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EB-5 Source of Funds – Best Practices for Mexican Nationals

Sam (00:00:05):
Hi everyone. This is Sam Silverman, managing partner EB5 Affiliate Network. Thank you for taking time out of your day to spend a few minutes with us to talk about source of funds best practices for Mexican nationals. Today, we’re going to be joined by Julian Montero, a good friend and colleague, a well-known and experienced EB-5 immigration attorney in the space with extensive dealings with Mexican EB-5 investors. Today’s webinar is going to be recorded, and we’re going to have a YouTube video posted of the recording of the webinar in a few days. So if you need to reference it in the future, it’ll be on our YouTube channel. And if you’re interested in getting a PDF copy of the slides following the presentation today, please reach out to us at the email on the center of the screen—info@eb5an.com—and we can share a copy of the presentation. During the presentation, if there are any questions that come up, please use the chat box on your screen to submit any questions, and we’ll try to cover as many questions as we can at the end of the webinar today.

Sam (00:01:26):
Okay. First, to get started, a quick outline of what we’re going to cover in the webinar today. First, we’re going to talk a little bit about our guest speaker and EB5 Affiliate Network, or EB5AN for short. We’ll talk about what exactly is source of funds, how does it fit in terms of the EB-5 investment context? We’ll talk about some of the most common sources of funds that investors draw capital from to make EB-5 investments. And we’ll talk about some of the pitfalls and issues that EB-5 investors face when documenting their sources of capital for their investment. Then we’ll talk specifically about best practices for Mexican nationals and what types of documents are really country-specific that investors with assets in Mexico are going to want to take note of. And then, we’ll wrap up at the end, and we’ll cover questions and answers.

Sam (00:02:37):
So, first, before we jump in, for those looking to determine if a project does qualify as a targeted employment area, meaning that the minimum investment is the lower $900,000 amount instead of the $1.8 million, please check out our targeted employment area map. It’s completely free available at eb5affiliatenetwork.com. You can type in any address in the US or any of the U.S. territories. And it’ll immediately tell you if a site does qualify and allow you to generate a free qualification report as well. Then, additionally, for more information about the EB-5 visa program and investment process, overall, you can reference our EB-5 guidebook, available in hard copy on Amazon, or if you want a digital copy at eb5guidebook.com, completely free as well. Okay. So we’ll start with a little bit about EB5 Affiliate Network and our guest speaker. So, as I mentioned earlier, I’m Sam Silverman, one of the managing partners at EB-5 Affiliate Network and joined today by my partner, Mike Schoenfeld, who I’ll let introduce himself as well.

Mike (00:03:52):
Hi everyone. Thanks for taking the time to join us today for the webinar. As Sam mentioned, I’m Mike Schoenfeld. My background’s on the screen. Prior to founding EB5AN about eight years ago, I was working in private equity at AEA and at the Boston Consulting Group before that, which is where I met Sam. As you can see, all three of us came from more of an institutional background, working at some of the largest financial institutions, legal firms, and consulting firms. And we tried to bring that experience to the EB-5 industry

Sam (00:04:31):
A little bit about EB5 Affiliate Network as a company—we’re a national regional center operator and fund manager overall across all of our regional centers. We have more than 1,885 investors for more than 60 countries. And we’ve been in the EB-5 space since 2013. Our regional centers cover about half of the continental United States, and all the regional centers are all owned directly by our parent company, EB5 Affiliate Network.

Sam (00:05:04):
Okay. One of the things that we’re most proud of as a company is that investors from a wide variety of backgrounds all around the world have consistently found value in our approach to EB-5 investment. And this is just a short overview map of where some of our investors are from. And now I’ll let our guest speaker, Julian Montero, step in and introduce himself and share a little bit about his experience practicing law in the EB-5 space and about his experience specifically with Mexican nationals seeking to pursue EB-5. Thank you very much.

Julian (00:05:51):
Sam and Mike, it’s a pleasure to be with you this afternoon, and thank you for those that are attending. Um, I’ve been practicing for about 25 years, and my background really comes from a general corporate background. I actually started off as a corporate tax lawyer in Boston and realized that my desire to be active with Latin America was probably better suited for other markets and moved to Miami at the end of 96. Since then, I’ve been quite active with all things Latam and a fairly active with Mexican investors in the EB-5 space. So it’s really a pleasure to be with all of you today.

