Immigrant Investor Program: Additional Actions Needed to Better Assess Fraud Risks and Report Economic Benefits
Published: 2015-08-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
GAO was asked to review fraud risks and economic benefits for the EB-5 Program. This report examines USCIS efforts under the EB-5 Program to (1) work with interagency partners to assess fraud and other related risks, (2) address any identified fraud risks, and (3) increase its capacity to verify job creation and use a valid and reliable methodology to report economic benefits. GAO reviewed risk assessments and processes to address fraud risks, verify job creation, and report economic benefits.
section_title: What GAO Found
paragraphs: The Department of Homeland Security's (DHS) U.S. Citizenship and Immigration Services (USCIS) administers the Employment-Based Fifth Preference Immigrant Investor Program (EB-5 Program) and collaborated with its interagency partners to assess fraud and national security risks in the program in fiscal years 2012 and 2015. Unique fraud risks identified in the program included uncertainties in verifying that the funds invested were obtained lawfully and various investment-related schemes to defraud investors. 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 does not have documented plans to conduct regular future risk assessments, in accordance with fraud prevention practices, which could help inform efforts to identify and address evolving program risks.
USCIS has taken steps to address the fraud risks it identified by enhancing its fraud risk management efforts, including establishing a dedicated entity to oversee these efforts. However, USCIS's information systems and processes limit its ability to collect and use data on EB-5 Program participants to address fraud risks in the program. For example, USCIS does not consistently enter some information it collects on participants in its information systems, such as name and date of birth, a fact that presents barriers to conducting basic electronic searches that could be analyzed for potential fraud, such as schemes to defraud investors. USCIS plans to collect and maintain more complete data in its new information system; however, GAO reported in May 2015 that the new system is nearly 4 years delayed. In the meantime, USCIS does not have a strategy for collecting additional information, including some information on businesses supported by EB-5 Program investments, that officials noted could help mitigate fraud, such as misrepresentation of new businesses. 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, developing a strategy for collecting such information would better position USCIS to identify and mitigate potential fraud.
USCIS increased its capacity to verify job creation by increasing the size and expertise of its workforce and providing clarifying guidance and training, among other actions. However, USCIS's methodology for reporting program outcomes and overall economic benefits is 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, USCIS reported 4,500 jobs for 450 investors on one project using its methodology instead of 10,500 jobs reported on EB-5 Program forms for that project. Further, investment amounts are not adjusted for investors who do not complete the program or invest $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.
section_title: What GAO Recommends
paragraphs: GAO recommends that, among other things, USCIS conduct regular future risk assessments, develop a strategy to expand information collection, and analyze the data collected on program forms to reliably report on economic benefits. DHS concurred with our four recommendations.

section_title: Letter
paragraphs: Congress created an additional employment-based immigrant visa  category (preference benefit) as part of the Immigration Act of 1990 to  promote job creation and encourage capital investment in the United  States by foreign investors in exchange for lawful permanent residency  (green card) and a path to citizenship. This category, commonly referred  to as Employment-Based Fifth Preference (EB-5), is for employment  creation by qualified immigrants seeking to enter the United States to   Upon meeting certain EB-5  engage in a new commercial enterprise.Immigrant Investor Program (EB-5 Program) requirements—including  investing $1 million (or $500,000 in targeted employment areas) in a new  commercial enterprise that will result in the creation of at least 10 full-time  jobs—immigrant investors and their eligible dependents are eligible to  receive 2-year conditional green cards to live and work in the United  States. Within the 90-day period prior to the second anniversary of the  date on which an immigrant investor obtained conditional status, he or  she can apply to remove the conditional basis of his or her green card.  Approximately 10,000 EB-5 visas per fiscal year are made available to  qualified immigrant investors and their families seeking to immigrate to  the United States through the EB-5 Program.
Under the EB-5 Regional Center Program, first enacted as a pilot in 1992  and reauthorized seven times since, a certain number of the EB-5 visas  are set aside annually for immigrant investors in economic units called  regional centers, which are established to promote economic growth.  Most recently, the Regional Center Program was extended until  September 30, 2015, and the term “pilot” was removed from the name of  the program. Under the Regional Center Program, immigrant investors  can pool their investments with those of other foreign and U.S. investors  to fund a new commercial enterprise within a regional center. An  immigrant investor in any new commercial enterprise, including under the  Regional Center Program, can meet the requirement that he or she be  engaged in the management of that enterprise, as opposed to  maintaining a purely passive role, if he or she is, for example, a limited  partner of a limited partnership. Immigrant investors must demonstrate  that their investment in a new commercial enterprise will result in the  creation or, in the case of a troubled business, preservation or creation  (or some combination of the two), of at least 10 full-time positions for  qualifying employees. Immigrant investors in a regional center  commercial enterprise may meet the statutory employment creation  requirement by providing evidence of creating or preserving, either  directly or indirectly, 10 full-time positions. In recent years, the Regional  Center Program has increased in popularity as a viable source of low- interest funding for major real estate development projects, such as the  Barclays Center—a multipurpose indoor arena in Brooklyn, New York— and the Marriott Convention Center Hotel in Washington, D.C. In fiscal  year 2014, the maximum number of visas available were allocated for the  EB-5 Program—approximately 10,000 annually, with about 95 percent of  the investments in regional center projects.
Several federal and state agencies are involved to varying degrees in  ensuring the integrity of the EB-5 Program. The Immigrant Investor  Program Office (IPO), within the Department of Homeland Security’s  (DHS) U.S. Citizenship and Immigration Services (USCIS), administers  the EB-5 Program—adjudicating applications and petitions while striving  to ensure that program participants, including immigrant investors and  principals operating U.S. regional centers, comply with program  requirements. USCIS also has a Fraud Detection and National Security  (FDNS) unit charged with preventing, detecting, and responding to  allegations of fraud in the program. States contribute to the EB-5  process—in relation to investors seeking a reduced investment of  $500,000 in a targeted employment area—by certifying through the state  government’s authorized body that the geographic or political subdivision  in which the enterprise is, or will be principally doing business, has been  designated a high-unemployment area. After USCIS approves initial  petitions for immigrant investors to participate in the program, the  Department of State (State) adjudicates the immigrant visa applications,  conducting background checks and other activities to help ensure  investors and their families comply with national security and other  requirements for admission to the United States. FDNS refers cases of  fraud related to immigrant investors to DHS’s U.S. Immigration and  Customs Enforcement (ICE), Homeland Security Investigations (HSI) for  investigation. The U.S. Securities and Exchange Commission (SEC)  investigates allegations of fraud or other misconduct in connection with  securities offerings related to EB-5 projects by U.S. principals operating  regional centers, or others. The Department of Justice’s (DOJ) Federal  Bureau of Investigation (FBI), as the lead federal agency for combating  terrorism, investigates any activity by investors or regional centers that  may pose a risk to national security as well as other criminal activities.
In 2005, we reported that, among other things, USCIS had not issued  implementing regulations to adjudicate hundreds of pending EB-5  petitions and applications. Specifically, we reported that USCIS  suspended about 900 EB-5 applications in 1998 because the financial  arrangements in the applications did not comport with the statute and  program regulations, and that guidance to adjudicators was unclear on  how to determine the type and value of benefit to the U.S. economy for  different types of investments. DHS concurred with our recommendation  to finalize and issue regulations, publishing a proposed rule in the Federal   However, as of June 2015, USCIS officials said that  Register in 2011.they had not finalized these regulations because of competing priorities.
