know, that it wasn’t, you know, kind of a sham transaction to just move money into this new company that you have. They want to see that, you know, you actually did arm’s length business transactions with real third parties that, you know, have no connection to your company and show that, you know, “I’ve billed $100,000 for company A, $200,000 for company B, and here’s the work that was done. And here’s the invoice. And here’s the bank statement showing when that money came in and that, you know, that was true income that was earned for a specific service, a real service, that was actually provided.”

Christian (00:38:44):
Yeah. To build on that, Sam, I mean, sometimes people come back to me and say, “Oh, you expect me to hand over 200 invoices?” Well, if you have five invoices that show large chunks of money coming into your business, then not necessarily—just show me those five, and that might be sufficient. But if they’re all $2,000 transactions, well, then there’s going, you know… we’re going to ask for more of those invoices to show that systematic method of business being done with income coming into the door of the business.

Sam (00:39:18):
Yup, exactly. And so, later in the presentation, we’re going to show a sample list of exhibits for an example of a source-of-funds case to give you an idea of what that exhaustive list of documents could look like. But to Christian’s point, if, you know, there are hundreds of invoices, then, you know, in some cases, you just might have to produce 100 invoices with all the records and, you know, yeah, that’s going to be 500 more pages, but, you know, guess what these total packages end up as—you know, 1000 pages and up. So, you know, it’s not uncommon to have, you know, 30, 40 exhibits and, you know, over 1000 pages of documents, you know, to show that everything is really buttoned up per the requirements. Rohit, do you want to jump in on capital gains?

Yeah. So, you know, on the capital gains side, there are different asset classes that we typically deal with on this element—we’re talking about real property or else equity.

Rohit (00:40:27):
These could be things on the share market, could be mutual funds. A few extra ones I’ll throw in—employee stock options are very common. And then, there are some other elements related to that, but let’s just talk about, kind of, the tiers here. Real property is very common, right? And there are many different elements just in terms of how a person acquired property. So, there is the inheritance element, which Anahita will talk about a little bit later when she gets into the gift implications. And then, there are those who have purchased property, and they’ve made it, sort of, systematic where they buy, sell. And given certain cities in which an investor may come from, particularly in India, the real estate market has skyrocketed, and it’s a supply-and-demand issue. There’s not that much land available. And as such, when people have land, and particularly in developing areas, where there’s just been a tremendous amount of metropolitan growth, then the valuation increases.

Rohit (00:41:34):
What we struggle with many times is there is the valuation that’s on what is called a registry. That’s what the government has collected a tax on. And there is, actually, the market value. And they’re usually distinct, they’re separate. So, a person theoretically purchased a piece of property for $50,000. They may have paid what is listed on the registry. They probably ended up paying, maybe, a cash value in addition to that—sometimes we can trace that, sometimes we can’t, and it’s not necessarily the case, but sometimes that happens—and then, eventually, five, six years later, the valuation has skyrocketed 10 X, 15 X, or so. And in trying to illustrate and explain that, the first thing that I always want to get is a market comparison. So, if we think about purchasing a property here in the US, typically, we’re going to do a comparison analysis.

Rohit (00:42:31):
Now, many times with investors, when they’re trying to do a market comp, they just simply get me a broker attestation. Well, problem is a broker attestation is self-serving—it doesn’t really get us there. And the broker attestation is basically just going to say, “We did an inquiry within the surrounding area, and this seems to be a relevant price.” Well, that’d be great. But the problem is that doesn’t really tell me and give me any factual elements. So, many times, I have to push back and say, “Well, get me an actual comp and show me a little bit more detailed so that when I go before USCIS, I can actually hang my hat on it and it’s not that some random individual has actually done that for me.” You do get, sometimes, a general pushback because the form which they’re using is, many times, a government template form, and it doesn’t really have an area for a comp.