Sam (00:06:40):
Julian, do you want to spend a few minutes just giving some background on Saul?

Julian (00:06:46):
Sure. Thank you, Sam. So, Saul Ewing is a full-service firm. We are in 17 cities across the US, predominantly focused in the Northeast, Midwest, and here in Florida, and have had the pleasure of working with Sam, Mike, and the EB5AN team for quite some time in EB-5 matters, assisting a variety of projects throughout their regional center footprint. And we also have the great pleasure of working with families throughout the world in the EB-5 process for themselves. And that’s actually a very rewarding part of my practice and where my greater value add is really focused on helping analyze the various strategies for source-of-funds compliance. Sam, I will note that on your map, I didn’t see that you have had investors from Chile participate through your program. So we’re going to work hard at changing that. That is also a viable market.

Sam (00:07:41):
Yeah, great. I was actually in Chile last year. Beautiful place. All right. Now we’re going to do a quick overview of source of funds in the EB-5 context. And once that’s over, then we’ll let Julian jump in and talk a little bit more about some of the specifics that investors want to be aware of as they consider making an EB-5 investment in a project. So, contextually, from a high level, source of funds is the process of documenting how an EB-5 investor obtained the $900,000 or $1.8 million that’s going into the EB-5 investment as part of the EB-5 program requirements per USCIS. The investor must invest their own money. They must show that they’re the legal owner of the capital that’s being invested, and they must show the path of funds to show how they obtained that capital that’s going into the EB-5 investment. So, essentially, it’s accounting and tracing not only where the money is from, but how did you obtain it and from what source and how is it effectively your money that’s going into the EB-5 investment.

Sam:
And so when, when you actually go to file the EB-5 application, and this is kind of the second-bottom part of this slide—there’s two required components that go into the initial filing, which is called the I-526 petition. So part one of that petition is all the project documents explaining how the project meets EB-5 rules. So let’s say you were investing in a condominium project. That’s going to be the business plan, economic study, private placement, memorandum loan agreement, all of the documents that explain how the project creates 10 jobs (the minimum number of jobs required for an EB-5 investment per investor), and also how the money is going to meet EB-5 rules and create those jobs and remain invested in the project. Then, the second part of that filing is what we’re talking about today, which is the source-of-funds documentation.

Sam (00:10:07):
So those are the documents that show the government that this investor from Chile or Mexico, or any other country, that the funds that are coming in are legal funds, that they were earned lawfully, meaning no drugs, no weapons, selling nothing illegal, and those funds belong to the person who’s making the investment. And so, that’s going to be the focus of today’s presentation—covering that half of the application of how do we deal with proving where the money is from. A lot of times, foreign countries don’t have, you know, the most accurate and detailed historical records. And so, you know, how do we navigate that, you know, potential disparity or lack of records and make sure that the application is assembled in a way that the U.S. government is going to approve that investor when they come up?

Mike (00:11:07):
So, in summary, as long as, as an investor, you choose a well-structured project that’s either already approved by the government or will be approved, the key focus that USCIS is going to spend their time on is on your personal source of funds. Most reputable regional centers will structure their projects so that they can be approved. So almost all of the denials that we see are based on source of funds, which is why it’s such a critical piece of the application.

Sam (00:11:33):
Yup. And that’s another thing to really highlight is that the part one of this I-526 petition—that part one is the same for every investor in the project. So, if the condominium project has 30 investors, every one of those 30 people will have an identical part one of their application and only part two, the source of funds, will obviously be unique for each of those 30 individual investors and will, of course, vary dramatically, you know, given that everyone has, you know, capital from different places, different countries, different sources.

Sam (00:12:12):
So now we’re going to shift gears and talk about, just high level, what are some of the common sources of funds and issues that EB-5 investors face?

Sam(00:12:21):
Starting out, first, obviously, ordinary income. So, an investor is working as a doctor in a hospital. They earn money or their spouse earns capital through a normal job. That’s ordinary income. And as long as you can show that, you know, you were employed, you earned that income and you have the records to support that, and any taxes that were required to be paid have been paid, that’s going to be ordinary income. Then, capital gains—that’s going to be money earned by the investor from the sale of an asset, with a gain, obviously. So, you buy a house for $100,000. You sell it five years later for $200,000, and you use that capital to invest in an EB-5 project. You would need to show all the documents associated with the purchase originally and the sale of that asset. Then, gifts, inheritance from family or friends. So money given without any expectation of repayment or funds that are inherited from family or other or other members. Then, fourth, finally, loans.