The DHS Office of Inspector General (OIG) has also issued two reports  on the EB-5 Program. Specifically, in December 2013, the DHS OIG  reported that several conditions had prevented USCIS from administering  and managing the EB-5 Program effectively. These conditions, as cited  by the report, included, among other things, laws and regulations that do  not give USCIS the authority to prevent a regional center’s participation in  the program on the basis of fraud or national security concerns. The  report concluded that because of difficulties ensuring the integrity of the  Regional Center Program, USCIS was limited in its ability to prevent fraud  or national security threats and could not demonstrate that the program  was benefiting the U.S. economy and creating full-time employment as  required by law. Further, in March 2015, the DHS OIG conducted an  investigation of employee complaints about the EB-5 Program and  reported that the former director’s communication with external  stakeholders on specific matters outside the normal procedures, coupled  with favorable action that deviated from the regulatory scheme, had  created an appearance of favoritism and special access. The DHS  Secretary, in response to the OIG findings, acknowledged the popularity  of the program as an economic development tool but also expressed  concerns about the program and asked Congress for help in  strengthening the program’s integrity. He noted that in the past, DHS  had unsuccessfully sought a number of statutory enhancements to the  program’s integrity and urged Congress to work with the department to  strengthen the security and integrity of the program.
You asked us to review the fraud risks and economic benefits for the EB- 5 Program. This report addresses the following questions:
To what extent have USCIS and its interagency partners assessed  fraud risks and other related risks in the EB-5 Program and what risks  did they identify?
To what extent has USCIS implemented efforts to address any  identified fraud risks in the EB-5 Program?
To what extent has USCIS increased its capacity to verify job creation  and used valid and reliable methodologies for reporting program  outcomes and overall economic benefits?
To determine the extent to which USCIS and its interagency partners  have assessed fraud risks in the EB-5 Program and what risks they have  identified, we examined past audit findings by GAO and DHS OIG, and  reviewed fraud risk assessments conducted by DHS, USCIS, State, SEC,  FBI, and ICE HSI. We interviewed USCIS, SEC, FBI, and ICE HSI  headquarters officials and analyzed USCIS processes, procedures, and  training for detecting, preventing, and investigating fraud and compared  them against standards in Standards for Internal Control in the Federal  Government, GAO’s Fraud Risk Management Framework, and GAO’s  Strategies to Manage Improper Payments. To gain the perspective of  Regional Center Program participants on the types and prevalence of  fraud in the program, we also interviewed the principals of two regional  centers located in proximity to USCIS headquarters and the USCIS  California Service Center, which we visited because it was primarily  responsible for administering the EB-5 Program prior to the program’s  transfer to USCIS headquarters’ new Immigrant Investor Program Office.  We also interviewed officials about fraud risks in the EB-5 Program from a  national industry association representing EB-5 Program regional centers  and a national immigration lawyers association in Washington, D.C., as  well as SEC and ICE officials in California during our site visit to the  USCIS California Service Center. Although the information from these  interviews and the site visit is not representative of all EB-5 industry  stakeholders’ perspectives, they provided insights into the fraud risks and  vulnerabilities of the program. We also reviewed a nonprobability sample  of 28 EB-5 Program files for immigrant investors and regional centers  USCIS approved to participate in the program to identify any potential  fraud indicators and review internal controls. While the files we reviewed  are not representative of all completed and approved applications and  petitions, they did provide us with information about different immigrant  investor and regional center circumstances.
To determine the extent to which USCIS has implemented efforts to  address any identified fraud risks in the EB-5 Program, we examined  agency action to address past DHS OIG and ICE HSI risk assessment  findings and evaluated the information systems and standard operating  procedures that USCIS adjudicators use for evaluating EB-5 petitions and  applications and that FDNS officials use for identifying, preventing, and  addressing fraud risks. We also evaluated USCIS’s internal quality  assurance capabilities as well as its records management and data  storage capabilities. To gain perspective on how EB-5 Program  processes have changed over time to address fraud risks, during our site  visit to the USCIS California Service Center, we interviewed six officials  who formerly adjudicated EB-5 Program petitions and applications. We  also interviewed a nonprobability sample of 16 current adjudicators and 8  economists in IPO to identify efforts taken to identify and address fraud in  the program. We selected the adjudicators and economists based on  factors such as length of employment with USCIS, grade level, and the  type of EB-5 Program forms they adjudicate. While the adjudicators and  economists we interviewed are not representative of all EB-5 adjudicators  and economists, from the interviews we were able to gain insights into  USCIS’s efforts to identify and address fraud, among other aspects of EB- 5 Program adjudication. We also interviewed FDNS and IPO supervisory  officials to identify specific corrective actions USCIS has taken or plans to  take to address fraud risks in the program. We compared the results with  standards identified in Standards for Internal Controls in the Federal  Government and GAO’s Fraud Framework, which have established  requirements and identified leading practices for addressing fraud risks.
To determine the extent to which USCIS has increased its capacity to  verify job creation and uses valid and reliable methodologies to report  program outcomes and overall economic benefit, (1) we assessed the  changes in USCIS workforce, guidance, training, and the petition  adjudication process to address past audit findings reported by GAO and  the DHS OIG; (2) reviewed the methodology used by USCIS to report the  total amount of investment and number of jobs created through the  program; and (3) reviewed the statement of work for a contracted study  on the program’s economic impact. We interviewed IPO management as  well as a nonprobability sample of 24 adjudicators, including 8  economists chosen for the reasons previously discussed, about their  views on the adequacy of the guidance and training provided by USCIS,  and their access to the data and information they needed to verify job  creation reported by immigrant investor petitioners and regional center  applicants. The views of these adjudicators and economists cannot be  generalized to all USCIS adjudicators and economists, but provided us  with insights into the quality of the guidance and training on verifying job  creation estimates. For the process USCIS used to adjudicate immigrant  investor petitions associated with regional center projects, we also  reviewed economic models used by immigrant investors and USCIS to  estimate the number of jobs to be created by the project when petitioning  to participate in the program as well as other methods for verifying the  number of jobs created when a petitioner seeks to remove the conditional  basis of his or her green card. To assess the models, we reviewed the  underlying economic assumptions and data as well as past studies and  audits identifying limitations in use of the models for the EB-5 Program.  We also interviewed subject matter experts to include academic  researchers in urban and economic development, a policy research think  tank, a state economic development agency, and Department of  Commerce (Commerce) officials responsible for administering the  Regional Input-Output Modeling System (RIMS II model). This system is  widely used across the private and public sectors, including USCIS, and  is considered to be among those valid for verifying job creation estimates  reported by program participants within regional centers. We selected  these experts to interview because they have reviewed various aspects of  the program, written published articles, or have a role in the EB-5  Program.
