USCIS Had Taken Some Steps to Assess and Address Fraud Risks, but Regular Risk Assessments and Additional Controls Could Improve Fraud Prevention and Detection

		USCIS and Others Had Identified Unique Fraud Risks to the EB-5 Program and Could Benefit from Planning and Conducting Regular Future Risk Assessments

In August 2015, we reported that USCIS had identified fraud and national  security risks in the EB-5 Program in various assessments it conducted  over time and in collaboration with its interagency partners. For example,  in 2012, USCIS met with interagency partners and National Security Staff  to assess fraud and national security risks in the EB-5 Program. An  internal memo discussing this effort also highlighted steps to enhance the  program’s ability to mitigate fraud such as through improved collaboration  with the SEC and the FBI. Further, later in 2012, USCIS worked with  FBI and the Department of Treasury Financial Crimes Enforcement  Network, among others, to assess the benefits of incorporating enhanced  security screenings to improve its vetting of EB-5 Program petitioners,  including the need to provide dedicated fraud personnel to the EB-5  Program, according to FDNS personnel. Most recently, in early 2015,  DHS’s Office of Intelligence and Analysis prepared a classified report,  which updated the program’s 2012 assessment of the fraud risks to the  EB-5 Program. USCIS officials said that they also identify potential fraud  risks in the EB-5 Program through their day-to-day oversight work, and  that law enforcement agencies such as HSI, the SEC, and the FBI may  also uncover fraud through their own investigative efforts and may share  the information with USCIS, as appropriate.
Although the risk assessments conducted by USCIS and other agencies  have helped provide information to USCIS to better understand and  manage risks to the EB-5 Program, these assessments were onetime  exercises, and, as we reported in August 2015, USCIS did not have  documented plans to conduct regular future risk assessments of the  program because, according to USCIS officials, the agency would  perform them on an “as needed” basis. However, FDNS officials noted  that fraud risks and schemes in the EB-5 Program were constantly  evolving, and stated that the office regularly identifies new fraud schemes  and that they must work to stay on top of emerging issues. We also  reported that the EB-5 program has grown substantially over time—the  total number of EB-5 visas issued increased from almost 3,000 in fiscal  year 2011 to over 9,000 in fiscal year 2014, according to State data,  which creates additional opportunities for fraud.
According to the risk assessments and FDNS officials, the EB-5 Program  possesses several risks that are generally not present in other types of  immigration programs. Specifically, a senior FDNS official noted that, as  is the case with other immigration benefits, EB-5 adjudications center on  the eligibility of the petitioner or applicant, however, the EB-5 Program  also has an investment component that creates increased program  complexity and the potential for fraud risks. Fraud risks which USCIS  and other agencies have identified for the EB-5 Program included those  related to both the investors and regional centers, such as the following.
Uncertain source of immigrant investor funds. USCIS’s 2012 risk  assessment identified the source of EB-5 petitioner funds as an area at  risk for fraud. As previously discussed, to be eligible for the EB-5  Program, immigrant investors must invest a minimum of $1 million—or  $500,000 in a targeted employment area—in a job-creating enterprise,  and investors must provide documentation showing that these funds  come from a lawful source. USCIS officials said that some petitioners  may have strong incentives to report inaccurate information about the  sources of their funds on their petitions or use fraudulent documents in  instances when the funds come from illicit—and thus ineligible—sources,  such as funds obtained through drug trade, human trafficking, or other  criminal activities. USCIS and State officials noted that verifying a lawful  source of funds was difficult as they did not have authority to access and  verify banking information with many foreign countries, and USCIS  officials said that therefore IPO and FDNS did not have a means to verify  self-reported immigrant financial information stated to come from these  foreign banks.
Legitimacy of investment entity. The amount of investment required to  participate in the EB-5 Program, coupled with the fact that investors are  making an investment in order to obtain an immigration benefit (i.e., green  card), can create fraud risks tied to regional center operators and  intermediaries. For example, SEC officials noted that immigrant investors  may be vulnerable to fraud schemes because they may be primarily  focused on obtaining their visas. As of May 2015, FDNS documentation  tracking investigations by program stakeholders such as the SEC and  HSI showed that over half (35) of the 59 open investigations were  primarily focused on securities fraud. Moreover, in January 2016, the  SEC’s Office of Inspections and Examinations identified the EB-5  Program in its examination priorities for 2016.
Given these identified fraud risks, and the constantly evolving nature of  risks to the program, we recommended in our August 2015 report that  USCIS plan and conduct regular fraud risk assessments of the EB-5  Program to better position it to identify, address, and mitigate emerging  fraud risks to the program. DHS concurred, stating that the EB-5 Branch  of USCIS’s FDNS would continue to conduct a minimum of one fraud,  national security, or intelligence assessment on an aspect of the program  annually. In February 2016, USCIS officials stated that they had  completed the data collection for their first review, which they estimated  completing by September 2016. This review will focus on all identified  national security concern cases initiated in the Fraud Detection and  National Security Detection System from fiscal years 2011 through  2015. They also provided draft policy documents demonstrating their  intention to require a minimum of one fraud assessment annually;  however, these documents had not yet been finalized. To fully address  the intent of our recommendation, USCIS needs to conduct at least one  review, as planned, and document plans for future assessments.

