Potential Implications of GAO Report on the EB-5 Immigrant Investor Program

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By the end of this month the EB-5 Immigrant Investor Visa Program will be up for renewal before Congress. The EB-5 program was first established by Congress in 1990 in an effort to increase the amount of foreign capital investment in the United States, and to create new jobs for Americans. In 1992 Congress expanded the program and created the Immigrant Investor Visa Program as we know it today, which allows foreign investors to invest in an EB-5 Regional Center project. A regional center is an authorized organization, entity, or agency that is designated by USCIS to sponsor capital investment projects within a specific geographic area including areas of high-unemployment or rural areas.  Section 203(b)(5) of the Immigration and Nationality Act, 8 U.S.C. Section 1153(b)(5) limits the number of immigrant visas that may be issued to EB-5 investors to 10,000 immigrant visas per fiscal year, provided the qualified investor is seeking permanent resident status on the basis of the creation of a new commercial enterprise. Half of these visas are allocated to EB-5 investors participating in a regional center pilot program. The required investment amount in a new commercial enterprise is $1,000,000 or $500,000 if the investment is being made in a targeted employment area experiencing a high unemployment rate of 150% relative to the national average, or a designated rural area as established by the Office of Management and Budget (OMB).

Despite its promise to increase economic growth, the EB-5 Immigrant Investor Program has been the subject of much criticism due to an increase in fraud on behalf of investors and regional centers, as well as the continued use of unlawful funds. This month, the United States Government Accountability Office (GAO) published a report that will be reviewed by Congress and USCIS, in consideration of new measures that may be implemented by Congress as part of the program’s renewal process. The report outlines the inherent weaknesses of the EB-5 program and areas of concern.

Since August 2015, GAO has been closely monitoring the program to detect and prevent fraud. The report finds that although USCIS has taken important steps to combat fraud within the EB-5 program, USCIS has not created a uniform ‘fraud risk profile’ to serve as a guide that all immigration officers must use when examining the legitimacy of EB-5 investor applications. GAO highlights that although USCIS has implemented risk assessment measures in separate documents and reports, the agency has failed to develop a comprehensive framework identifying fraud indicators.

The report interestingly discusses the measures USCIS is taking to identify fraud within the program. USCIS is currently diverting the resources of overseas staff to investigate applicants who have committed an unlawful source of funds to the creation of a new commercial enterprise. USCIS is also utilizing a pilot program to conduct site visits for the purpose of identifying and assessing fraudulent investments. It has not been identified whether these site visits are randomized or calculated. Additionally, the service has frequently adopted new, revised forms to help identify fraud, however they have continued to rely heavily on paper files, making the process of sorting and analyzing the files of immigrant investors time consuming and ineffective. In their own analysis of EB-5 regional center programs and immigrant investor files, GAO could not easily identify fraud indicators, due to the fact that most files spanned well over thousands of pages. According to USCIS, the immigrant investor program itself accounts for 14 million pages of supporting documentation received on an annual basis. It is expected that USCIS will take steps to implement a digital system to easily analyze these files and facilitate fraud detection, although these measures are still in the early stages. Over the next few years, GAO has recommended that USCIS implement fraud risk management systems and a standardized way to identify fraudulent schemes, by conducting regular fraud risk assessments.

It is very likely that Congress will rely on these considerations when proposing the renewal of the EB-5 program. The House of Representatives has already proposed three separate bills that if approved will tighten the EB-5 program considerably. Together these bills intend to establish additional security checks, closely monitor regional centers, increase regional center sanctions, and terminate regional centers who have failed to disclose information pertinent to a fraud investigation, have engaged in fraudulent conduct, or acted in such a manner to threaten national security.

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