To determine the extent to which USCIS’s methodology for reporting  program outcomes is valid and reliable, we compared how USCIS  compiles numbers for total jobs created by the EB-5 Program and the  dollar amount of EB-5 Program investments against the information  included in EB-5 Program petitions and verified by USCIS throughout the  adjudication process. We compared USCIS’s methodology against  guidance in GAO’s Standards for Internal Control in the Federal  Government and requirements in the Project Management Institute’s The  Standard for Program Management for programs to establish monitoring  and controlling activities to report on program performance. In regard to  USCIS’s plans to fund a contracted study reporting on the overall  economic impact of the EB-5 Program, we also interviewed USCIS  officials as well as officials at Commerce with whom USCIS has  established a memorandum of agreement to study the program’s  economic impact, to identify the study methodology and data inputs. We  compared the planned methodology for this study against Office of  Management and Budget (OMB) Circular A-94, Guidelines and Discount  Rates for Benefit-Cost Analysis of Federal Programs, which applies to all  analyses used to support government decisions to initiate, renew, or  expand programs or projects that would result in a series of measurable  benefits or cost.
We conducted this performance audit from October 2014 through August  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Individuals seeking to establish a regional center under the EB-5 Program  must submit an initial application and supporting documentation as well  as an update for each fiscal year (or as otherwise requested by USCIS)  showing that the regional center continues to meet the program  requirements to maintain its regional center designation. Prospective  regional center sponsors apply to the program by submitting Form I-924,  Application for Regional Center under the Immigrant Investor Pilot  Program. On this form, applicants are to provide a proposal, supported by  economically or statistically valid forecasting tools, that describes, among  other things, how the regional center (1) focuses on a geographic area of  the United States; (2) will promote economic growth through increased  export sales and improved regional productivity, job creation, and  increased domestic capital investment; and (3) investors will create jobs  directly or indirectly. Applicants must also include a detailed statement  regarding the amount and source of capital committed to the regional  center, as well as a description of the promotional efforts they have taken  and planned. Once a regional center has been approved to participate in  the program, a designated representative of the regional center must file  a Form I-924A, Supplement to Form I-924, for each fiscal year, to provide  USCIS with updated information demonstrating that the regional center  continues to promote economic growth, improved regional productivity,  job creation, or increased domestic capital investment in the approved  geographic area. USCIS is to issue a notice of intent to terminate the  participation of a regional center if it fails to submit the required  information or upon a determination that the regional center no longer   As of July 2015,  serves the purpose of promoting economic growth.USCIS had approved approximately 689 regional centers spread across  49 states, the District of Columbia, and 4 U.S. territories; and USCIS  terminated the participation of 34 regional centers for not filing a Form I- 924A or not promoting economic growth.
Prospective immigrant investors seeking to participate in the EB-5  Program must complete three forms and provide supporting  documentation that USCIS or State officials, as appropriate, assess to  ensure that they have met (1) the terms of participation for the program,  (2) conditions for lawful admission for permanent residence on a  conditional basis either through adjustment of status if already in the  United States under other lawful immigration status or the immigrant visa  process if abroad, and (3) requirements of the program to have lawful  permanent resident conditions removed. (See fig. 1.)
section_title: USCIS and Others Have Identified Unique Fraud Risks to the EB-5 Program and Could Benefit from Planning and Conducting Regular Future Risk Assessments
paragraphs: USCIS has 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 its 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 that USCIS was undertaking  to mitigate fraud risks to the program, such as improving collaboration  with law enforcement agencies such as SEC and FBI. In response to this  assessment, later in 2012, USCIS worked with FBI and the Department of  the Treasury’s Financial Crimes Enforcement Network (FinCEN),among others, to better understand the scope of EB-5 Program fraud  risks and to assess the benefits of incorporating enhanced security  screenings to improve its vetting of EB-5 Program petitioners. FDNS  officials told us that one key determination of the study was the need to  provide dedicated fraud personnel to the EB-5 Program, which, as  discussed later, USCIS implemented. Most recently, in early 2015, DHS’s  Office of Intelligence and Analysis prepared a classified report updating  the program’s 2012 risk assessment, in response to congressional and  USCIS requests, which assessed the fraud risks to the EB-5 Program.
In addition to conducting these risk assessments, USCIS officials told us  that they identify potential fraud stemming from the EB-5 Program  through regular oversight work such as producing reports on investors’  sources of funds. Additionally, law enforcement agencies such as ICE  HSI, SEC, and FBI may also uncover fraud through their own  investigative efforts and, as appropriate, will share this information with  USCIS.
FDNS officials noted that fraud risks and schemes in the EB-5 Program  were constantly evolving, and that updating their 2015 risk assessment  helped them better understand the nature and scope of fraud risks to the  program. Further, FDNS officials stated that the office constantly identifies  new fraud schemes, and that they must work to stay on top of emerging  issues. SEC training materials for EB-5 Program staff on securities fraud  also stated that fraud scams are creative and constantly changing, and  may make use of new distribution channels such as social media.  Moreover, as noted previously, the 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; this creates additional opportunities for fraud.
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 USCIS does 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.  Standards for Internal Control in the Federal Government provides  guidance on the importance of identifying and analyzing risks, and using  that information to make decisions. These standards address various  aspects of internal control that should be continuous, built-in components  of organizational operations. One internal control standard, risk  assessment, calls for identifying and analyzing risks that agencies face  from internal and external sources and deciding what actions should be  taken to manage these risks. The standards indicate that conditions  governing risk continually change and mechanisms are required to  ensure that risk information, such as vulnerabilities in the program,  remains current and relevant. Such mechanisms could include periodic  risk assessment updates. Moreover, our executive guide for helping  agencies identify effective strategies to manage improper payments notes  the importance of periodically updating risk assessments because of  constant changes in governmental, economic, industry, regulatory, and  operating conditions that can affect program risks in their programs.  Information collected through periodic reviews, as well as daily  operations, can inform the analysis and assessment of risk. Furthermore,  DHS’s Risk Management Fundamentals states that DHS and its  component agencies should use a risk-based approach when managing  programs that includes, among other things, identifying potential risks,  assessing and analyzing identified risks, and using risk information and  analysis to inform decision making. Planned regular or updated future  risk assessments could help better position USCIS to identify, evaluate,  and address fraud risks given the potential for changing conditions.
Unlawful Source of Petitioner Funds  As one example, Fraud Detection and  National Security (FDNS) Directorate officials  told us about a case in which a petitioner did  not report potential financial ties to a number  of brothels in China, which would have raised  questions about the legitimacy of the  petitioner’s source of funds. FDNS’s fraud  detection efforts ultimately identified this  connection and the U.S. Citizenship and  Immigration Services (USCIS) denied the  petition.
See 8 C.F.R. § 204.6(e), (f), (g)(1), (j); 8 C.F.R. § 216.6(c)(2). In the Senate Judiciary  Committee report accompanying the Immigration Act of 1990, it is stated that “the  committee intends that processing of an individual visa not continue under this section if it  becomes known to the Government that the money invested was obtained by the alien  through other than legal means (such as money received through the sale of illegal  drugs).” S. Rep. No. 101-55, at 21. This committee report was cited as a basis for  changing the definition of capital to exclude assets directly or indirectly acquired by  unlawful means. See 56 Fed. Reg. at 60,902.
EB-5 Program adjudicators to FDNS for fraud concerns.2015, on the basis of detailed reviews by FDNS staff located in  headquarters and overseas, FDNS determined that the sources of funds  in many of these petitions contained a high risk for fraud. In addition, ICE  HSI headquarters officials provided us with cases of immigrant investors  using overseas preparers to submit counterfeit documentation to  fraudulently show that funds were lawfully obtained, which can make  determining the legitimacy of the source of funds challenging. Further,  ICE HSI officials stated that they are concerned that overseas document  preparers and recruiters may try to use increasingly sophisticated  methods to circumvent program controls. USCIS officials said that IPO  and FDNS did not have a means to verify self-reported immigrant  financial information with many foreign banks. In addition, both USCIS  and State officials noted that they did not have authority to verify banking  information with many foreign countries. For example, State officials said  that because the U.S. government lacks access to many foreign financial  systems, there is no reliable method to verify the source of the funds of  petitioners.