So, there is some back and forth you ended up doing. But the other element is, you know, how was the property first acquired? One of the questions on here is, do I have to go back to the first property I acquired? So, if the individual that we’re dealing with is someone who has commonly delved in this business and does a lot of buy–sell transactions, that can get complicated, because if I have to go back 15 years, while I don’t really have an idea of how they earned the money, they may have gotten an initial gift along the way. They may have, you know… along with family members, they may have purchased several different properties, but then they didn’t really have partnership agreements.

Rohit (00:44:06):
So, trying to really unpack that gets very complicated. And we do have to explain to USCIS how that occurred. I’ve seen RFEs where the agency comes back—even if we’ve given a great level of detail—but they sometimes go back to the first property, the second property, and then they say, “Well, who is this other person that you’ve identified as, you know, putting some money in your account? Why did they do that?” And even if we attempted to explain that in the forefront, when there wasn’t a partnership agreement, it was the person’s brother, we at least try to explain that, okay, this person put in 30%, the property was sold, they got their 30% cut. Maybe there was a trail that came with it as a result. Maybe it was this, maybe it was that, but that all has to make sense to the adjudicator.

Rohit (00:44:55):
The other element in terms of selling equities, fixed deposits—I always want to know which bank, or banks, the individual deals with. If they’re dealing with a state-chartered bank like the State Bank of India, Bank of Punjab, that makes life a little bit more difficult because those banks are not necessarily as electronically driven. They’re they started to shift, but getting information may be difficult because they still deal with what are called passbooks, which are more the check depository elements. They are still paper-heavy in terms of the fixed deposits. Maybe sometimes you can get a printout from the bank of the actual [documents] that they have at the bank, but it’s usually paper-driven. But if we’re dealing with an individual who is dealing with, let’s say, Kotak or HDFC or ICC Bank, then, okay, it’s a little bit differently because then we can get some of those electronically.

Rohit (00:45:53):
The other element is also bank statements, because the person may have been selling and buying and selling over several different banks. And it’s very common in these jurisdictions for an individual to have five, six, seven, eight different banks. Part of that is, you know, maybe just the mistrust on what happens if the bank goes belly up, and there isn’t necessarily something akin to an FTIC insurance, or even if there is, being able to collect on that is going to take too long. So, they spread their wealth over several different places. And so, trying to really do a forensic analysis showing all the different banks, that’s how they got the money and tracing it back through all the trading can get very, very complicated. Sometimes investors will simply just give me, you know, the back pages of the tax returns and say, okay, go figure it out.

Rohit (00:46:45):
But, again, that doesn’t necessarily substantiate what it is we want. So, there is, you know… it’s a case-by-case analysis. Until we actually get into the nitty-gritty of the accounts, it’s hard to obviously advise a client on what what’s going to be required, but suffice it to say if the person has been dealing with employee stock options, dealing with purchases and sales of various equities, we make an assumption about the offset—that it is going to be intense, and it’s going to be over a several-year period, unless that individual is earning very high income levels over a few years. And then, we can actually go back and rely on saying, “Well, look, this person makes a million dollars a year. It’s perfectly reasonable to assume that they have a $5 million valuation and some mutual funds, because that’s just been built over a few years, not necessarily over a lifetime.” Move to the next slide, Sam.

Rohit (00:47:46):
Okay, great. So, this is the other element on gifts or inheritance from family. And Anahita actually talked about this a little bit ago, about 15, 20 minutes ago, but this gets really interesting, right? Because, particularly in the instance where we’re dealing with HUF. So, not very common if we’re dealing in India and, you know, a Hindu family and they’ve got a component where it’s sort of akin to a trust—I’ve actually spent some time on this topic with some colleagues over the years trying to really explain and spoonfeed that to USCIS. It’s not necessarily the easiest element. We generally hope the person doesn’t have that, but it’s sometimes [they do]. But you could either have an HUF estate. You could have just general estate or will-driven estate, with family members—basically a grandfather or great-grandfather, a great-grandmother, as the case may be, had property, and it’s just been passed on through the generations, and in those circumstances, if it’s really ancestral property that we’re dealing with, we don’t necessarily go back into valuations and the like.