Sam (00:13:35):
So, loans are allowed. So, if you owned a home and you decided to take a mortgage on that home, or you had a business and you took a loan, then as long as you can show that you own the home and you took the loan and could show the funds coming from the bank to you as a result of that loan, then that loan capital could be used as part of your source of funds for your EB-5 investment. Again, the key here is that the tax treatment on all four of these scenarios is going to vary dramatically based on what country those actions took place in. And so, the U.S. government understands that not all foreign countries follow the same or similar tax structure as the United States. And so, you just have to be able to document and show that whatever taxes that movement of funds was subject to, given the jurisdiction of the transaction, and that those taxes were appropriately paid and all of the correct paperwork, documentation records, and all that were all properly kept per the rules in the jurisdiction where the transaction occurred.

Sam (00:14:57):
Okay. So now we’re going to spend a little bit of time talking about ordinary income. So, for this, I’m going to let Julian jump in and talk to us a little bit about how ordinary income is typically handled in the context of Mexican investors who are earning income in Mexico and how, you know… what record-keeping challenges and things typically come up in that context.

Julian:
Thank you, Sam. I will note that, fortunately, Mexico is a fairly formal country with respect to corporate governance and the preserving and maintenance of bank records. And so, we have the benefit that most of the investors that we work with tend to be highly qualified professionals and have a very good set of detailed bank records. The other thing to note in particular for Mexican investors is that due to the very close cultural and geographic ties, it’s quite common for Mexicans that are considering the EB-5 program to have U.S. bank accounts.

Julian (00:16:11):
And so, that’s a potential pro and a con. It’s a pro because we have the benefit of U.S. bank records and, oftentimes, including bank statements in English. The initial challenge is that many would-be investors have the notion that having the money in the bank, particularly in U.S. banks, is the completion of the source-of-funds analysis. And what I tell them is actually, that’s the start. It’s a very good start, but we then need to work backwards to understand how the funds ultimately were earned and how they made it to the U.S. bank account. So, as you said, Sam, earlier on, this is really an analysis of forensic accounting to trace the funds, but back to the issue at hand, fortunately, we have the benefit of very formal bank regulations, bank records, and corporate governance documents, quite similar to what you would expect to be able to receive from a U.S. entrepreneur. So, corporate minutes, resolutions, and obviously, salary payments, whether they be from third-party companies or from a closely held corporate group.

Sam (00:17:39):
Thank you. Thank you, Julian. So how do those items kind of differ in this source of capital gains? Obviously, a lot of investors, you know, have recognized and built wealth, you know, generational wealth over time through real estate. So how does the record-keeping kind of impact real estate that’s been held for a long period of time, and what types of documents and issues do you find that are commonly dealt with in that context for EB-5 in Mexico?

Julian:
Sure. So again, if we’re dealing with a capital gain from the sale of an asset, you are going to have the underlying transaction documents and then the bank statements that will correlate and document the source of those funds. If it is a distribution from a company… and I’m not sure if you have dividends in another slide or not, Sam… I’ll pause for you to direct me on that, or if we’re addressing that here at this slide.

Mike (00:18:52):
Yeah, so I believe… let’s talk about dividends here on the capital gain slide. I think that that’s the best place to discuss it.

Julian (00:18:58):
Okay. Terrific. Thanks for that, Mike. So, I will tell you that in our experience, the majority of Mexican investors that we deal with are established with closely held business entities and are usually able to document dividends that have been received over a period of time at great detail. So, that actually makes the process for us to be quite simple, because we can turn to the underlying corporate records, the resolutions authorizing the distributions, and then have a solid understanding of what occurred to generate the capital and then to understand where the capital has been maintained. Mexico also has a concept called cufin, which… I think the analog would be a net tax profits account.

Julian (00:20:00):
And this is something that we often work very closely with colleagues in Mexico to determine whether or not that particular group may have access to this type of retained earnings, so to speak, as that may be advantageous from a tax perspective to the Mexican national, when they receive the funds. So, unlike some other countries, where perhaps we’re looking at the sale of real estate or other tangible assets, it’s been our experience that when we’re dealing with Mexican nationals, we’re going to first focus on understanding if they have accumulated dividends from their corporation or, as in the prior case, if they have the ability to demonstrate a long earnings potential from professional endeavors.