Legitimacy of investment entity. The amount of investment required to  participate in the EB-5 Program, coupled with the fact that EB-5 investors  are making an investment in order to obtain an immigration benefit, can  create fraud risks tied to unscrupulous regional center operators and  intermediaries. According to SEC officials, they have identified instances  of fraudulent investment schemes, including securities fraud, related to  EB-5 investments. From January 2013 through January 2015, SEC  officials reported receiving over 100 tips, complaints, and referrals related  to possible securities fraud violations and the EB-5 Program. Just over   half of these tips, complaints, and referrals resulted in further investigation  by SEC staff or were referred to other state, local, or federal law  enforcement agencies for further review. According to an SEC official,  as of July 2015, SEC has initiated four civil enforcement actions alleging  securities law violations by EB-5 Program participants. Moreover,  according to FDNS documentation, as of May 2015, over half (35) of the  59 open investigations tracked by the program primarily involved  securities fraud issues. In addition, SEC officials noted that immigrant  investors may be vulnerable to fraud schemes because they may be  primarily focused on obtaining their visas. SEC officials noted that,  anecdotally, immigrant investors often accepted lower rates of return on  their investment relative to other non-EB-5 Program investors in the same  project as well as non-EB-5 Program investment opportunities. A 2015  academic study reported that EB-5 Program loans bear a lower overall  interest rate than conventional loans because the immigrant investors are  motivated by the visa rather than the maximization of financial returns.SEC officials said that investors sometimes did not exercise due diligence  about their investment decisions, thus increasing the likelihood that  immigrant investors could be taken advantage of by unscrupulous  regional centers through fraud schemes or by being steered toward poor  investments. Moreover, SEC officials told us that the U.S. government is  limited in its ability to investigate foreign-based sales and marketing  practices of EB-5 Program investment opportunities and that unrealistic or  patently false promises are sometimes made to investors. For example,  SEC cases have uncovered incidents of regional center principals  defrauding prospective immigrant investors by misrepresenting the  business investment. Additionally, USCIS and ICE HSI officials all  reported that it can be difficult to verify whether funds are being invested  in projects and commercial enterprises as reported in immigrant investor  petitions and regional center applications and immigrant investors may  also be involved in schemes to fraudulently portray job creation or  economic activity. For example, ICE HSI officials reported on a 2014  investigation related to a business enterprise that did not provide  employees any work and told the employees to sit in an office during  business hours. In another example cited by ICE HSI, in 2013, an alleged  future EB-5 Program hotel project site was actually a vacant lot; the  owner of the location was not aware of any plans to build a hotel there.
Appearance of favoritism and special access. The DHS OIG reported  in March 2015 that a previous USCIS director had created an appearance  of favoritism by providing certain petitioners and stakeholders with special  access to DHS leadership and preferential treatment for their EB-5   The OIG report also stated that Program applications or petitions. according to USCIS whistleblower allegations, which the OIG  corroborated in some cases, the former director created special  processes and revised existing policies in the EB-5 Program to  accommodate specific parties. According to the OIG, if not for the  intervention of the then director, the career staff at USCIS would have  decided adjudication matters differently. According to the OIG report,  some USCIS employees felt uncomfortable and pressured to comply with  managers’ instructions that appeared to have come from the former  director or those working directly for him. Not consistently following  standard processes designed to identify potential fraud and other risks in  adjudicating applications can increase the likelihood that those with  criminal ties or those making fraudulent investments will go unnoticed. It  may also create a control environment tolerant of not adhering to risk  mitigation processes and could reduce trust and transparency in the  overall adjudication process. Although the OIG report did not make  specific recommendations, following its issuance, the DHS Secretary  expressed further concerns about the program and asked Congress for  help to strengthen the security and integrity of the program, stating that  the EB-5 Program was frequently contacted by outsiders on behalf of  those with an interest in the outcome of a particular EB-5 Program case.  The DHS Secretary also announced the creation of a new protocol to help  prevent the reality or perception of improper outside influence in the EB-5  Program. As of June 2015, USCIS officials had developed the protocol  and anticipate that it will be fully implemented by August 2015.
Given these identified fraud risks, and the constantly evolving nature of  risks to the program, planning and conducting regular fraud risk  assessments of the EB-5 Program could better position USCIS to identify  and evaluate emerging fraud risks to the program and address and  mitigate these risks.
section_title: USCIS Has Taken Some Steps to Address Fraud Risks, but Additional Controls Could Improve Fraud Prevention and Detection
subsections: section_title: USCIS Has Taken Some Steps to Enhance Its Fraud Risk Management Efforts
paragraphs: USCIS has taken some steps to enhance its fraud risk management  efforts, including creating an organizational structure conducive to fraud  risk management, establishing a dedicated entity to design and oversee  its fraud risk management activities, conducting fraud awareness training,  and establishing collaborative relationships with external stakeholders,  including law enforcement agencies.
USCIS established an organizational structure to better address  fraud risks. In 2013, USCIS restructured the organization of its EB-5  Program operations to help better detect fraud, moving EB-5 Program  activities from its California Service Center office and centralizing these  operations in USCIS headquarters’ new Immigrant Investor Program  Office in Washington, D.C. As of June 2015, nearly all EB-5 adjudication  operations are now colocated in Washington, D.C., with the exception of  adjudication for Form I-485 applications from immigrant investors who are  already in the United States under other lawful immigration status and  who are applying to adjust their status to conditional permanent residency  under the EB-5 visa category. USCIS officials indicated they plan to move  adjudication of the Form I-485 applications from the California Service  Center to the National Benefits Center in Lee’s Summit, Missouri, by the  end of 2015. These officials stated that because USCIS is primarily  paper-driven, colocation also allows for relatively more efficient handling  and examination of files for fraud and other risks. In November 2013,  USCIS also established a fraud specialist unit for the EB-5 Program  within FDNS. FDNS officials said that they increased the number of fraud  specialists and hired individuals with specialized skill sets in areas that  they consider critical to fraud prevention, including economics, finance,  immigration, and national security, as well as relevant language skills. 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, which will bring the total authorized  FDNS EB-5 staff from 13 to 21.
USCIS established fraud awareness training. GAO’s fraud control  framework states that providing training on fraud awareness and potential  fraud schemes to all key government staff is important in stopping fraud.  FDNS’s training of its employees includes specialized fraud training. For  instance, as of May 2015, FDNS had sent 8 of its 12 staff to Federal Law  Enforcement Training Centers for specific training on detecting money  laundering following an introductory course provided in headquarters in  May 2014. FDNS has also developed an “EB-5 University” to provide  staff with monthly presentations on specific fraud-related topics believed  to be immediately relevant to adjudication of EB-5 Program petitions and  applications. USCIS held six sessions from August 2014 through January  2015, each of which addressed a different issue, including an overview of  FinCEN and the use of external agency data for investigating potential  fraud.