		USCIS Had Taken Some Steps to Address Fraud Risks, but Additional Controls Could Improve Fraud Prevention and Detection

In August 2015, we reported that USCIS had taken some steps to  enhance its fraud risk management efforts. These included establishing a  dedicated entity to design and oversee its fraud risk management  activities, creating an organizational structure conducive to fraud risk  management, conducting fraud-awareness training, and establishing  collaborative relationships with external stakeholders, including law  enforcement agencies. In November 2013, USCIS established a fraud  specialist unit for the EB-5 Program within FDNS. As of May 2015, FDNS  was in the process of hiring an additional 8 dedicated staff with  specialized fraud expertise to enhance its EB-5 Program fraud detection  capabilities and oversight, bringing the total FDNS EB-5 Program staff to  21. According to FDNS officials, as of January 2016, the FDNS EB-5  Division included 22 full-time equivalent staff, of which 18 positions were  currently occupied. We further reported in August 2015 that in 2013  USCIS also colocated staff who screen and adjudicate EB-5 petitions  within IPO and began having FDNS officers and intelligence professionals  work alongside EB-5 Program adjudicators to facilitate fraud-related  information sharing. FDNS established training opportunities to include  specialized fraud training at the Federal Law Enforcement Training  Center related to money laundering and an internal “EB-5 University” to  provide staff with monthly presentations on specific fraud-related topics  believed to be immediately relevant to EB-5 Program adjudication.  According to SEC, ICE, FBI, and USCIS officials, USCIS also increased  its level of coordination with law enforcement agencies to cross-train staff  with additional expertise and increase communication and collaboration  on investigations and enforcement actions that can be taken when  potential fraud, criminal activity, or national security threats are detected  in the EB-5 Program.
However, in our August 2015 report we also reported that USCIS faced  significant challenges in its efforts to detect and mitigate fraud risks.  Specifically, we found that USCIS’s information systems and processes  limit its ability to collect and use data on the EB-5 Program to identify  fraud related to individual investors or investments or to determine any  fraud risk trends across the program. USCIS relies heavily on paper- based documentation. While USCIS personnel are to enter certain  information from these paper documents into various electronic  databases, these databases have limitations that reduce their usefulness  for conducting fraud-mitigating activities. For example, information that  could be useful in identifying program participants linked to potential fraud  is not required to be entered into USCIS’s database, such as the  applicant’s name, address, and date of birth on the Form I-924 used to  apply for regional center participation in the EB-5 Program. USCIS  officials stated that the agency will be able to collect and maintain more  complete data on EB-5 Program petitioners and applicants through the  deployment of electronic forms in its new system, the Electronic  Immigration System (ELIS). However, USCIS has faced long-standing  challenges in implementing ELIS, which, as we reported in May 2015,  was nearly 4 years delayed and $1 billion over budget.
As we reported in August 2015, USCIS has taken alternative steps to  gather information to mitigate fraud risk while improvements to its  information systems are delayed, such as expanding its site visits  program to include random checks of the operation of EB-5 Program  projects. However, opportunities remain to expand information collection  through interviews with immigrant investors and expanded EB-5 Program  petition and application forms. USCIS is statutorily required to conduct  interviews of immigrant investors within 90 days after they submit the  Form I-829 petition to remove conditions on their permanent residency.   However, USCIS also has the statutory authority to waive the requirement  for such interviews. As of April 2015, USCIS officials stated that USCIS  IPO had not conducted an interview at the I-829 stage. We reported that  conducting interviews at this stage to gather additional corroborating or  contextual information could help establish whether an immigrant investor  is a victim of or complicit in fraud—a concern shared by both ICE HSI and  SEC officials, who noted that gathering additional information and context  about individual investors could help to inform investigative work. USCIS  officials said they anticipate conducting these interviews in the near  future, but had not developed plans or a strategy for conducting  interviews at this stage primarily because IPO was relatively new and  began adjudicating I-829 petitions in September 2014.
In August 2015, we also reported that USCIS does not collect certain  applicant information that could help mitigate fraud. Specifically, USCIS  does not require information on the Form I-924 about the businesses  supported by the regional center and program investments coordinated  by the regional center, such as the names of principals or key officers  associated with the underlying businesses, or information on advisers to  investors such as foreign brokers, marketers, attorneys, and other  advisers receiving fees from investors. According to USCIS officials, at  the time of our August 2015 report, USCIS was drafting revised Forms  I-924 and I-924A that would seek to address many of these concerns.  However, as these revisions have not been completed, it is too early to  tell the extent to which they will position USCIS to collect additional  applicant information. Given that information system improvements with  the potential to expand USCIS’s fraud mitigation efforts will not take effect  until 2017 at the earliest and that gaps exist in USCIS’s other information  collection efforts, we concluded that collecting additional information  would better position USCIS to identify and mitigate potential fraud. We  recommended that USCIS develop a strategy to expand information  collection, including considering the increased use of interviews at the  I-829 phase as well as requiring the additional reporting of information in  applicant and petitioner forms. DHS concurred and, as of February 2016,  officials reported that USCIS continues to take steps to develop and  implement a strategy to expand information collection that includes  revisions to the Form I-924, I-924A, I-526, and I-829 applications and  petitions to capture more information. In addition, these officials stated  that USCIS had not yet conducted an interview at the I-829 stage, but  they were finalizing an interview process and planned to begin conducting  interviews in the third quarter of fiscal year 2016.