Sam (00:21:00):
Got it. Okay. Yeah, that makes sense. Let’s shift over to talk about gifts and inheritance. So, obviously, you know, the U.S. taxation system for gifts and inheritance, you know, varies dramatically from, you know, a lot of other regimes. So, in the context of Mexico specifically, you know, what types of records are going to be applicable here? And, you know, what types of taxes potentially, you know, is the investor going to have, you know, to look at to be responsible for, if they’re going to be sourcing funds from, you know, a gift or from funds that have been inherited?

Julian (00:21:39):
Right. So, one of the big differences in Mexico and other countries is we have to be sensitive to the applicable gift tax that may occur when there is a gift. And so, for that purpose, we usually look for other sources of capital because of the potential gift tax. If, ultimately, the transfer of the funds is going to occur through a gift, then, as you note, one of the key components is explaining to the group that the issue of the source of funds is now transferred to the donor. And so, that obviously brings a series of potential pitfalls and concerns because the donor is not necessarily seeking the immigration benefit. And there’s tension as to why they should document and demonstrate their private financial records when the benefit is being sought and obtained by a third party.

Julian (00:22:45):
But this is one of the things that we will review with the family. Obviously, gifts can play a part of this, inheritance as well. The challenge with inheritance is understanding that USCIS is tending to probe the decedent’s ability to have obtained the funds or the assets in ways that, I think, appear to be a little bit more intrusive than has been in the past. I’m noting that many practitioners are seeing a request for evidence on I-526 petitions where the source is inheritance where there is a more in-depth analysis of the history of the decedent. And so we’re going to try to anticipate as much as possible and provide a set of robust documents that will describe who the decedent was and how they obtained the funds. This is really part of a holistic approach, as you’ve described, because the reality is when we’re dealing with Mexican investors, they tend to be high-net-worth or ultra-high-net-worth individuals.

Julian (00:23:59):
So I would say that one of the takeaways in particular with Mexico is that the wealth of your average EB-5 investor, when we compare it to other markets, at least with the client base that we’re handling, is probably on a greater scale of wealth. And so, that brings opportunities but also, again, challenges because we have to probe further and understand where they may have funds, what other assets they may have that we can ultimately use for EB-5, so that we can develop a very elegant and efficient strategy for them, where, at least, with our practice, the focal point often is to shorten the time horizon of review. So in that instance, perhaps inheritance is not one of the options that we would look at initially, especially if the decedent passed many years ago, as that tends to complicate the ultimate analysis for the source of funds.

Sam (00:25:02):
And Julian, you mentioned requests for evidence earlier. Can you talk a little bit about what that is and what the procedure is for that and, kind of, you know, how it happens, why it happens and, you know, how common is it and, you know, how is the response handled, all of that?

Julian (00:25:19):
Absolutely. It is something that more and more of us are having to deal with at the adjudicators at USCIS either become more sophisticated or more picky. I’m not quite sure which one of those may be the cause, but it does seem that there has been an uptick in requests for evidence. And that is the mechanism pursuant to which the adjudicator will submit a series of questions based on the petition and the underlying documents submitted with the petition. And as you well indicated, Sam, they are most often focused almost exclusively on the source-of-funds aspect. So we don’t tend to receive many RFEs based on the project. They tend to be more focused on the source of funds. And I will tell you, from our experience, at least in cases of inheritance, there seems to be a pattern where if we did not anticipate from the very beginning the potential questions associated with the narrative behind where the decedent obtained the assets or the funds and did not provide sufficient documents to address that, you know, we can expect to receive an RFE based on inheritance.

