Source of Funds Evidence for Indian EB-5 Investors

Rebecca is the Manager of the EB-5 Investor Visa Practice at Davies & Associates LLC.

If you want to obtain US permanent residency through an EB-5 investor visa, you need to demonstrate where you obtained the investment funds. Much to the frustration of many Indian investors, the U.S. government does not consider it sufficient to simply present a balance sheet that shows you have enough net worth. You must trace the actual funds that are remitted for the investment and show that they originated from clean sources.

What is the EB-5 Investor Visa?
Those who make a qualifying investment into a qualifying U.S. business can obtain EB-5 classification which then converts into U.S. permanent residency for the investor and their family (their spouse and children under age 21 at the time of filing the application).

You must trace the actual funds that are remitted for the investment and show that they originated from clean sources.

The minimum investment amount is currently $900,000 USD in targeted-employment areas or $1,800,000 USD in high employment areas. The investment must create (or, in some situations, save) at least ten permanent U.S. jobs. There are a wide range of companies that would qualify, from small solely-owned businesses to large Partnerships that are organized by Regional Centers to pool the money of many investors.

The applicable legal regulations enforced by United States Citizenship and Immigration Services (“USCIS”) when they decide the outcome of an EB-5 application specify that sufficient proof must be submitted that all investment capital was “obtained though lawful means.” This article offers a brief introduction to this source of funds requirement.

What is an Acceptable Source of Funds?
There is no exhaustive list of what sources of funds will be acceptable for an EB-5 investment. Common sources include land sale proceeds, accumulated salary, owner dividends, stock sales, loans, and inheritances.

It is also very common for the investment funds to be totally, or partially, obtained through gifts from friends and family. But it is not sufficient to just show a gift deed and the receipt of the gift; evidence of where the gift donor obtained the funds is required. In short, the source of funds evidentiary exercise shifts to the gift donor.

Source of Funds Evidence Example
To illustrate the source of funds evidence requirements, I will provide a hypothetical example of a typical scenario we see from India.

The EB-5 investor is the owner of an IT services company in Mumbai. He founded his company in 1990 and over the years has taken out salary and excess profits. He routinely moves the salary and profits into Fixed Deposits and Mutual Funds. He decides to liquidate 5,000 units of a Mutual Fund to obtain the capital for the EB-5 investment. Those 5,000 units were purchased in multiple transactions between 2010 and 2020.

We review the bank statements from 2010 to 2020 to see what actual funds were used for the Mutual Fund purchases and explain those funds. For example, 1,000 units were purchased on 2 January 2017 for Rs 1 crore via a debit from his bank account and immediately prior to that debit was a deposit of Rs 2 crore of excess profits from his company—so the purchase of those 1,000 units easily connects to the profit receipt and those 1,000 units are cleared for liquidation and use for the EB-5 investment.

Another 500 units of the Mutual Fund were purchased on 5 February 2015 and the funds in the bank account for that purchase debit were from the deposit of Fixed Deposit maturity proceeds. That Fixed Deposit was opened from stock sale proceeds in 2014. We then examine the 2014 bank statements to see which funds were used to purchase that stock. This source of funds exercise goes back until there are no missing links and the chain begins with an easy-to-explain clean source, such as a salary deposit or excess profit deposit.

USCIS and the Reserve Bank of India (“RBI”) both require all investment remittances to comply with applicable Indian laws. For EB-5 investors, the RBI’s Liberalised Remittance Scheme (“LRS”) is the most commonly-used mechanism for moving funds out of India. If the LRS is utilized to fund an EB5 investment, then the source of funds must comply with the LRS, the Foreign Exchange Regulation Act (“FEMA”), and all other applicable laws. The remittance rules differ based on whether you are an Indian resident or an NRI and are beyond the scope of this article.

The outward remittance plan, and the source of funds, should be pre-approved by a qualified LRS/FEMA professional to mitigate your risk of non-compliance.

The Good News
While the source of funds exercise may seem daunting, we have always been able to guide our Indian investors through selecting funds for investment which we can sufficiently evidence to the satisfaction of USCIS. The key to avoiding an EB-5 petition denial based on failure to prove lawful source of funds is to involve your U.S. immigration lawyer and your LRS/FEMA professional early in the process, before any remittances are made.