	USCIS Had Increased Capacity for Verifying Job Creation but Did Not Use a Valid and Reliable Methodology for Reporting Program Outcomes and Economic Benefits

		USCIS Strengthened Its Workforce, Guidance, Training, and Process for Verifying Job Creation

We reported in August 2015 that USCIS had taken action to increase its  capacity to verify job creation in response to past GAO and DHS OIG  reports that found that USCIS did not have staff with the expertise to  verify job creation estimates and that the agency’s methodologies for  verifying such estimates were not rigorous. In particular, in December  2013, the DHS OIG reported that USCIS lacked meaningful economic  expertise to conduct independent and thorough reviews of economic  models used by investors to estimate indirect job creation for regional  center projects, and recommended that USCIS coordinate with other  federal agencies to provide expertise in the adjudication process.  USCIS took action over time to increase the size and expertise of its  workforce, provide clarifying guidance and training, and revise its process  for assigning applications for adjudication. For example, in fiscal year  2013, USCIS increased its staffing from 9 adjudicators to 58, including 22  economists, and issued a policy memorandum clarifying existing  guidance to help ensure consistency in the adjudication of petitions and to  provide greater transparency for the EB-5 Program stakeholder  community, according to IPO officials. In addition, USCIS improved its  training curriculum to better ensure consistency and compliance with  applicable statutes, regulations, and agency policy, including an update in  2014 of the new employee EB-5 training program and the establishment  of an ongoing training focusing on recurring issues and petition cases that  are novel in nature.
Further, as we reported in August 2015, USCIS provided its economists  with access to data from the Regional Input-Output Modeling System  (RIMS II) economic model in fiscal year 2013 that increased their capacity  to verify job creation estimates reported by investors for investments in  regional center projects. IPO program managers estimated that as of  fiscal year 2015, about 95 percent of EB-5 Program participants used  economic models to estimate job creation, with about 90 percent of those  investors using RIMS II. The RIMS II model is widely used across the  public and private sectors and is considered to be among those valid to  verify estimates of indirect and induced jobs reported for investments in  regional center projects, according to USCIS and Department of  Commerce (Commerce) economists, as well as industry and academic  experts. Indirect jobs include jobs that are not directly created by a  regional center business, but may result from increased employment in  other businesses that supply goods and services to the regional center  business as well as induced jobs created from workers’ spending of  increased earnings on consumer goods and services.
However, we also reported in August 2015 that the use of RIMS II data  alone does not provide USCIS with the capacity to determine the location  of jobs created, such as the number of jobs created in targeted  employment areas that most immigrant investors use to qualify for a lower  investment amount. USCIS’s May 2013 policy memorandum notes that  Congress expressly provided for a reduced investment amount in a rural  area or an area of high unemployment in order to spur immigrants to  invest in new commercial enterprises that are principally doing business  in—and creating jobs in—areas of greatest need. IPO program  managers stated that approximately 90 percent of immigrant investors  qualify for a reduced investment amount—$500,000 instead of $1  million—to participate in the EB-5 Program because they are claiming  investment in a commercial enterprise which will create employment in a  targeted employment area. The remaining 10 percent of immigrant  investors pay twice that amount to participate in projects that are not  limited to these locations. The IPO Economics Division Chief said that  USCIS has not identified a need to verify the creation of jobs in a targeted  employment area because the law permits regional center investors to  use input-output models that do not have this capacity and program  regulation and policy require that the investment capital be made  available to the job creating entity which is principally doing business in  the targeted employment area. IPO economists we interviewed also  said that given the relative ease of proving job creation through economic  modeling compared with documentation requirements to prove creation of  direct jobs, immigrant investors generally claim indirect jobs, rather than  direct jobs, to qualify for the program.