Julian (00:26:46):
So when we’re putting together this petition, we always have to pause and analyze the set of documents from the point of view of the adjudicator and remove ourselves from the familiarity we have with the family at this point, with the documents, so that we can really be objective. And it is a critical component of being successful in this day and age, understanding what the particular questions we will be, and that obviously will vary from the strategy that has been chosen—whether it is ultimately a gift, inheritance, dividend distribution, income earned over years, or loans. If I may, Sam, I’d like to just expand a little bit further on loans because with respect to Mexican nationals, I believe that is one of the more viable strategies. And the reason why is, as I’ve indicated, most of the groups that we’re working with are groups in Mexico that have had funds in the U.S. for quite some time. And so, they have long-lasting relationships with U.S. financial institutions, and based on the rather recent developments in EB-5 jurisprudence with respect to the use of loans, there are some interesting strategies that we’re now developing, and probably, at least with our client base, those are more likely than not going to be the first option. So, we will explore the loan option and exhaust that before we proceed further as that can be quite an efficient and elegant strategy for a well-capitalized Mexican national.

Sam (00:28:37):
Got it. Got it. Okay. All right. So we’ll shift gears a little bit now and talk a little more specifically. So when you’re in the documentation process, Julian, working with, you know, these types of families, you know, what are some of the you know, types of documents that you’re going to be looking for? And then what is the process, typically, for how, you know, those documents are going to be obtained and then translated, right? And then, one other point I want to just note is that for this investment, you only need to source the $900,000 or the $1.8 million that’s going into the project. There’s no requirement to show, you know, how, you know, your whole net worth, where, you know, all of your assets are, it has nothing to do with, um, you know, anything above the EB-5 capital investment that’s going in into the project. And so, as Julian mentioned earlier, you know, it’s kind of like putting a puzzle together. You know, in this case you don’t need every single piece, but you need enough pieces so that you hit that minimum amount. So anyway, with that in mind, I’ll let Julian take back over here.

Julian (00:30:00):
Thank you, Sam. And by the way, that’s a great point, the last one you’ve emphasized, and that is to keep in mind that the objective is to source the particular investment amount that is going into the EB-5 project. And this is not an exercise to, you know… this is not a personal financial statement—we’re not interested in analyzing the entire worth. And that is probably the starting point for our discussion and analysis with the families that we work with, because with that in mind, I will ask them if they are part of a private company group. Does your company have the ability to do an anticipated dividend, or have you received dividends within the last year that might be of sufficient amount? We’ll then ask, again, do you have funds in the U.S., do you have a strong banking relationship with a U.S. bank or a Mexican bank where you may be able to obtain an unsecured loan?

Julian (00:31:12):
So, if the bank is able to provide a set of loan docs where it is clearly a loan not secured by any assets, that is, obviously, based on our review of the current state of the jurisprudence, compliant with USCIS source-of-funds requirements. We also, obviously, will ask for the applicable tax filings. And, again, we have the benefit that Mexico is fairly formal with respect to the preserving of tax records. I always note that tax documents, tax filings are static documents. What I mean by that is that they’re not depicting the flow of the capital or necessarily the actual sources of the capital. So they’re not always vital… they’re an important component of the documentary set. But the bank statements are really going to be more critical with respect to documenting the flow of the funds, which, in these RFEs, these requests for evidence… oftentimes, if your analysis with respect to the bank statements has not been thorough, and you have not presented a set of consecutive monthly bank statements, then you are likely to receive a request for evidence based on the path or the flow of the funds.

Julian (00:32:51):
So we work very closely with the families and their advisors. And that’s another key point. This is not an exercise where the U.S. legal team should try to do this themselves. Most of the families we work with in Mexico have sophisticated legal advisors and financial advisors, accountants. And this is really a team effort. And again, from our perspective, this is not necessarily an exercise driven by the immigration lawyers at our firm. I’m a corporate transactional lawyer, but the reason for that is I have to understand, what are corporate resolutions? What are dividends, how are these documented? I have to be conversant and familiar with what documents I should expect and what questions I should ask when our client is an entrepreneur or has been an executive who may have received stock options or other generation over many years.

Sam (00:34:04):
Got it. Got it. Thank you, Julian. All right. So we touched a little bit on ordinary income already, so we can skip through that. We talked a little bit about capital gains… Julian, maybe can you spend a few minutes talking about, you know, a potential sale of a piece of real estate and what types of documents, you know, would be required there? Let’s say that it was a home in Mexico City, you know, that was purchased 10 years ago, and it’s gone up significantly in value, and we’re going to have to, you know, show, you know, how the funds were accumulated initially, you know, for that initial purchase and then, you know, potential mortgage or, you know, sale, you know, closer to the present day.

