The most effective route to dual citizenship or residency diversification is to leverage the power of citizenship by investment and Golden Visa programs, but what source of funds can entrepreneurs, investors, and families invest in those programs?
As these programs represent the best and most effective Plan B money can buy, Astons’ team of experts are here to explain the due diligence element commonly known as ‘source of funds’ or ‘source of wealth’.
The investment migration industry – citizenship by investment and residency by investment [Golden Visas] – requires various elements of due diligence, and one of the most important involves the funds utilized for the program investments.
In the industry, investment migration consultants call this ‘source of funds’ and as there are cultural elements to wealth, Astons is repeatedly asked by our clients if they can fund their investments in various ways.
Although it may seem self-explanatory, this issue is intricate and takes center stage during due diligence checks within citizenship and residency by investment programs and is central to being approved for your chosen program.
Also it surprises many entrepreneurs, investors, and families when they discover that common legal fundings sources, such as mortgaging a property, are not acceptable sources of funds for these programs.
As the source of funds is a central element to investment migration programs, the question, what qualifies as an eligible source, is a valid one.
And Astons delivers the answer.
What is the source of funds requisite?
Citizenship by investment programs and Golden Visas are capital investments, meaning they must be completed in cash.
For example, if your chosen program is the Greece Golden Visa, a real estate based program, the property must be paid in full with cash. It is not possible to mortgage a property in these programs.
The phrase source of funds refers to the actual real-life origin story of the income or money an investor uses to pay for the investment in the citizenship or residence by investment program – whether it’s a real estate purchase, private equity fund investment, or starting a business.
Governments implement a source of funds requirement to ensure that the capital and application comply with anti-money laundering (AML) standards and regulations.
In a nutshell, source of funds checks are a critical practice that ensures that the money the investor uses to invest in the country has been obtained and possessed legally.
Under most investment migration programs (those in Canada being the main exception), the source of funds requirement only applies to the investment amount, not the entire net worth of the investor.
Let’s use one of the most popular dual citizenship programs of 2023 as an example – the Antigua & Barbuda citizenship by investment program.
If an investor chooses the National Development Fund option, that requires an investment amount of $100,000 and another $37,500 in processing and due diligence fees.
In this case, the government will not have to check the source of funds for the entire sum of $137,500 but instead will check the source for the investment amount of $100,000 only.
However, it’s a bit different for another of the most popular dual citizenship programs of 2023 – the St. Lucia citizenship by investment program.
St. Lucia only requires the investor to transfer the money from an accredited financial institution or bank [who has already conducted its own checks] and the investor signs a legal affidavit validating the legality of the funds.
On the extreme end is Malta, which offers both a citizenship by investment and Golden Visa option.
Malta conducts a 4-level screening procedure within their due diligence process.
And, not only does which program you choose impact the source of funds element, the investor, themselves, can influence it.
Proving the source of funds can be simple or complex depending on the investor’s location and nationality, method of acquiring their wealth, and income streams.
How to prove the source of funds?
When applying for a citizenship by investment or Golden Visa program, it is critical to understand how the government will conduct its source of fund background check and due diligence.
Each program has its own criteria and requirements, but it boils down to one simple concept – following the money.
Some programs will take one or two steps back when checking the source of funds, while others will try to go all the way back until they uncover the absolute original origin of the money.
For example, Caribbean citizenship by investment programs take one or two steps back. To put this idea in context, let’s analyze some common sources of funds.
Taking Antigua’s example once more, an investor may have a bank account balance of $200,000 which is more than enough to cover the investment. In this case, the authorized agent – such as Astons – will highlight this deposit and flag it as the source of funds.
The government will want to understand where that money comes from, and here are a few examples of following the money in this specific case:
- If the $200,000 is from an inheritance, the government will require an inheritance certificate (one step back).
- If it is capital gains from selling real estate, stocks, gold, or otherwise, the government will request the purchase agreement or certified receipts (one step back)
- Dividends from an investor’s business, the government will request letters from the business and the company’s financial records (two steps back, the first is the company paying the investor, and the second is proof the company is making money)
However, Canada’s Provincial Nominee Programs (PNPs) take more steps back as they have a net worth requirement.
This includes checking a specific amount of net worth that an applicant has and finding the origin of the source of funds. Canada’s programs tend to be very invasive as they follow the money until they are satisfied they have found the starting point.