		USCIS Did Not Have a Valid and Reliable Methodology for Reporting Program Outcomes and Economic Benefits

In August 2015, we reported that USCIS’s methodology for reporting  EB-5 Program outcomes and economic benefits was not valid and  reliable because it is based on the minimum program requirements for job  creation and investment. To estimate job creation, USCIS multiplies the  number of immigrant investors who have successfully completed the  program with an approved Form I-829, by 10—the minimum job creation  requirement per investor. To estimate overall investment in the economy,  the agency multiplies the number of immigrant investors approved to  participate in the program with an approved Form I-526, by $500,000— the minimum investment amount, assuming all investments were made  for projects in a targeted employment area. Accordingly, USCIS reported  that from program inception in fiscal year 1990 through fiscal year 2014,  the EB-5 Program has created a minimum of 73,730 jobs and more than  $11.2 billion in investments.
Our review and past GAO and DHS OIG audits of the program have  pointed out the limitations of this methodology to report reliable program  outcomes in that the data can be understated or overstated in certain  circumstances. For example, USCIS officials stated that 90 percent of  immigrant investors reported creating more than the 10-job minimum, and  10 percent of immigrant investors pay $1 million instead of $500,000  because they invest in projects outside of a targeted employment area.  Estimating economic outcomes using the minimum program requirements  in these circumstances would lead to an underestimate of the program’s  benefits. For example we reviewed one project with about 450 immigrant  investors that created over 10,500 jobs, or about 23 jobs per investor,  while USCIS counted only the 10-job minimum per investor, a total  difference of 6,000 jobs. Additionally, according to DHS’s 2013  Immigration Statistics Yearbook, about 32 investors paid $1 million  instead of $500,000 into the program in fiscal year 2013, a total difference  of $16 million not counted by USCIS.
Conversely, USCIS’s methodology may overstate some economic  benefits derived from the EB-5 Program. For example, the methodology  assumes that all investors approved for the program will invest the  required amount of funds, and that these funds will be fully spent on the  project. According to IPO officials and our analysis of EB-5 Program data,  there are far fewer investors who successfully complete the program than  were approved for program participation, and the actual amount invested  and spent in these circumstances is unknown. For example, our analysis  showed that approximately 26 percent of all EB-5 investors who entered  the program from its inception year through fiscal year 2011 may not have  completed the process to show funds spent and jobs created with an  approved I-829 as of the fiscal year ending in 2014.
As we reported in August 2015, USCIS collects more complete  information on EB-5 Program forms, but does not track or analyze this  information to more accurately report program outcomes. Specifically,  immigrant investors are required to report (and USCIS staff are to verify)  the amount of their initial investment on the Form I-526, and to report the  number of new jobs created by their investment on the Form I-829.  However, USCIS officials said that they reported EB-5 Program outcomes  using minimum program requirements because these are the required  economic benefits stated in law, and that they are not statutorily required  to develop a more comprehensive assessment of program benefits. We  concluded that tracking and using more comprehensive information it  collects on project investments and job creation on the Forms I-526 and  I-829 submitted by immigrant investors and verified by USCIS would  enable USCIS to more reliably report on EB-5 Program outcomes and  economic benefits. We therefore recommended in our August 2015 report  that USCIS track and report data that immigrant investors report, and the  agency verifies on its program forms for total investments and jobs  created through the EB-5 Program. DHS concurred and, as of February  2016, officials anticipated developing a data system that will enable  USCIS to track and report data immigrant investors report in fiscal year  2017.