Julian (00:34:55):
Yep. Thanks. Sam, that’s actually a great hypothetical to really illustrate the various components of the source-of-funds analysis. And it really illustrates how intricate this can be. So, we had the pleasure of working with a Mexican national who is an actual U.S. citizen these days. He’s a good friend, and he’s participated in a few conferences and webinars with me, and the source of funds for his investment were derived from real estate transactions in Mexico. So he was a home builder, and we actually had to trace the construction, the development, and sale of five consecutive single-family residences over about a seven-year period to find the ultimate source of the funds. And this exercise, I think, is one that really illustrates the requirement to detail. As indicated, when you sell a property or any assets, you have the obligation of demonstrating how you obtained the funds to acquire that asset.

Julian (00:36:15):
And if those funds were obtained from the sale of a prior asset, we have to go back in time until we ultimately can find the seed money, so to speak. So when it comes to the sale of real estate, and this should be generally understood as any asset, whether it be gold bars, undeveloped land, any tangible assets—it is the obligation of the investor to document what happened and how they were able to earn the funds that they used to acquire the asset in the first place. I will note, since we’re on the topic of EB-5, that USCIS has also been asking entrepreneurs that have a closely owned company where they have either received a dividend or a return of capital how they obtained the seed money to fund that company. And this can oftentimes be somewhat silly, I dare say, for at least countries where you have fixed capital, like Mexico, where, you know, you might have invested $5,000 to start the company, and that is going to show in the initial set of the corporate records. So we’ve seen a few RFEs where they actually ask, well, where did the equivalent of $5,000 come from? So that’s just an illustration of the level of detail that you have to have when you’re starting this process.

Sam (00:38:02):
Got it. Thank you, Julian. So I think, I know, Julian, we do have some investors from Mexico joining us today. And so, I know, you know, with a lot of these investors, you know, sometimes English isn’t their best language, particularly when it comes to more complicated transactional and investment decisions, obviously EB-5 being one of those. So, maybe now would be a good time to kind of, you know, take five or six minutes and kind of quickly summarize how the EB-5 source of funds works and then kind of walk through, you know, these four examples or categories of potential sources of funds and how, you know, you would work with an Mexican investor to, you know, to get through those sections, but in Spanish.

Julian (00:39:03):
Thank you, Sam. I’ll do so. [Spanish] Sam, we’re back in English. Thank you.

Sam (00:46:10):
Great, great. Thank you, Julian. I picked up about 80% of that, so that’s good. Okay. So, we already covered a few of these items, so we’ll skip through these. Then, we’ll open it up for questions and cover as many as we can. Oh, actually, before we do that, I do want to point out just kind of helpful resources on our website. The source-of-funds section, as we talked about, is part of that initial petition. And so, we’ve put together a skeleton outline here of a sample just to give an idea of what types of documents are needed and how those documents end up coming together as part of the I-526 petition.

Sam (00:47:06):
So, this is completely a fictional scenario, but it’s a good kind of way to give you an idea of what the final product looks like. That’s going to actually be submitted to the U.S. government. And as part of that, we’ve compiled a list, again, of completely fictional documents that a person may need, but it just gives you an idea of the extent, and as Julian mentioned, you know, this can be a very, you know, detailed set of documents and a lot of different interlocking pieces that are all gonna need to be, you know, correctly labeled and translated, you know, to tell the story without any holes so that an adjudicator can immediately approve the petition and not issue one of those requests for evidence because a document is missing or something isn’t clear, which you want to avoid.

Mike:
And with that, I think we’re going to open it up to the questions, and we’ll go through them and start answering. So, one question that we’ve gotten is what is the most common source of funds for investors coming from Mexico? So, Julian, can you jump back in on that and, based on all of the cases that you’ve seen, what’s the most common structure that’s used to show, historically, where the $500,00 and now where the $900,000 comes from?

Julian (00:52:10):
Sure. Thanks for that. Um, based on our practice, it would clearly be the use of dividends. It seems to me that most of the families that are contemplating EB-5 that are coming from Mexico have a closely held business activity. And we’re able to work with the families and their financial advisors and their tax advisors to develop efficient strategies using dividends, or this concept of cufin, which is a particular Mexican concept, which may have some tax advantages for the individual taking the profits from the company in Mexico. So, I would say the use of dividends was historically the most active. I will tell you that now, based on the Zhang decision, we are shifting our focus initially for the viability of loans, again, based on the fact that most of these families have well-established relationships with financial institutions in the US, and we have found that many of them are able to obtain unsecured loans from U.S. financial institutions.