Rohit (00:49:00):
We just sort of show some chain and explain the property deeds and how it came to be. We’ll obviously backstop it with paper, and in many circumstances, there will have to be translations that go with it along with the will, to the extent it’s not there. And it’s something that’s being passed down. What we always also want to look for is to make sure there’s no claims, adverse claims, on the property. And they can do a search on the registry within that particular jurisdiction to determine whether or not that’s a typical. There’s also the element of if it’s an ancestral part, and let’s say they’re siblings involved. We sometimes even ask for some of the siblings to sign affidavits to ensure that there’s no claim because what USCIS is concerned with is whether or not the individual is the rightful owner of the underlying asset that’s generating the EB-5 capital contribution.

Rohit (00:49:52):
So, if somebody can make a claim two years down the line and say, “Well, that actually should have come to me, but dad erroneously gave it to my brother or sister,” then that obviously could be a little problematic. So, we always want to make sure that there there’s nothing of that nature. And then, in terms of whether that property is responsible for generating a loan or whether that property is responsible for generating some sort of security that’s fused as a backstop, we want to make sure that it’s not otherwise encumbered. I recall a case about a year and a half ago where we were just doing some back and forth—the individual had several different properties and had encumbered them in several different ways but was using one particular property for the purposes of loan and did not represent to us that the property was actually encumbered under a different transaction.

Rohit (00:50:48):
And there was something, you know, the investor wasn’t very forthcoming. I kept asking probing questions, eventually a commission, a separate registry search, and then realized, okay, it was actually encumbered under something else and realized, well, look, if that ever came to light, it would have been problematic. So, we had to go back to the investor and say, “Look, you know, you didn’t really tell us this was a case. What’s the deal, what’s going on here?” And so, we eventually had to pull that out. So, if I go back to what I mentioned earlier, there’s a reason we as counsel give our clients a hard time. I mean, we are the barometer for whether or not something is going to pass muster. Many times, by the time we’re filing a I-526, the relationship may be a little strained.

You may like us when we started working on the case, you may heavily dislike us by the time we’re done, but we’re doing it for a purpose because if you can’t get past us, then strong chance you’re not going to get past USCIS. So, there’s rationale in that. I don’t know, Sam and the rest of the team, whether or not we want to talk about Wang and Zhang and some of the recent cases, but the one element that we’re always looking for is, if you’re taking a loan on a piece of property, and you’re utilizing that for EB-5 purposes, the valuation of that property needs to be at least the value of the loan or more. In most cases, it needs to be more because why would a lender give you 100% value in the loan? That makes no sense, that’s too much of a risk.

Rohit (00:52:21):
So, we have to be able to at least articulate that and show the underlying loan agreement and explain what’s happening there. Sometimes I’ve run into issues where the person has an overdraft account, which is common in certain banks that have, as they call it, schemes or practices—they will allow this person to have a line of credit which doesn’t really seem to be drawing on any other underlying collateral but rather just a long-term relationship. So, it’s just a line of credit with this person who has been with that bank for 15 years, has very high net worth, but then [the line of credit] is reliant on the fact that they’re going to keep making deposits. That gets a little bit more tricky to define because it doesn’t really fit the very narrow chapters of what USCIS wants on collateral. But if those circumstances arise, then we’ll figure out a way around that.

Rohit (00:53:07):
Now, Sam and Mike put a very interesting and important note here, which is the Reserve Bank of India has a restriction on using proceeds from a loan based on property collateral for EB-5 purposes. And the reason that they have that is because they are concerned with capital flight. So, most people are probably familiar with the remittance restrictions on how much money you can transfer out of India or some of these other countries, but surrounding that are a lot of other rules which one needs to be cognizant of, because yes, you may be able to get by on your bank, because the first test is your bank is actually the lender, or the remitter, of the capital has been charged by the Reserve Bank of India to be the first level of defense. If they allow you to remit the money, it’s always possible that they can come back.