For real estate capital gains, for example, Canada’s government may require the investor to present not only the purchase agreement but proof of how they got the real estate in the first place, which could require going back years or decades.
What income sources qualify?
As previously stated, the source of funds is not simply about the legality of the money, but the source. Like mentioned earlier, mortgages and loans are legal sources of funds, but are not acceptable sources of funds for investment migration programs.
In general, the vast majority of legal income sources qualify as sources of funds. Some of these sources include:
- Capital gains from real estate, stocks, bonds, or other standard assets such as gold and currencies
- Salaries, dividends, and bonuses
- Retirement payments and pensions such as IRA accounts
- Gifts (from transparent, traceable sources)
- Arbitrage gains from local and global trading (must be verifiable)
We say most legal income sources because some programs are more accepting of various sources, and others have stringent requirements on what qualifies as eligible income sources.
Then, there is the matter of unconventional income streams, such as capital gains from selling cryptocurrency. This is especially a hot topic of debate because it is still vague in various sections of the globe.
Cryptocurrency gains may qualify, but that depends on the program, cryptocurrency regulations in both the host and destination countries, and the method of trade.
For example, Turkey is open to accepting cryptocurrency gains or possibly a crypto-backed loan as a source of payment. However, if the investor is from China, then this is not an acceptable source, as crypto is illegal in China.
It must be noted, at this time, no program will accept cryptocurrency of any kind as a direct source of funds – however, the UAE Golden Visa is open to accepting crypto as a means to pay for real estate in their residency program.
Astons does accept crypto as a source of payment for our service fee.
The best way to approach unconventional matters such as cryptocurrencies, NFTs, and other less mainstream revenue sources is to contact an experienced and licensed partner such as Astons, who understands the program’s requirements and how the government will conduct its checks.
Tips for proving the source of funds
Proving the source of funds for an investment may be a straightforward matter for some investors, as they may have a lump sum deposit that is easily traceable to its origins and covers the entire amount of the investment requirement.
For others, especially entrepreneurs, it may be more complex as they have multiple income streams that could be deriving revenue from active and or passive investments, each bringing in smaller amounts that add up to the minimum investment requirement.
To ensure your source of funds checks go smoothly, here are some general tips:
- Document all income: ensure you maintain a paper trail of all income to prove its origin as best as possible – it’s better to have than to need
- Use banks or financial institutions: this also applies to all investors, as banks will conduct their own due diligence before accepting deposits, adding to an indisputable layer of authenticity to the funds
- Try to limit to one or two deposits: tracing multiple funding sources may be difficult for government officials, especially as the documentation can differ based on each country’s financial regulations. You can make it easy for government officials to pinpoint the source of funds by flagging one or two deposits that amount to the value of the investment
- Use accounts in “safe countries”: tracing the source of funds in countries with low-level AML practices or high-security concerns will only complicate and extend the process. Opening a bank account in a highly regulated financial environment and using that as the investment source can make it much easier for citizenship or residency by investment officials
- Choose the program wisely: as mentioned, each Golden Visa and citizenship by investment program has its own set of requirements and criteria. Understanding your current financial situation and choosing the program that best aligns with it and your privacy rights is an excellent way to ensure the source of funds process goes along smoothly
- Be aware of cultural differences: countries have varying financial regulations and taxation frameworks. You need to understand if there are any cultural gaps in your finances that may require a government official more time to uncover or understand.
Partnering with the right experts, like Aston, streamlines the process by highlighting them from the beginning and advising investors how to offer supporting documentation
Astons – Partnering with success
Working with a licensed and experienced investment migration consultant such as Astons is the only way to navigate the complex world of investment migration.
Astons analyzes everything about a client’s case, for free, long before any government official sees it. And, Astons provides each client a preliminary due diligence review in which we inform them of their likelihood of success for their chosen program.
Astons preliminary review has resulted in a 100% rate of application approvals when we advised clients they had a high likelihood of success.
As an industry leader with over three decades of success and a team of seasoned experts in international and immigration law, investment migration, as well as due diligence, we are simply a service but a partnership that over 9000 clients have trusted.
Schedule your Free Confidential and Comprehensive Consultation with an Astons’ expert today. We will analyze your wants, dreams, goals, and demands and then provide you a list of solutions that satisfy them for you to choose the best option.