Sam (00:53:28):
Got it. In terms of the dividends, what types of documents and information, if any, are required to kind of legitimatize that, like, it is a real, you know, established, ongoing, commercial business that’s making the dividend, and it’s not just a vehicle, you know, where just, you know, cash was just put in it and, you know, it’s now being, you know, paid out, you know, in the form of a dividend… how do you kind of have that part of it?

Julian (00:53:55):
Great question, Sam. So, we start from the point of view of, you know, any corporate lawyer, and that is, the organizational documents, understanding the nature of the business. When was it organized, making sure that it is still validly organized. So, all of the relevant corporate resolutions and certificates, registrations, licenses that are necessary to establish a bona fide business entity. We’ll then turn to the underlying financial aspects of the business—the general balance sheets, have there been audited financials prepared on an annual basis by any of, you know, either a tier-one or tier-two global accounting firm, the tax records of the business. And then, to the extent that this is a dividend or a sequence of dividends, we’ll look at the corporate resolutions. We’ll work with the family’s legal advisors to really understand the nature of the corporate resolutions, make sure that the dividends have been duly authorized.

Julian (00:55:03):
If a dividend was authorized in a particular year for the amount indicated in that document, it needs to be corroborated by the bank statements of both the company and the recipient. So, then, the other component is really the analysis of the flow of the funds. And this is where we get into the meat of it. So we’ll turn to the bank statements of the company for the period of time relevant for the distribution, whether, you know, it’s a bonus or a dividend, to make sure that those documents are internally consistent and that it’s clear. One of the many pitfalls I’ve seen when people come to our office with, you know, petitions prepared by other groups is you have internally inconsistent documents. It might have said that the dividend was for, you know, 10 X, and it’s for 8.5 X.

Julian (00:55:55):
And it was never explained that there was a tax that occurred, and that’s why it’s for a lesser amount. So, you really have to be quite conversant with what actually happened and then trace the funds so that the recipient received the amounts that are documented. So it’s fairly thorough. But, again, it’s really a pleasure to work with groups from Mexico because they will have these documents, and, you know, we’re able to read them in their native language without the complication of a translation before we’re able to work with the families. And then, obviously, we identify the documents that have to be translated. We use third-party translators, and the benefit of our team is then we’re also able to vet the translation because I’ve seen, unfortunately, oftentimes, when people do not review the U.S. language translation and compare it with the source document, there are inconsistencies, and I have found that USCIS is beginning to pick up on that. So, again, we’re dealing with some fairly sophisticated adjudicators that are reviewing this, in my opinion, in the way that they ought to be.

Sam (00:57:23):
And so, in the RFE context, what are some of the most common types of RFPs that, you know, you see investors from Mexico being, you know, being faced with answers?

Julian (00:57:39):
Sure. Well, I’ve gotta be honest with you. We’re fairly tight with, with our process, but, the RFE… so, generally, we’ll be—and I think that this can be applicable to Mexican investors and non-Mexican investors equally—the bank statements, right? So, flow of the funds, tracing of the funds, understanding where the funds have been, that’s critical. Inheritance is, I think, becoming more problematic if you are unable to really understand how the decedent obtained the asset or the funds and provide some, I’d say, fairly robust documentation associated with how these funds were earned. I think most folks that are using inheritance are seeing some probing along those lines. But I would tell you that Mexico benefits from not having currency restrictions or any other challenges that you have from many countries where, you know, you can’t convert the currency, or even if you can, you can’t do direct transfers from Mexico to the US, so it is really one of the more transparent markets to work with with respect to EB-5 source-of-funds analysis.

Sam (00:59:12):
Okay. Yeah, I think, I think that’s all we’ll have time to cover today. Julian, thank you for taking the time and thank you for sharing all of your experience and doing that bit of the presentation in Spanish. I think that was really helpful for us. And, again, all of the contact information for both Julian and for our team is listed on the screen. And if you would like a copy of the PowerPoint slides, please reach out to us info@eb5an.com. And if you would like to share or rewatch this webinar, look for it on our YouTube channel in the next few days. And if there are any questions specifically about source of funds, please reach out to Julian. And so with that, we’ll wrap it up for today. Thank you again, Julian.