USCIS took steps to improve law enforcement collaboration. USCIS  took steps to improve its level of coordination related to EB-5 fraud risk  with SEC, ICE HSI, and FBI. USCIS does not generally conduct  enforcement actions and therefore coordinates with, and also makes  referrals to, law enforcement when it detects potential fraud, criminal  activity, or national security threats. According to SEC, ICE HSI, FBI, and  USCIS officials, USCIS has increased its level of coordination with law  enforcement agencies to cross-train staff with additional expertise. For  example, in September 2014 USCIS held an interagency symposium to  encourage collaboration among the government partners that have a  stake in the EB-5 Program. These officials also said that USCIS has  established more reliable avenues of communication among the  agencies, which has led to increased communication and collaboration on  referrals, investigations, and enforcement actions that can be taken when  potential threats and fraud are detected in the EB-5 Program. As of May  2015, USCIS was also finalizing a memorandum of understanding with  the Department of the Treasury’s FinCEN to improve USCIS’s ease of  access to information related to financial fraud and related criminal  activity. Moreover, since consolidating operations in Washington, D.C.,  USCIS officials stated that they have expanded the scope of their  background checks to include a greater number of individuals associated  with EB-5 investments and have increased the number of databases used  to examine individuals considered high risk. These officials said that  they are currently working with stakeholders to further enhance and  automate checks across law enforcement databases.
section_title: Limitations in USCIS’s Information Collection and Use Hamper Its Ability to Detect and Mitigate Fraud Risks
paragraphs: USCIS faces significant challenges in its efforts to detect and mitigate  fraud risks. Specifically, 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  trends across the program. While improvements to USCIS information  systems are delayed, USCIS has taken alternative steps to gather  information to mitigate fraud risk, 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.
Limitations in electronic data on EB-5 Program regional center  applicants and immigrant investors. USCIS relies heavily on paper- based documentation. While USCIS contractors and employees 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.Moreover, FDNS officials told us that some data fields are also not  standardized, a fact that presents significant barriers to conducting basic  fraud-related searches. For example, the “geographic location” field,  which USCIS personnel use to record where a regional center intends to  operate, variously contains counties, parishes, cities, states, ZIP codes,  census tracts, and other abbreviations. USCIS’s rules guiding data entry  leave many form fields “optional” in USCIS data-systems because,  according to USCIS officials, the adjudication is completed from the paper  application forms, so USCIS considers entering these data unnecessary.  However, including such information in USCIS databases could better  position USCIS to use information on investors to assess whether any  potential fraud may exist with individual investors or across the program  and initiate appropriate mitigating actions. For example, including in  USCIS databases information on regional center principals and other  Regional Center Program participants that is not consistently recorded in  those databases, such as name and date of birth, could help USCIS  better identify specific individuals who may be targeted for or are under  investigation. Further, more standardized information in USCIS  databases, such as for the geographic locations of regional centers, could  help the agency better identify and assess any potential regional center  fraud trends, for example, within and across geographic areas.
USCIS officials stated that the agency will be able to collect and maintain  more readily available data on EB-5 Program petitioners and applicants  through the deployment of electronic forms in its new system, the  Electronic Immigration System (USCIS ELIS). USCIS officials told us in  May 2015 that they expect USCIS ELIS capabilities for the EB-5 Program  to become functional in 2017. However, USCIS has faced long-standing  challenges in implementing USCIS ELIS, a fact that raises questions  about its eventual deployment and thus the extent to which it will position  USCIS to collect and maintain more readily available data. As we  reported in May 2015, USCIS ELIS is nearly 4 years delayed and  program costs increased by over $1 billion. In March 2012, USCIS began to significantly change its acquisition strategy to address various  technical challenges with the system, and these changes have  significantly delayed the program’s planned schedule. Changes made to  the program’s acquisition strategy were intended to help mitigate past  technical and programmatic challenges; however, at the time of our  review, the plans had not yet been approved and USCIS was operating  without a current and approved acquisition program baseline. USCIS  subsequently approved the plans for an acquisition program re-baseline  in May 2015. However, as we reported in May 2015, USCIS’s ability to  effectively monitor USCIS ELIS program performance and make informed  decisions about its implementation has been limited because department- level governance and oversight bodies were not using reliable program  information to inform their program evaluations. While USCIS ELIS is  under development, other actions could help USCIS mitigate fraud, as  discussed below.
FDNS’s project site visits are limited in number and scope, but  FDNS has taken steps to expand them. FDNS presently conducts EB-5  Program site visits when IPO staff have identified a material concern such  as indicators that a project is behind schedule or nonexistent and that  cannot be verified through other means such as database searches or  requests for evidence from the petitioner or applicant. FDNS officials  told us that during a site visit, they typically look for evidence to  corroborate petitioner and applicant information such as loan  documentation and invoices showing that a business project’s  management staff use of investment funds is consistent with the  approved business plan. USCIS, SEC, and ICE HSI officials and  members of the national industry association representing regional  centers said that additional site visits could enhance program integrity. In  one example, USCIS officials stated that an EB-5 Program site visit was  conducted because three stand-alone businesses claimed they were  operating at the same address on their EB-5 petition materials. The  businesses had placards on the door, but the owner of the property did  not know the petitioners were using the space to run businesses. As a  result, USCIS rejected these EB-5 Program petitions. GAO’s fraud control  framework states that inspections and physical validations are important  tools to help mitigate fraud.officials, even relatively simple site examinations, limited to a physical  visit of the investment site, may catch indicators of fraud risk when the  site is obviously unsuitable for the stated business purpose or when the  petition or application includes falsified information. According to these  officials, more comprehensive site examinations are staff intensive but  sometimes necessary for detecting fraud. ICE HSI officials said that this  includes cases when a business has not invested in physical property or  is inactive even though the EB-5 documents show that spending is taking  place. These more comprehensive examinations include gathering   Further, according to SEC and ICE HSI  sources of information related to the project site such as mortgage  documents and local city records.
Recognizing the potential benefits of site visits, USCIS plans to expand  the EB-5 Program site visits, which could enhance fraud detection and  deterrence. FDNS officials stated that they would like to conduct  additional scrutiny of cases based on indications of fraud risk, which may  include site visits; however, because of the EB-5 Program data limitations  described above, FDNS has been unable to develop risk indicators and  therefore cannot conduct risk-targeted site visits. However, officials plan  to pilot random site visits, which may also help to identify and deter fraud.  According to FDNS officials, USCIS approved their request for EB-5  Program random site visits in 2015, but they were not granted the staff  positions required to administer these site visits. As of May 2015, FDNS  had received authorization to hire 8 additional EB-5 Program staff, a level  that FDNS officials stated is sufficient to begin administering a random  site visit program. FDNS requested an expanded site visit budget for  fiscal year 2016, which is now pending approval. FDNS officials stated  that if the request is approved, a pilot random site visit program will begin  sometime in fiscal year 2016. While improvements to USCIS information  systems are delayed, piloting a random site visit program is a step that  could provide USCIS valuable information in its efforts to mitigate fraud.