		USCIS-Commissioned Study to Assess Overall Program Benefits Addressed Some Past Limitations but not the Costs of the EB-5 Program

We reported in August 2015 that USCIS had commissioned the  Economics and Statistics Administration (ESA) of the Department of  Commerce (Commerce) to conduct a study of the economic impact of the  EB-5 Program. USCIS undertook this action in response to a December  2013 DHS OIG recommendation that USCIS conduct a comprehensive  review of the EB-5 Program to demonstrate how investor funds have  stimulated the U.S. economy. As of June 2015, USCIS and ESA had not  yet finalized the methodology for the new study; however, ESA and  USCIS approved a statement of work in November 2014 that outlined a  preliminary methodology and study steps that would address some, but  not all, shortcomings of prior studies of the overall EB-5 Program benefits.  We reported that ESA officials planned to finalize the study methodology  once they completed a review of the program data submitted by IPO, and  to issue a final report in November 2015.
However, the study was not intended to address the program’s costs,  which are important for assessing a program’s net economic impact. Both  USCIS and ESA officials confirmed the study would be an economic  valuation which, unlike an evaluation, considers only the benefits of  economic activity, and does not assess the program costs. USCIS  officials said the decision was made not to assess the program costs due  to associated challenges and because the information may not justify the  investment. Our review of the draft methodology, however, showed some  potential to include some cost information. Specifically, ESA officials said  that after consulting with USCIS officials, they planned to collect  information related to the permanent residence of the immigrant investors  and their dependents to estimate the value of household spending. IPO  officials said that ESA may also collect information that may help to  estimate or disclose some of the costs associated with the program. To  help provide Congress and other stakeholders with more comprehensive  information on the overall economic benefits of the program, we  recommended in our August 2015 report that USCIS include a discussion  of the types and reasons any relevant program costs were excluded from  the Commerce study. DHS concurred and said that USCIS IPO would  recommend to Commerce that a description of potential costs not  assessed as a part of the study be included when the study is published.  In February 2016, USCIS officials stated that the study had not yet been  published and estimated it would be completed by May 2016.
Chairman Goodlatte, Ranking Member Conyers, and members of the  committee, this completes my prepared statement. I would be happy to  respond to any questions you or members of the committee may have.

