United States: New EB-5 Regional Center Compliance Audits And Recent FBI Raids Suggest Increasing Enforcement Of Future EB-5 Program

While the EB-5 industry has endured more than three years of increasingly shrill (publicly, at least) Congressional debates, which has spawned a seemingly unlimited number of EB-5 bills introduced into Congress and widespread industry posturing and internal warfare, all ostensibly aimed at modernizing the EB-5 Immigrant Investor Program and minimizing fraud perpetrated against investors, the United States Citizenship and Immigration Services (USCIS) has recently rolled out its long-awaited EB-5 Regional Center Compliance Audit Program.

The Audit Program is advertised as an additional way to enhance EB-5 program integrity and verify information in regional center applications and annual certifications. Under this program, USCIS will collect case-specific data as part of a compliance audit. Skeptics may point out the irony of this approach. Boiled down to its essence, the USCIS compliance auditors will be asking regional centers to provide USCIS with data that they already have in their possession. (Hello, I'm here calling from USCIS, conducting an EB-5 compliance audit. Can you tell us what we should already know?).

The compliance audit will verify the information provided by designated regional centers in applications (I-924) and annual certifications (I-924A). It also verifies compliance with applicable laws and authorities to ensure continued eligibility for the regional center designation. It also includes obtaining information, on a consensual basis, through compliance audit data requests and site inspection.

The Audit

The USCIS EB-5 audit team will perform, but may not be limited to, the following tasks:

  • Review applications, certifications, and associated records;
  • Review public records and information on the regional center;
  • Verify the information, including supporting documents, submitted with the application(s) and in the annual certification(s);
  • Conduct site inspection;
  • Interview personnel to confirm the information provided with the application(s) and annual certification(s).

How to Prepare for a Compliance Audit

  1. Before the site inspections: Regional centers should be prepared to present any information originally submitted with the application(s) or certification(s), any updates to that information, and any information requested in the data request that has not previously been provided. Additional information may also be requested.
  2. During the site inspections: Regional centers should immediately provide any readily available documents and information that the audit team requests to verify information provided in the application(s) or certification(s).
  3. After the site inspections: Regional centers should provide all additional information requested to verify or update information in any follow-up communication from USCIS.
  4. The audit team will document the findings in an audit report, which becomes part of the regional center's record. If the report contains any indicators of fraud, USCIS will assess whether further investigation is warranted.

Participating in a Compliance Audit

Although an EB-5 regional center may decline to participate in a compliance audit, USCIS may follow-up with the regional center separately regarding compliance with program requirements. At any point during an ongoing compliance audit, if the regional center principal expresses an unwillingness to participate in the site inspection, the visit will be terminated. The audit team will complete the audit report using the data available and indicate that the site inspection was terminated at the request of the regional center.

What does this mean to the Regional Center Program?

  1. Since the USCIS announcement does not provide much specificity as to the required documents, one can assume that all public and non-public databases or records are considered fair game.
  2. All regional center financial documents, state filings, economic studies, business plans, securities documents, and – although not specified – one can assume all project-related offering documents (much of which would have already been provided to USCIS and subjected to their adjudications process).
  3. It is also unclear whether the USCIS will audit only the regional center's activities or whether it has the authority to reach the NCE or JCE, particularly if these are only affiliated through a "rent-a-regional-center" arrangement.
  4. Expect further guidance and discussions from the USCIS.

FBI Raids San Gabriel, Arcadia locations over EB-5 Visa Fraud Scheme.

Shortly after the announcement of the EB-5 Regional Center Compliance Audit, the FBI and federal immigration agents, on April 5, 2017, raided a regional center's office (California Investment Immigration Fund or CIIF) in the San Gabriel Valley for evidence related to an alleged $50 million visa fraud scheme. The FBI alleges that US attorney Victoria Chan and her father, Tat Chan, exploited the visa program by misleading over 100 Chinese nationals to invest over $50 million through the EB-5 program. Instead of investing the EB-5 capital into the proposed job creating enterprises (hotel, retail, and hospitality real estate projects), the suspects allegedly spent the money on personal items, cars, and homes. According to the San Gabriel Valley Tribune, federal agents seized client files, emails, computers, cell phones, immigration records, bank records, travel-related documents, deeds, documents on real estate deals, utility and cell phone bills, records of payments, and documents associated with CIIF or its related companies. None of the projects proposed in various locations were ever built.

Increasing Enforcement in EB-5

With similar ongoing investigations, combined with the EB-5 Regional Center Compliance Audit, it is highly recommended that all EB-5 regional centers work closely with their immigration attorneys to prepare well in advance and comply with such audits. Any potential violations of SEC regulations could be internally audited beforehand to assess various risk factors and potential solutions prior to an audit.

Furthermore, victimized EB-5 investors such as the ones allegedly connected to the recent FBI raids should immediately contact an immigration attorney experienced in EB-5 and securities fraud to maximize financial and immigration benefits, while coordinating in conjunction with the SEC, FBI, USCIS, and other federal agencies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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