USCIS does not interview immigrant investors seeking removal of  permanent residency conditions. 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 has not conducted an interview at the I-829 stage.  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. For  example, interviews could present an opportunity to gather additional  information on the extent to which the initial investment proposal offered  to potential immigrant investors differed from the actual investments  made and interest returned on investments. Further, these interviews  could gather additional information from immigrant investors in cases  where their associated regional center or commercial enterprise is  suspected of fraud, such as whether investors were asked to recruit other  investors as a condition of receiving a return on their investment. Thus,  USCIS’s use of its authority to conduct interviews under the program  could help collect information that would otherwise be difficult to obtain  from investors. USCIS officials agreed that conducting interviews at this  stage could be a source of relevant information and said they anticipate  conducting these interviews in the near future. However, USCIS officials  explained that they have not developed plans or a strategy for conducting  interviews at this stage primarily because IPO is relatively new and began  adjudicating I-829 petitions in September 2014. These officials added that  IPO is in the process of determining whether or not to schedule an  interview with a current immigrant investor but does not have a general  strategy for conducting these interviews. While we recognize the  establishment of IPO is relatively new, developing a strategy for  conducting interviews on investors at the I-829 stage could, for example,  help corroborate information those investors originally submitted to  demonstrate that the investors have met program requirements before  having their conditions for lawful permanent residency removed. Given  that IPO is relatively new, this strategy could include an approach to focus  on those investors at the I-829 stage who may be at higher risk for fraud.
USCIS does not collect certain applicant information that could help  mitigate fraud. In fiscal year 2011, USCIS expanded reporting  requirements to gather information about ongoing regional center  activities such as information on the active projects managed by each  regional center. According to USCIS and SEC officials, this information  has helped identify potential incidents of fraud. However, 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  business, or information on advisers to investors such as foreign brokers,  marketers, attorneys, and other advisers receiving fees from investors.  According to USCIS officials, USCIS is drafting revised Forms I-924 and  I-924A that will 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. SEC and FDNS stakeholders with whom we spoke  emphasized that collecting additional information could be useful for  USCIS to combat fraud. For example, according to these officials, the  absence of information about businesses supported by regional centers  limits USCIS’s ability to identify potential fraud such as misrepresentation  of a new commercial enterprise. USCIS officials agreed that some  additional information collection would enhance program integrity but  have not done so because the process to add questions to application  forms to capture information requires USCIS to document the rationale for  such changes by directly connecting new questions to statutory eligibility  criteria, and USCIS has dedicated its regulatory group to other priorities  pending potential new legislation or expiration of the Regional Center  Program in September 2015. We recognize these competing priorities  currently exist; while these priorities are being addressed by USCIS’s  regulatory group, the agency could also develop a strategy for identifying  and collecting additional information on its petition and application forms  to help mitigate fraud risks to the program, such as information on the  businesses supported by regional centers.
GAO’s fraud control framework states that fraud prevention can be  achieved by requiring registrants to provide information that is sufficient to  provide reasonable assurance against fraud risks. Further, Standards  for Internal Control in the Federal Government states that identified  program risks, including fraud risk, should guide management’s planning  and development of internal controls. 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, developing a strategy to  capitalize on existing opportunities for collecting additional information  would better position USCIS to identify and mitigate potential fraud.
section_title: USCIS Has Made Efforts to Enhance Its Statutory Authority to Help Mitigate Risks Associated with the EB-5 Program
paragraphs: USCIS has recognized that the connection between national security  concerns and specific EB-5 Program eligibility criteria may, at times, be  tenuous. Specifically, USCIS has determined that it cannot terminate  participation of regional centers, or deny immigrant investor petitions or  regional center applications solely on the basis of national security  concerns, unless such concerns lead an adjudicator to determine that the  petitioner or applicant does not meet one or more EB-5 Program eligibility  criteria by a preponderance of evidence. The preponderance of  evidence standard requires petitioners or applicants to establish eligibility  by demonstrating that it is more likely than not that they meet all EB-5  Program requirements. USCIS’s authority with respect to fraud or  misrepresentation identified by an adjudicator in the petition or application  process is less uncertain than that for national security concerns in that  petitioners or applicants must show that their claims for EB-5 Program  eligibility are more likely true than not (i.e., probably true), and potential  fraud would generally bear on the truthfulness of petitioner or applicant  claims. USCIS officials noted that USCIS has authority to deny a Form I- 485 application based on fraud, misrepresentation, and national security  concerns as these constitute grounds of inadmissibility that would render  an immigrant investor ineligible for adjustment to conditional permanent  residency.
According to FDNS officials, some regional centers continue to operate  despite concerns of fraud or associations with criminal activity. For  example, FDNS officials cited a case involving a regional center principal  against whom a federal grand jury returned a multiple count wire fraud  indictment, and who was, at the time, in custody in a foreign country.
According to FDNS officials, USCIS terminated this regional center  because the principal failed to file the Form I-924A application  supplement as required by regulation rather than, for example, on  grounds related to the charges upon which the regional center principal  was indicted.
USCIS officials noted that if fraud or national security concerns either  alone or in combination with other factors lead an adjudicator to  determine, based on a preponderance of the evidence, that a regional  center is failing to fulfill the statutory requirement of promoting economic  growth, adjudicators can under those circumstances terminate the  regional center or deny an application for regional center designation.  However, USCIS believes that unless a connection can be made that the  regional center is failing to promote economic growth, it does not have the  authority to terminate a regional center. According to USCIS officials,  the lack of authority to terminate a regional center or deny an immigrant  investor petition or regional center application based solely on national  security or fraud concerns is a major challenge and requires a significant  amount of time to link findings to the statutory criteria.
In addition to S.1501, in January 2015 the American Entrepreneurship and Investment  Act of 2015, H.R.616, was introduced in the House of Representatives, and would provide  a permanent authorization of the regional center program. explicitly requires that fraud, misrepresentation, criminal misuse, and  threats to public safety or national security be considered in establishing  eligibility criteria for regional centers; and states that the Secretary of  DHS shall deny or revoke approval of a regional center business plan  application with any particular investment or business arrangement that,  in his or her unreviewable discretion, presents a public safety or national  security threat or significant risk of criminal misuse, fraud, or abuse.
section_title: USCIS Has Increased Its Capacity for Verifying Job Creation but Does 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
paragraphs: USCIS has 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 agencies’ methodologies for verifying such estimates were not  rigorous. Specifically, in April 2005, GAO reported that USCIS  adjudicators lacked the expertise to adjudicate EB-5 Program petitions,  and were not sufficiently trained to properly adjudicate EB-5 Program  petitions because of the complex business and tax issues involved.More recently, 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 petitions and applications for adjudication. For example, in  2014, USCIS began increasing its staffing from 9 adjudicators to 58  adjudicator officers and 22 economists as of June 2015, and in May 2013,  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. IPO  program managers stated that USCIS revised its application assignment  process in 2015 to help improve the consistency and efficiency of its  adjudication of large-scale, multi-investor regional center projects. Under  the new approach, the same economist is assigned to review the  business plan, economic analysis, and organizational documents for each  project involving multiple regional center investors. We interviewed 8 EB- 5 Program economists who reported that they were satisfied with the  guidance and that the training provided them with a high degree of  confidence in adjudicating EB-5 petitions and applications.