	GAO Contact and Staff Acknowledgments

For questions about this statement, please contact Rebecca Gambler at  (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this statement  included Seto Bagdoyan, Director; Cindy Ayers; Krista Mantsch; Taylor  Matheson; Jan Montgomery; Jon Najmi; Edith Sohna; and Nick Weeks.  Other contributors to the report on which this statement is based are  listed in the report.
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Summary:
Why GAO Did This Study

Congress created the EB-5 visa category to promote job creation by immigrant investors in exchange for visas providing lawful permanent residency. Participants are required to invest $1 million in a business that is to create at least 10 jobs—or $500,000 for businesses located in an area that is rural or has experienced unemployment of at least 150 percent of the national average rate. Upon meeting program requirements, immigrant investors are eligible for conditional status to live and work in the United States and can apply to remove the conditions for lawful permanent residency after 2 years.
This statement discusses USCIS efforts under the EB-5 Program to (1) work with interagency partners to assess fraud and other related risks and address identified fraud risks, and (2) increase its capacity to verify job creation and use a valid and reliable methodology to report economic benefits. This statement is based on a report GAO issued in August 2015 ( GAO-15-696 ), with selected updates conducted in February 2016 to obtain information from DHS on actions it has taken to address the report's recommendations.

What GAO Found

In August 2015, GAO reported that the Department of Homeland Security's (DHS) U.S. Citizenship and Immigration Services (USCIS), which administers the Employment-Based Fifth Preference Immigrant Investor Program (EB-5 Program), had collaborated with its interagency partners to assess fraud and national security risks in the program in fiscal years 2012 and 2015. These assessments were onetime efforts; however, USCIS officials noted that fraud risks in the EB-5 Program are constantly evolving, and they continually identify new fraud schemes. USCIS did not have documented plans to conduct regular future risk assessments which could help inform efforts to identify and address evolving program risks. GAO recommended that USCIS plan and conduct regular future fraud risks assessments. DHS agreed, and as of February 2016, USCIS officials stated that they planned to complete an additional risk assessment by September 2016 and a minimum of one annually thereafter. GAO also reported in August 2015 that USCIS had taken steps to address the fraud risks it identified by enhancing its fraud risk management efforts; however, USCIS's information systems and processes limited its ability to collect and use data on EB-5 Program participants to address fraud risks in the program. For example, USCIS did not consistently enter some information it collected on participants in its information systems, such as name and date of birth, and this presented barriers to conducting basic electronic searches that could be analyzed for potential fraud. USCIS planned to collect and maintain more complete data in its new information system; however, the information system improvements with the potential to expand USCIS's fraud mitigation efforts were not to take effect until 2017 at the earliest. Given this time frame and gaps in USCIS's other information collection efforts, GAO recommended that USCIS develop a strategy to expand information collection in order to better position the agency to identify and mitigate potential fraud. DHS concurred, and in February 2016 USCIS officials stated that USCIS plans to develop such a strategy by the end of fiscal year 2016.
In August 2015, GAO reported that USCIS had increased its capacity to verify job creation by increasing the size and expertise of its workforce, among other actions. However, USCIS's methodology for reporting program outcomes and overall economic benefits was not valid and reliable because it may understate or overstate program benefits in certain instances as it is based on the minimum program requirements of 10 jobs and a $500,000 investment per investor instead of the number of jobs and investment amounts collected by USCIS on individual EB-5 Program forms. For example, total investment amounts are not adjusted downward to account for investors who do not complete the program or upward for investments of $1 million instead of $500,000. USCIS officials said they are not statutorily required to develop a more comprehensive assessment. However, tracking and analyzing data on jobs and investments reported on program forms would better position USCIS to more reliably assess and report on the EB-5 Program economic benefits. Accordingly, GAO recommended that USCIS track and report data that investors report and the agency verifies on its program forms for total investments and jobs created through the EB-5 Program. DHS agreed and plans to implement this recommendation by the end of fiscal year 2017.

What GAO Recommends

In its August 2015 report, GAO recommended that USCIS, among other things, conduct regular future risk assessments, develop a strategy to expand information collection, and analyze data collected on program forms to reliably report on economic benefits. DHS concurred with the recommendations and reported actions underway to address them.