The Government Accountability Office (GAO) recently published its first report on the EB-5 Program since 2016. The report delves into many aspects of the Program, but the conclusion rested on two definitive recommendations to U.S. Citizenship & Immigration Services (USCIS) to which USCIS agreed. The recommendations include:
- The Director of USCIS should systematically collect and track data on the types and characteristics of EB-5 program fraud.
- The Director of USCIS should develop and implement a process to collect and assess data on reasons for EB-5 petition and application denials and Regional Center terminations, including whether fraud or national security was a factor in the action.
Fraud Detection at IPO
The report went into detail about the inter-workings of the EB-5 Program, both the Direct track and Regional Center track and provided data and background on the Program that is helpful for both vested EB-5 stakeholders and novices alike. Because of the recommendations listed above, much of the report focused on fraud detection protocols within the EB-5 adjudication process, including detailing the different paths a petition or applications may take if it is flagged for further investigation for suspicion of fraud (or national security concerns).
It is interesting to note that while the report states that the EB-5 Program is a unique pathway to a U.S. visa and ultimately residency which (in their words) makes it more ripe for fraud than other visa categories, that according to USCIS data, in fiscal year 2021, the number of EB-5-related investigations created—including leads, cases, and national security concerns—made up less than 3 percent of pending petitions (I-526 and I-829). Furthermore, the number of confirmed fraud or national security concerns was less than 1% of pending petitions.
Given this information, it is important to highlight that the report stated that USCIS does not have readily available data on specific characteristics of fraud concerns or fraud trends in the EB-5 Program. Additionally, it does not collect data on petition/application denial reasons or Regional Center termination reasons, including when fraud or national security is the underlying factor.
IIUSA regularly makes Freedom of Information Act (FOIA) requests for this very information: reasons for issued notices of intent to deny (NOID), denials, and Regional Center terminations. In recent years, we have received pushback on these requests and have no collected any meaningful data. While USCIS cites the reason for the request denial to be related to providing personal and identifying information on an A-file (despite IIUSA explicitly stating in the request that we do not want personal information, but simply the reasons for the NOIDs, denials, and terminations), it is perhaps becoming more apparent that the real reason for the denial may be lack of aggregated data.
The report also addressed other means which USICS has taken since GAO’s last report/recommendation to the agency to improve fraud detection and the Program overall. In addition to increased statutory authority granted to it by the EB-5 Reform and Integrity Act of 2022 (RIA), the report noted the following steps as well (these can be reviewed in detail starting on page 46 of the report):
- Compliance Division and compliance review
- CFIUS reviews
- FDNS Administrative Site Visit and Verification Program
- Training initiatives
- Checks for high-risk countries and entities
Fraud Detection and Backlogs
While there is much more in the report to digest that stated in this summary, one final item of interest to note is related to IPO staff feedback on staffing shortages and adjudication backlogs. The report states:
Twelve of the 15 IPO staff we interviewed commented on backlogs and staffing shortages in IPO FDNS, noting that fraud or national security referrals and investigations take an extensive amount of time to complete. For example, one staff member stated that once an adjudicator identifies a fraud indicator and sends a request for assistance to IPO FDNS, it can take years before officials start an investigation or bring charges, or an adjudicator issues a request for evidence and/or a notice of intent to deny the petition.
Given both the cited increase in flagged cases by adjudicators for suspicion of fraud or national security concerns and the exponential increase in adjudication times for EB-5 petitioners, one wonders if the two are potentially related.
Help for Future Petition/Applications
While the report includes many interesting nuggets of information, the most pertinent and potentially helpful conclusion for the industry are GAO’s recommendations to USCIS for better data collection on petition/application denials. It is well known that the EB-5 industry supports integrity measures to ensure the Program is used lawfully by upstanding immigrant investors, but having insight into aggregate data on denial reasons will be helpful for future petition/application submissions as the GAO recommendation includes data collection for denials in general, not just those related to fraud of national security concerns. This all comes at a presumption that USCIS will make this data publicly available either through its website or FOIA requests.