Further, IPO program managers reported that USCIS has provided its  economists with access to data from the RIMS II economic model since  fiscal year 2013 that increased their capacity to verify job creation  estimates reported by immigrant investors for investments in regional  center projects. IPO program managers estimated that as of fiscal year  2015, about 95 percent of EB-5 Program petitioners used economic  models to estimate job creation, with about 90 percent of those petitioners  using RIMS II. The RIMS II model is widely used across the public and  private sectors and is considered to be valid to verify estimates of indirect  and induced jobs reported for investments in regional center projects,  according to USCIS and Commerce economists, as well as industry and  academic experts. Indirect jobs include jobs that are not directly created  by the new commercial enterprise, 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.  Under the law establishing the Regional Center Program, regional center  investors are permitted to meet the job creation requirement using  reasonable methodologies to estimate the number of jobs created,  including jobs estimated to have been created indirectly through revenues  generated from increased exports, improved regional productivity, job   Further, the EB-5  creation, or increased domestic capital investment.Program regulation permits regional center investors to estimate direct  and indirect jobs for regional center projects using reasonable  methodologies, including multiplier tables that are based on input-output  economic models—coefficients that when used in conjunction with inputs  such as a specified investment amount, can estimate economic outputs,  such as job creation. USCIS economists said that the use of the RIMS II  multipliers in combination with other information, including the eligible  project investment amount, the code that identifies the project industry,  and project location, has provided them with the necessary capacity to  better ensure investors meet program requirements for job creation. We  conducted a technical review of articles and other documents on the  model as well as interviewed subject matter experts, including industry  and academic researchers who published studies of the EB-5 Program  structure, Commerce officials with the Bureau of Economic Analysis who  administer the RIMS II model, and USCIS IPO officials who review the  various economic models used by EB-5 investors. On the basis of our  reviews and interviews, we determined that IPO’s use of RIMSII data is a  reasonable methodology to verify job creation as permitted in law and  program regulation.
A targeted employment area is defined as a rural area or an area that has experienced  unemployment of at least 150 percent of the national average rate. A rural area is defined  as any area not within either a metropolitan statistical area (as defined by the Office of  Management and Budget) or the outer boundary of any city or town having a population of  20,000 or more (based on the most recent decennial census of the United States). See 8  U.S.C. § 1153(b)(5)(B)(ii), (iii); 8 C.F.R. § 204.6(e), (j)(6)(ii). A technical limitation of input- output models as a whole is that they cannot predict when and where indirect jobs will be  created. amount—$500,000 instead of $1 million—to participate in the EB-5  Program because they are claiming investment in a commercial  enterprise that 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 reasonable methodologies such  as input-output models that do not have this capacity, and because  program regulation and policy address the issue by requiring that capital  be invested in a job-creating enterprise that is principally doing business  in a targeted employment area.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.
subsections: section_title: USCIS’s Methodology for Reporting Program Outcomes Is Not Valid and Reliable in Certain Instances
paragraphs: USCIS’s methodology for reporting EB-5 Program outcomes and  economic benefits is not valid and reliable because it may overstate or  understate results in certain instances as it is based on the minimum  program requirements for job creation and investment instead of the  number of jobs and actual investment amounts investors report on EB-5  Program forms. 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 immigrant 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  instances. For example, USCIS officials stated that the majority 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 immigrant  investor, while USCIS counted only the 10-job minimum per immigrant  investor (totaling 4,500), a difference of 6,000 jobs. Additionally,  according to DHS’s 2013 Yearbook of Immigration Statistics, about 32  immigrant investors paid $1 million instead of $500,000 into the EB-5  Program in fiscal year 2013, a total difference of $16 million not counted  by USCIS.
Conversely, USCIS’s methodology may, in certain instances, overstate  some economic benefits derived from the EB-5 Program. For example,  the methodology assumes that all immigrant 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 our analysis of EB-5 Program  data, there are fewer immigrant 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  Program immigrant 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.
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 (or  expected to be created within a reasonable time) by their investment on  the Form I-829. However, USCIS officials said that they report 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  overall program benefits.
The Project Management Institute’s The Standard for Program  Management states that programs need to establish monitoring and  controlling activities to report on program performance.collecting, measuring, and disseminating performance information so  program management has the data necessary to report on the program’s  state and identify areas in need of improvement. Additionally, GAO’s  Standards for Internal Control in the Federal Government states that  activities need to be established to monitor performance, managers need   This includes  to compare actual performance against planned or expected results, and  controls should aim at validating the propriety and integrity of  performance measures. Further, transactions should be promptly  recorded to maintain their relevance and value to management in  controlling operations and making decisions throughout the entire process  of an event from initiation through final classification. Tracking and  reporting the investment and job creation data it collects on the Forms I- 526 and I-829 would better position USCIS to more accurately assess  and report on the EB-5 Program’s outcomes, in line with the program’s  mission to bring new investment capital and jobs into the country and to  help Congress and others better evaluate the benefits of the program.
Views differ on whether USCIS methodology, as defined in EB-5 Program  regulations, should allow immigrant investors to claim all jobs created by  projects with EB-5 and non-EB-5 investors.  We and the DHS OIG have  previously raised questions about this practice because immigrant  investors are to create 10 jobs based on their investment in the new  commercial enterprise, and therefore including non-EB-5 Program  investments in the enterprise can inflate the job creation benefit of the  immigrant investment.program managers said that while they do not have resources to verify  this fact for each project, it is possible that a regional center project would  not occur or be viable without EB-5 Program investment funds, which  provide an alternative source of capital for projects that might not be able  to attract or afford investments from other foreign or U.S. sources. In the  final rule implementing section 121 of the Immigration Act of 1990, legacy  Immigration and Naturalization Service (INS) contemplated multiple  investor scenarios in promulgating EB-5 regulations, and on the basis of   The IPO Economics Division Chief and IPO  comments in response to the proposed rule, permitted the practice of  allocating only to immigrant investors the jobs created as a result of the  establishment of a new commercial enterprise by multiple investors, some  of whom may not be seeking EB-5 visas.
Additionally, according to the IPO Economic Division Chief, his analysis  showed that projects in many industries could not generate the required  number of jobs based on the minimum EB-5 investment alone, and  otherwise would not be able to use and benefit from the EB-5 Program. Specifically, his analysis showed that about 160 industries, including  manufacturing, are unable to create the required 10 jobs per investor  based solely on the EB-5 Program minimum investment of $500,000.  According to IPO officials, without the practice of allowing immigrant  investors to claim jobs generated by investments from other sources, a  higher investment amount would be required for investors to meet the job  creation requirements in these industries and qualify for removal of their  permanent residency conditions.
GAO did not independently corroborate the outcomes of this analysis.
Economic modeling for the project showed that 10,500 jobs were created by the total  project spending. All 10,500 jobs were distributed on a pro rata basis such that each of the  450 investors was allocated 23 jobs each. This represents a “job cushion” of  approximately 130 percent over the USCIS-required 10 jobs per investor. According to an  IPO economist we interviewed, most projects build in a job cushion to ensure that all  investors meet the job creation requirements and to increase the likelihood that investors  achieve approval for lawful permanent residency. met the job creation criteria necessary to achieve lawful permanent  residency.