Rohit (00:54:07):
The RBI could always come back and do a capital call and make you call back the funds. So, either USCIS may ask about this, because they will be familiar with the restriction, or, eventually, the embassy in Mumbai may ask about it and say, “Well, how did were you able to make [the remittance]?” So be very careful about what you do in those circumstances. The second one you’d want someone to be cognizant of is, India just recently imposed a TCS tax collection at source of about 5% on all remitting dollars, which took effect the start of this fiscal year in India. And that becomes complicated because folks have restrictions on how much they can transfer out between themselves or between family members. But then there’s also this 5% element, which, yeah, maybe there’s a way to claw that back through write-offs down the line, but it is something that we’ll have to necessarily deal with. So, those are my piece, and I think I’ll turn it over to Anahita.

Sam (00:55:09):
Great. Great. And thank you. Thank you, Rohan. We’ll spend a few minutes now running through, kind of, a real-life example, and I think this will make clear a lot of the points that were made earlier. This is a more complicated example involving a loan from a company that’s actually generating business through invoices, through consulting services. So, it’s going to be probably one of the more difficult sources of funds, to give you an idea of what could be required at the far end of the spectrum.

Anahita (00:55:50):
Right. I can take on this. And Sam mentioned, I can’t see them the rest of the thing. All right. So, in the sample, the U.S. business owner’s making a loan to an EB-5 investor against a real estate asset. Like Rohit said, I always want to take a step back and go back to the collateralized asset, which, in this case, for example, is a multifamily apartment in Mumbai.

Anahita (00:56:24):
The first question that needs to be answered is, how was this asset acquired? Was it self-employment, was it third-party employment? How did you acquire the funds to purchase this property? The next step would be the appraisal of the property. Again, as Rohit said, it’s very easy to get appraisal documents in India saying, “Hey, this is worth $1.5 million dollars.” I’ve had the embassy question valuations in the past. So, you’re going to have the push the investor to get you legitimate comparables as to the value of the building or comparable sale prices for apartments in that area. So, once you’ve established the source of funds utilized to purchase this multifamily apartment, along with the appraisal value, you will use that as a collateral. The most important thing you need to show is that this person in the United States, or anywhere in the world, has the ability to foreclose on this property if you were to default on the loan.

Again, this is a more complex source-of-funds transaction. Ideally, you’d have a bank involved in India, who will then easily be able to foreclose if you weren’t paying your loan or your interest. Keep in mind, USCIS has come back and asked for documentation of a source of funds of repayment over and over again. You also need to show—in the case of India, it’s called an Index Two, which is a deed which will show recording of the mortgage—and demonstrate a clear path to foreclosure. So, then, once all of that has been set up and you’ve received $900,000 from, say, your friend, who’s U.S. national, you then would have to show how your friend has acquired these funds. How did he make the money he made, or she made the money she made, in order to give you the loan? In this case, this person is in the consulting business.

Anahita (00:58:29):
Because it’s a U.S.-based business, that makes it a lot easier to document. You know, you’ll have incorporation documents, you’ll have an operating agreement. A lot of the times, you can go onto the state website and pull out annual reports, registration documents—USCIS will be able to verify the authenticity of the documents. One benefit of using consulting businesses as source of funds is the startup costs for that business is relatively low compared to an asset-heavy business like manufacturing. So, if your friend then has to explain, “Hey, what funds did you use to start a digital consulting business?” Your friend can come back and say, these are services. All I needed was income money to pay rent for office space. And I got that money saved from my employment of five years. That can be easily explained utilizing W-2s, rental agreements, and just a sworn affidavit. And then, the 1040, your W-2s will substantiate the income.

