Proving Where Your Money Came From: Source of Funds in E-2 Cases

A strong business plan and a large investment still will not carry an E-2 case if you cannot show where the money came from. Source-of-funds problems are among the most common reasons E-2 applications stall. They are also among the most preventable.

This article covers one topic: how to document the lawful source of your investment, and how to trace it into the business.

What the consular officer needs to see

State Department guidance asks three questions about your investment funds:

1. Is the source lawful? Funds from illicit activity cannot support an E-2.
2. Do you possess and control the funds? The money must be yours to invest, or under your control.
3. Can the funds be traced? The officer should be able to follow the money from where it originated to where it was invested.

The guidance lists acceptable sources broadly. They include savings, gifts, inheritance, contest winnings, loans secured by your own personal assets, and “other legitimate sources.” Notably, the money does not have to come from outside the United States.

The two halves of a source-of-funds case

A convincing source-of-funds presentation has two parts.

1. Origin: how you acquired the money. This is the story of how the wealth was built or received, such as years of salary, the sale of an apartment, or a parent’s gift.

2. Path: how the money moved into the business. This is the paper trail of bank transfers from the original account, through any intermediate accounts and currency conversions, into the U.S. business account and out to the landlord, the contractor, or the seller.

Many applicants document the origin well but leave gaps in the path, or the other way round. Officers need both.

Evidence by type of source

Employment income and savings
- Tax returns and salary records covering the years the savings were built
- Bank statements showing the savings growing over time
- Employer letters confirming position and compensation

Sale of real estate or other property
- Proof you owned the property, such as a deed or title registration
- Sale contract and closing or settlement statement
- Bank record showing receipt of the sale proceeds

Business income, dividends, or sale of a company
- Company financial statements and tax filings
- Shareholder resolutions or dividend records
- Share purchase agreement, if you sold a business

Gifts from family
- Signed gift letter stating the amount, the relationship, and that the gift is not a loan
- Evidence that the giver lawfully had the funds, such as the giver’s bank statements or income records
- Transfer records from the giver’s account to yours

Inheritance
- Will, probate or estate documents, or an equivalent court or notarial record
- Records of the distribution to you

Loans
- Loan agreement showing you are personally liable
- Evidence of the personal collateral, such as a mortgage on your home
- Remember that loans secured by the U.S. business’s own assets do not count toward the investment (see Part 3)

Cryptocurrency and other digital assets
- Records showing when and how the assets were acquired, such as purchase history or mining or employment records
- Exchange statements showing the conversion to currency
- The transfer path into a bank account

Digital assets can support an E-2, but the documentation must be as complete as for any other source.

Common problems, and how to avoid them

Large cash deposits. Cash leaves no trail. If cash must be part of the story, document where it came from and deposit it well before the investment. Expect questions either way.

Money routed through third parties. Funds that pass through a friend’s or relative’s account, or through an informal money-transfer channel, break the chain of control. Wherever possible, move funds directly from your own account to the business.

Commingling. Mixing investment funds with unrelated money in the same account makes tracing harder. A dedicated account for the investment funds keeps the trail clean.

Unexplained transfers between your own accounts. Each hop between accounts needs a bank record. Internal transfers are easy to lose track of years later.

Missing translations. Foreign-language bank statements, contracts, and court documents need accurate English translations.

Applicant-prepared financial summaries. The guidance notes that unverified, unaudited statements prepared solely from information the applicant supplies are normally not enough. Where possible, use bank-issued records, filed tax returns, and statements from professional accountants.

Plan the money movement before you move the money

The best time to think about source of funds is before the first transfer. A few planning steps save a great deal of trouble later:

1. Map the path in advance. Know which account the funds come from, how they are converted to U.S. dollars, and which U.S. account receives them.
2. Check outbound-transfer rules in your home country. Some countries require declarations or approvals for large outbound remittances, or cap how much individuals can send abroad each year.
3. Keep every record. Collect wire confirmations, currency-exchange receipts, and bank advices at each step.
4. Invest from the business account. Pay the lease deposit, equipment, and contractors from the U.S. business’s account rather than personally. This shows the funds were committed to the enterprise.

Summary

Think of source of funds as telling a documented story. Every dollar you claim as investment should connect, through records, back to a lawful origin that you can explain in a sentence. When that story is complete, this part of the case rarely becomes an issue. When it has gaps, it can sink an otherwise strong application.

Attorney’s perspective

Source of funds is the part of the case that can be prepared furthest in advance, and the part that most often goes wrong. I plan the money’s path with clients before the first transfer, and assemble the records for every step. For clients whose funds come from mainland China or Taiwan, we also factor in local foreign-exchange and remittance rules.

For advice about your own situation, call +1 718-218-5805 or schedule a consultation. We meet clients in Flushing and Manhattan, in English or Chinese.

References

• 9 FAM 402.9-6(B), Source, Possession, and Control of Funds: https://fam.state.gov/fam/09FAM/09FAM040209.html
• 9 FAM 402.9-11(B), Suggested E-1/E-2 Document Checklist: https://fam.state.gov/fam/09FAM/09FAM040209.html

Series overview

This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. For advice about your situation, please contact us.

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