section_title: USCIS-Commissioned Study to Assess Overall Program Benefits Addresses Some Past Limitations, but Not the Costs, of the EB-5 Program
paragraphs: USCIS has commissioned Commerce’s Economics and Statistics  Administration (ESA) to conduct a study of the economic impact of the  EB-5 Program. According to the IPO Economics Division Chief, 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 outlines a preliminary  methodology and study steps that would address some, but not all,  shortcomings of prior studies of the overall EB-5 Program benefits. Past  studies, for example, included small sample sizes that were not  representative of the total population and may have overstated economic  impact because of the use of national, instead of regional, multipliers in  the analysis. ESA’s study is to assess the value of the EB-5 Program  beginning at the EB-5 project level for all projects completed (or at least  lasting 2 years) for fiscal years 2012 and 2013. According to Commerce  officials, the study findings will include (1) the immigrant investor  investments as well as the non EB-5 investments used in each job  creation estimate; (2) the number of jobs created as well as the value of  the jobs from each project, citing the geographic area for which the job  creation was claimed in the economic impact assessment; and (3) the  likely household spending of immigrant investor families while living in the  United States. Commerce officials indicated that for the study, all projects  within a state will be added to derive a state total and then the state totals  will be aggregated to determine a national total. ESA will review a  majority of the economic impact assessments that led to the job creation  estimates for each of the projects to determine whether the models used  for estimating job creation were applied correctly. ESA also plans to use  information submitted by immigrant investors on EB-5 Program forms and  entered into the Intranet Computer Linked Application Information  Management System (iCLAIMS) to more specifically and reliably report  program benefits. USCIS has provided ESA with data from the iCLAIMS  database, including information from forms immigrant investors and  regional centers use to meet program participation requirements—Forms  I-526, I-829, I-924, and I-924A—which, according to an ESA official, ESA  is beginning to examine in greater detail. ESA will review DHS’s data  collection and reporting system prior to using the iCLAIMS data to  determine the value of the program. USCIS officials said that ESA plans  to finalize the study methodology once it completes a review of the  program data submitted by IPO, and to issue a final report in November  2015.
Additionally, the level and mechanisms of the most prevalent forms of social support  (the transfers made through Social Security payments and various forms of income  assistance) in the United States are inversely related to income, and since incomes for an  accredited investor are in, at minimum, the top 5 percent of incomes in the United States,  it is unlikely that they receive any form of social assistance. currently collects to support. USCIS officials said that for these reasons,  the costs to gather the information may not justify the investment.
The Office of Management and Budget Circular A-94 Revised, Guidelines  and Discount Rates for Benefit-Cost Analysis of Federal Programs, which  applies to all analyses used to support government decisions to initiate,  renew, or expand programs or projects that would result in a series of  measurable benefits or costs extending for 3 or more years into the  future, identifies actions agencies can take in cases where costs cannot   Specifically,  be quantified when measuring the impact of a program.OMB Circular A-94 provides that in analyses where not all benefits or  costs can be assigned a monetary value, a comprehensive enumeration  of the different types of benefits and costs can help identify the full range  of program effects. For example, DHS costs to track and remove  immigrant investors (and their families) from the United States who do not  successfully complete the program, and costs to social programs such as  Medicaid, Medicare, and Social Security may be associated with the  program but difficult to quantify. Ensuring that the ESA study includes a  discussion of costs that should be considered but cannot be quantified for  the program would provide Congress and other stakeholders with more  information on the overall value of the program.
section_title: Conclusions
paragraphs: The EB-5 Program seeks to stimulate the economy by promoting job  creation and encouraging capital investment by foreign investors in the  United States. However, these features of the program that can provide  economic benefit to the United States can also create unique fraud and  national security risks that must be identified and addressed. Planning to  conduct risk assessments on a more regular basis would better position  USCIS to identify, evaluate, and address future and changing risks to the  program. This may be of particular importance as USCIS is unable to  comprehensively identify and address fraud trends across the program  because of its reliance on paper-based documentation and because it  faces certain limitations with using available data and with collecting  additional data on EB-5 immigrant investors or investments. Developing a  strategy to expand its data collection efforts, such as interviewing  investors who apply to remove conditions on their permanent resident  status and requesting additional information on applicant and petitioner  forms, could better position USCIS to address these limitations.
USCIS’s ability to apply a valid and reliable methodology for reporting EB- 5 Program outcomes and economic benefits is important for program  accountability and to provide the public and Congress with more complete  information to evaluate the program and make reauthorization decisions.  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.  Additionally, taking steps to ensure that the valuation it commissioned  Commerce to conduct includes a discussion of the types of costs that  should be considered, but could not be quantified by the study, would  provide Congress and other stakeholders with more comprehensive  information on the overall economic benefits of the program.
section_title: Recommendations for Executive Action
paragraphs: To strengthen USCIS’s EB-5 Program fraud prevention, detection, and  mitigation capabilities, and to more accurately and comprehensively  assess and report program outcomes and the overall economic benefits  of the program, we recommend that the Director of USCIS take the  following four actions: plan and conduct regular future fraud risk assessments of the EB-5 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;  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; and  include a discussion of the types and reasons any relevant program  costs were excluded from the Commerce study of the EB-5 Program.
section_title: Agency Comments and our Evaluation
paragraphs: We provided a draft of this report to Commerce, DHS, DOJ, SEC, and  State for their review and comment. DHS provided written comments,  which are reproduced in appendix I, and Commerce, DOJ, SEC, and  State did not provide written comments. In its comments, DHS concurred  with the four recommendations and described actions under way or  planned to address them. Commerce and DHS provided technical  comments, which we incorporated as appropriate.
With regard to the first recommendation, that USCIS plan and conduct  regular future fraud risk assessments of the EB-5 Program, DHS  concurred, stating that the EB-5 Branch of USCIS’s FDNS will continue to  conduct a minimum of one fraud, national security, or intelligence  assessment on an aspect of the program annually, as it has done since  2012. DHS further requested that GAO consider this recommendation  resolved and closed. While we believe that planning to continue  conducting a minimum of one assessment on an aspect of the program  annually is a positive step, to fully address the intent of our  recommendation, USCIS needs to conduct at least one review, as  planned. Thus, we continue to consider this recommendation open.
With regard to the second recommendation, 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 estimated that actions to develop such a strategy would be  completed by September 30, 2016. Upon completion of the strategy,  these actions should address the intent of the recommendation to  strengthen USCIS’s ability to prevent, detect, and mitigate fraud in the  EB-5 Program.
With regard to the third recommendation, 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 estimated that a plan to collect and  aggregate additional data, including revisions to USCIS data systems and  processes, would be completed by September 30, 2016. When USCIS  implements this plan, this action should address the intent of the  recommendation to more comprehensively assess and report program  outcomes of the EB-5 Program.
With regard to the fourth recommendation, that USCIS include a  discussion of the types and reasons any relevant program costs were  excluded from the Commerce study of the EB-5 Program, DHS concurred  and said that USCIS IPO will recommend to Commerce that a description  of potential costs not assessed as a part of the study be included when  the study is published later this year. Should Commerce include such a  discussion of relevant program costs in its study that USCIS estimates  will be completed November 30, 2015, this action should address the  intent of our recommendation to more comprehensively assess and report  the overall economic benefits of the EB-5 Program.
We are sending copies of this report to interested congressional  committees; the Secretaries of Commerce, Homeland Security, and  State; the Attorney General of the United States; as well as the U.S.  Securities and Exchange Commission Chair. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov or Seto  Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Key contributors to this report are listed in  appendix II.
section_title: Appendix I: Comments from the Department of Homeland Security
section_title: Appendix II: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
paragraphs: Rebecca Gambler at (202) 512-8777 or gamblerr@gao.gov, or Seto  Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Cindy Ayers, Joah Iannotta,  David Alexander, Christopher Hayes, John Karikari, Andrew Kurtzman,  Natalie Maddox, Jan Montgomery, Jon Najmi, Brynn Rovito, Edith Sohna,  and Nick Weeks made key contributions to this report.