Anahita (00:59:32):
And then, from there, you’re going to establish a path of wire. A lot of the times, the question I get asked is, “Is it okay for my friend to just directly wire the funds to, say, the regional center in the United States?” This depends on the adjudicator. I have had times where I’ve had the adjudicator come and say, “Well, the donor didn’t relinquish control, and they never sent the funds back to the done, who then has control to do whatever they please with the funds.” Usually, my recommendation is, you know, have a bank account set up for the done, and then wire the funds to the investment vehicle. And then, there are times where USCIS just accepts that the friend is investing on behalf or at the instruction of the investor.

Anahita (01:00:28):
So, this slide is just a sample of what the template cover letter looks like. I’ve had a bunch of investors come to me, showing me their petition, and there is no descriptive narrative of how the funds were acquired. This will come back as an RFE, and in today’s day and age, you want to be very careful. The preliminary filing needs to be heavy—if it’s not well-documented, USCIS has the right to outright reject your petition. So, if you see a 300-page EB-5 petition, you should have red flags. You should be seeing red flags. You want to document the entire story of how the source of funds were acquired and the path of wire—from what bank account and the funds go to which bank account, when did it go to the regional center. Along with that, you also want to document all the exhibits that you are providing to USCIS. So, make a detailed list. Sam, if you could go to the next slide.

Anahita (01:01:33):
Yeah. So, this is a summary of exhibits. What we try and usually do is tell the story, first in the form of a descriptive narrative, and then provide a summary of exhibits. This is just the sample for the source of funds in the previous flow chart that are talking about the asset valuation letter, third-party proof of the [asset’s] existence, date of mortgage, death certificate, will. Yeah. And so, what I also tend to do in practice is, if I am stating, “Hey, this is an asset valuation letter, what is it saying? Oh, it’s evidencing the value of the property,” [I’m] basically doing the job of the adjudicator so that they don’t have to think twice.

Sam (01:02:18):
Thank you. Thank you, Anahita. We’ll go back to the previous slide for one second. One thing we want to emphasize here is that, you know, this is a template example for the case of loaning funds to an investor who has an asset overseas and the accompanying exhibits. Obviously, this is not a one-size-fits-all situation, but it is a good example of what the source-of-funds section can look like as part of the cover letter that’s being sent into USCIS. And one important thing to note with that is in the cover letter, you’re going to have… the initial sections are going to talk about the project. So, let’s say you’re investing in a project in Florida. Well, the first five pages of the cover letter are going to explain how your investment in that Florida project meet the EB-5 rule requirements for creating 10 jobs and keeping money at risk, et cetera.

Sam (01:03:16):
And then, typically, the last section of the letter is going to be this background source-of-funds section, typically two to three pages, sometimes longer, which is going to describe exactly how the funds came into the possession of the investor. And on our website here, link at the bottom of that, I’ll put it in the chat box as well, is an article that describes a few different case studies and includes a link to download this three-page template outline. So, you can get an idea of what this could look like for a situation where there’s a loan being made to an overseas asset. And as I mentioned, any questions, please submit them through the chat.

Mike (01:06:14):6:14):
And with that, we’re going to dive into some of the questions that we received on the webinar. We are going to screen through—anything that’s very individual-focused I will probably skip over, but anything we think applies to many of the viewers of the webinar we’ll dive into. So, Sam, we’ll go ahead and start asking the questions, and our panelists can jump in with their thoughts.

Sam (01:06:37):
So, we’ve got a number of questions. We’ll try to cover as many as we can. The first one we got is, “Can I take a $500,000 unconditional interest-free loan from a friend as a source of funds?” And maybe we’ll have Rohit jump in and answer that first one.

