EB-5 Immigration Program Susceptible To Fraud

Tom Williams/CQ Roll Call/AP
Tom Williams/CQ Roll Call/AP

The immigration program for wealthy investors — the Employment-Based Fifth Preference Immigrant Investor Program or EB-5 — is vulnerable to fraud, new a Government Accountability Office report reveals.

The EB-5 Program provides visas to foreign nationals who invest $1 million — or $500,000 in high unemployment areas — in a commercial enterprise and create at least 10 full-time jobs.

The GAO reports, however, that the program is a source of unique, constantly evolving risks, that U.S. Citizenship and Immigration Services’ assessments of the economic benefits may not be accurate, and that its data collection methods are incomplete. Further new information systems to collect more data are years away.

Such fraud risks include uncertainties about the sources of investor funds, questions about the legitimacy of EB-5 investment entities, and political favoritism.

The GAO report, released Wednesday, notes that Securities and Exchange Commission officials have identified fraudulent investment schemes and from 2013-2015 “reported receiving over 100 tips, complaints, and referrals related to possible securities fraud violations and the EB-5 Program” with over half resulting in further investigation. As of May, there were 59 open investigations into EB-5 investment schemes.

Senate Judiciary Chairman Chuck Grassley (R-IA), who has sounded the alarm about fraud in the program, reacted to the report saying the “status quo is unacceptable.”

“Without adequate systems in place we can’t verify the source of funds from petitioners or ensure that investors aren’t being defrauded,” Grassley said.

“One of the simplest ways to keep fraud at bay is to conduct site visits and use the in-person interview to a greater extent with people in the country on the EB-5 visa who are trying to gain lawful permanent residency. These straightforward tools are being used at a minimum or not at all.  That needs to change,” he added.

Grassley and Ranking Member Patrick Leahy (D-VT) have legislation that would reform the program when it comes up for reauthorization this year.

“The Department of Homeland Security needs additional authorities and enforcement tools to guard against fraud and abuse. And increased transparency and oversight are essential to instill confidence in the program,” Leahy added in a statement Wednesday. “Today’s report on the EB-5 program from the Government Accountability Office further confirms that such reforms are necessary.”

Senate Foreign Relations Committee Chairman Bob Corker (R-TN) further highlighted the national security and economic risks the program presents.

“It is critical that Congress work to strengthen oversight of this program to ensure it actually creates American jobs that otherwise would not be created and does not jeopardize our national security,” he said.

“It is also important that the Department of Homeland Security develop more effective ways to detect and eliminate cases of fraud and to make sure the source of funds being used for these applications is not coming from criminal activity,” Corker added.


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