and businesses . 6 However , many countries do not have such policies in place , which makes exchanges much less traceable even if the investor is a holder of the digital wallet and the ultimate beneficiary of the conversion of crypto into conventional currency . When the transaction involves a third party , such as an exchange intermediary or a donor of investment funds , identification of that third parties with sufficient particularity becomes nearly impossible .
These apparent challenges present a question : what , if anything , can be done preventively to make a stronger case for investors utilizing the funds contributed or delivered by third parties ? The language of the statute contains the reference to the approach that may assist the practitioners in presenting their case or , if USCIS finds the documents unpersuasive , may preserve the argument for litigation .
“ GOOD FAITH ” – IS IT REALLY THAT GOOD ?
RIA introduces a new requirement for the funds originated from the third parties providing that gifted and borrowed funds may not be counted toward the minimum capital investment requirement unless “ such funds were gifted or loaned to the alien investor in good faith .” 7
“ Good faith ” is a concept apparently borrowed from the contract law and is used to describe a rule that requires every party to a contract to implement the agreement as intended , not using means to undercut the purpose of the transaction . 8 In the context of integrity measures promulgated by RIA , “ good faith ” requirement opens a door to a scrutiny of relationship between the investor and a third party lender or grantor . Simply put , the attorney representing an investor now has to document not only the fact of a gift or loan , but also comprehensively answer why that significant sum of money was provided to the investor by a third party .
TMI : HOW MUCH INFORMATION SHOULD BE PROVIDED ?
Many practitioners now agree that it is always safer to err on the side of over-documenting the source of funds , rather than leave certain questions open for interpretation by the adjudicator . However , this approach is not necessarily endorsed by those third parties whose presence in the investor ’ s case is incidental and who feel reluctant to provide extensive documentation on sensitive financial matters to support the investor ’ s case . Thus , it is now more important than ever to have an open conversation with the investor at the early stage of representation to set the right expectations for the exposure before the burdensome and invasive RFE is issued and collection of the documents is done with significant time constrains .
Nevertheless , despite the change in the statutory language , the adjudication standard – preponderance of evidence – remains intact , and setting this framework at the time of initial submission may limit the scope of the materials necessary to satisfy the burden of proof . The regulations exclude only the capital obtained by unlawful means . By prescribing this one and only limitation on how investors may acquire the investment capital , the regulation implicitly omits other limitations . 10 The investor shall not be required to prove beyond reasonable doubt the qualifications of his capital , even if the capital was provided by third parties .
The courts previously recognized that in adjudication of EB-5 cases , USCIS verifies compliance with the requirements that serve valid government interests – preserving the integrity of the EB-5 program by confirming that the funds utilized are not of suspect origin . 9 This approach is now expanded to the third parties to ensure that the actual purpose of transaction between that parties and the investor is not to inject unlawfully obtained funds into the process . Thus , it would be prudent to address the potential inquiry into the nature of the connection of the investor to the third party at the early stage of the document collections . Affidavits from these parties are not even optional when more explanation is needed on motivation of the party engaging in the EB-5 process as a donor or lender , whether the intent is supported by financial renumeration , family ties , or other considerations . The anecdotal evidence suggests that even inclusion of informal photographs illustrating long ongoing relationship between the grantor and the investor helps to address the adjudicator ’ s concern that the gift or loan was not provided in good faith .
12 EB5 INVESTORS MAGAZINE