Rohit (01:06:57):
So, I had referenced earlier Wang and Zhang sort of cases. And we’re not going to dive into the intricacies of that, because, you know, in terms of whether or not that’s applicable, whether or not that’s something that we want to necessarily test, different attorneys have different opinions on the validity of that. But suffice it to say, if we are strictly looking by what we’ve presented in the webinar today, an unconditioned, uncollateralized loan will not make sense because, well, why the heck would a friend give you $500,000 without any level of security? And how do we know that this particular person is not going to come back and try and claw that back from you later? Number one. And number two, how do we know that you’re not necessarily just giving this person capital on the backend that you couldn’t source and then he or she is basically giving you capital that is sourceable? And so, those are general questions that we’ll have on the upfront. And if we can’t get past that line of inquiry, then that’s probably going to be a no.

Christian (01:08:09):
This is Christian—just to add to that, it’s not something that you can say, well, today, it’s a loan, and then, you know, months later when the government opens it up and may ask questions about it, and then you say, “Well, let’s characterize it as a gift.” That’s not an acceptable change, either. USCIS is going to say, “Well, this was described as a loan, and therefore you did demonstrate that it’s a loan.” That’s if that type of loan was even used to file the I-526 petition in the first place.

Sam (01:08:47):
Yep. Yep. Thank you, guys. One another question we had is, “If my EB-5 investment capital is from myself, business income, and I have all the tax documents to show the income, do I also have to prove my initial investment in the business to start it?”

I can take a stab first.

Go ahead, Christian.

Christian (01:09:10):
Oh, sure. Well, I was just going to add on to some of the points that I made earlier about this topic, which was, yes, generally speaking, USCIS does want to know how an entrepreneur, a business owner, was able to put in the capital to start up the business or to join the business, whether it was three years ago or—and I don’t mean to sound too daunting—but 30 years ago. Now, that amount of evidence is going to vary depending on how long ago and how much, you know, record-keeping is being done to demonstrate the source of that initial capital. But in general, USCIS does want to know more information about it. And we work with clients on how to put forth enough information, whether it comes directly from the investor or, as I mentioned, from some supporting evidence from others who may know about where the money came from, or may have been around when that initial investment occurred. Go ahead.

Rohit (01:10:17):
Yeah. And I think, you know, just to add to that, I’ve seen each thing ends up being slightly different. I go back to what Christian said at the start of the webinar, which is a preponderance of evidence, right? And so, counsel will advise you as to what we think works based on all the facts provided surrounding the source of funds. And if we don’t get warm and fuzzy over the details, then we can assume that USCIS similarly will not. I recall a case I had a couple of years back, where the individual had put in, I think it was a very low amount, $100,000. It was five or six years back. And all of a sudden, the valuation of the business was now in the upwards of $20, $30 million, which, yeah, maybe you strike the jackpot, and it makes sense.

Rohit (01:11:11):
But then, when we were probing, looking through the books, it wasn’t clear how we got to the valuation because revenue numbers were not there. There was certainly capital, but then what the person had done over the years, where they started attaching all these different properties and different lines of businesses to the original business… we just sort of got lost in the framework because it now had become this conglomerate of different entities. And when we’re sourcing back to the original, $100,000, we then started having to go in different tangents because now, it’s like, this new entity joined, okay, let’s go source that one. And then this one joined, let’s go source that one. And everything just got mixed up. So, it varies on a case-by-case basis, is essentially the scenario.

Thank you, Rohit, Christian. Another question we got is, “If I have a stock portfolio worth $2 million and I take a third-party loan against it, what types of documents do I need to show?

Christian, you go, then I go.

Christian (01:12:20):
Sure. So, if you have a portfolio of investments that you’re using as security to receive a loan from… did you say a bank or a third party? What kind of documents do you need to show? Is that what the question was?

Yep. Yep. It doesn’t say, just “third-party loan”—could be a bank or most likely a financial institution.

Christan (01:12:4001:12:40):
Sure. So, the investments I have found to be, you know, for clients, fairly easy to document that in terms of, let’s show the initial purchase of the investment and the maintenance of those investments, and we’ll show portfolio reports or statements over the years, depending on how long that those investments have been in place—if it’s five years, maybe it’s the end-of-year statements. If it’s five months, you know, five months of those investments is a lot easier to show than years and years of it. We also do need to get into how the investor purchased or made those investments. And that can vary depending on each individual’s background, whether the money was gifted to that an individual, or perhaps those investments were gifted, or whether, you know, the individual was able to make those investments because they made a good salary over the last 10 years—that will vary.

Christian (01:13:44):
But regardless, we do need to get into some type of description on that source of investment, if you will. Now, in terms of the loan, you know, we do need to show who that lender is and if it’s a bank, well, typically it’s pretty straight forward how the bank has money to loan. If it’s a third party, an individual or a company, we do want to demonstrate how that individual or company has money to loan to the investor. We also need to get loan agreements drafted with interest rates and terms and security described, that collateral described of those investments and the collateral valuation explained. So, it’s not good enough just to say, as the borrower, you know, “I’m putting forth these investments, which are worth this amount.” We want to have an accountant or some other form of valuation put on that collateral and worked into the loan agreements. And it all comes together. And that’s what it would look like, kind of in a nutshell. Of course, each case can vary and get into more detail, but that’s a quick and dirty answer of it.

Rohit (01:15:03):
Not much more from my end.

Thanks. Thanks, Christian. Thanks, Rohit. Another question we got is, for both Christian and Rohit, “How does the engagement process work? If I’m looking to hire an attorney, you know, how long is it typically going to take to get documents together? And then, you know, what if there’s an RFE—is that a separate charge, or is that all included, or how does that vary? And then, also, you know, is there a variance, you know, based on how many family members I have who are going to be part of the application?”

Rohit (01:15:41):
Detailed question. So, on our end, you know, we do sort of have standard pricing at each step. So, the EB-5 process is a three-step process. The I-526, the consular [application] or the adjustment of status, and then the eventual I-829. So, we sort of follow along with what a lot of our peers do in terms of the varying charges. At the I-526 stage, it doesn’t really matter how many family members—we’re focused more just on the source of funds. The subsequent element, on the adjustment or consular [processing], is where that comes into play. And then, obviously, yes, we would be charging for each member. It’s not a huge amount or anything of that nature, but the terms… generally, while we have our standard, we also want to make sure we understand what the sources of the outset are. If it’s going to end up being a, you know, a really difficult, heavily complicated case, we may charge a little bit more to cover our time because now, all of a sudden, we’re not just looking at four banks, you know, four different banks—we’re now looking at 15, 20 different banks.

You know, the asterix on that point is, is that even a source of funds we should be doing right? Because then, if USCIS is going to get too confused with everything, then we’re just asking for trouble. We want to keep things simple. Keep in mind, not every investor is a good EB-5 investor for purposes of the source-of-funds analysis. You may have the capital, it may be valid and legal, but it may be way too complicated for USCIS. But, again, that’s a judgment call we’ll collectively make. And then, as far as RFEs are covered, personally, on my end, we have a carveout for that, but generally what happens is we get an RFE, we’ll take a look, and then I’ll go back to the message and say, “Look, here’s what I assume the time is on the basis of it.”

Rohit (01:17:47):
And we’ll agree on a particular number that at least covers us. But keep in mind, for clients, if you’re looking for coverage in the RFE, USCIS is taking two, two and a half, three years to review I-526 petitions. So, if we do get an RFE down the line, we’re really having to go back and look at that thousand-page source of funds to remind ourselves as to what all the intricacies are, spend the time and then look at exactly what USCIS is not coming up with, which some of it may actually be new stuff that we never really had to do in the past. So, that’s how my investment works.

Christian (01:18:26):
Yes. And I do mine similarly. So, it’s all going to be an engagement agreement. You would typically see a flat fee involved when working on EB-5 immigration matters with an attorney, and it just can depend whether that flat fee is going to cover the I-526 and the RFE, if that comes in, and it covers the adjustment of status or consular processing, and it covers the I-829 petition, or whether all of them are broken up into different stages. I can tell you that not all, you know… it’s not a one-size-fits-all for clients. Clients like different arrangements, different stages to be paid in the flat fee model. So, I don’t think there’s one answer for that, but that’s some general feedback.

Sam (01:19:24):
Great. Thank you very much, Rohit and Christian, that was really helpful. We’ve got one final question, and then we’ll wrap it up. And we did get a couple of requests for the slides, so I put a message in the chat box. Everyone will get an email with a link to a video recording of the entire webinar, but if you want to get just the PowerPoint slides, then just send an email to the email address in the box, and then we can have that sent over to you. So, the last question that we got is, “If an overseas asset is used as collateral to make a U.S. dollar loan from the US, are there any money laundering or currency control concerns that USCIS might raise?” I think one important note for one is that if it’s a U.S. dollar loan and it’s coming from the United States, then it’s probably—and I’ll let Rohit and Christian comment on this—but it’s probably best that the money doesn’t leave the country, go to India or Brazil, and then come back, right? Probably best to just have it remain in the US. But I’ll let Christian and Rohit comment on what they think for that.

Rohit (01:20:31):
I’ll take a first stab. Yeah, I mean, the round tripping can be complicated of the money. The other element, though, is being able to argue that the rightful beneficiary was the individual that’s at stake. This sometimes becomes a little complicated because certain countries have different restrictions, I mean, India being one of them, where on the RBI side, when you’re sending money out through different family members, they want to see that the underlying account in which the capital was eventually accumulated had that remittor as the beneficiary of that account, the beneficial owner. So, that’s a complicated theme, but then there’s also USCIS concerns as to whether that capital is properly attributable back to this borrower that took the loan. If the money hasn’t necessarily left the US and if the person doesn’t have a U.S. bank account, then what are we doing there?

Rohit (01:21:32):
So, there’s different circumstances, and we’ll have to pay for it accordingly. And it has to, obviously, make sense that the eventual beneficial owner is that investor with all the relevant capital. But going to the underlying question, whether a U.S. lender is making money to a borrower sitting outside with assets outside of the US, you know, we’ll go to the terms of the loan agreement and whether or not the collateral is properly secure. We’ll look, at least from a corporate perspective, we want to make sure the jurisdiction is applicable. What happens in event of default? Where exactly is the property registered? What’s our ability to default out of the borrower for absence of payments on the loan, and what are the terms? So, these are different ports of analysis of that, but in theory, can it work? Yes. But it is very fact-specific.

Christian (01:22:32):
Yeah. I agree. I agree with everything Rohit just said. You know, if the funds don’t go back to the home country and they’re sent directly to the EB-5 project, that that can be done, but we have to worry about that ownership and control element, of showing USCIS that the investor has over the EB-5 funds. I have successfully filed or have cases that have been successful in terms of loans that used collateral that was not in the United States. They were outside of the United States. I’ve seen USCIS ask more questions about it at times. You know, “Is this something that really is enforceable?” And we’ve had to demonstrate that it is. Other times, USCIS has not questioned it, but it is not something to take lightly. And you want to take a very good look at it before you do that kind of arrangement.

Sam (01:23:36):
Great. Great. Thank you. Thank you very much, both of you, and Anahita as well, for sharing your thoughts and comments on these various situations and giving us a little bit of exposure to some cases and RFEs and experiences that you both have had with USCIS. So, with that, we don’t have time for any more questions, but all the contact information for all of our participants is on the screen, as well as ours. If you have any questions about any of the materials, please send us an email. And as I mentioned earlier, everyone will get a link to a video recording of the whole webinar, if they want to go back and reference a certain section. If you do want a copy of the slides, send an email—in the chat box I put the email address—send us a note, and we can get you the slides as well. So, thank you again, everybody, for taking some time, and sorry, we ran a little bit over, but it was a great overview of source of funds for Indian and South American investors.