After more than two years in the works, the new rules to modernize and reform the exceedingly-flawed EB-5 investor program have finally been published in the Federal Register. While the news may sound like something of importance to only Washington policy wonks, the proposed Department of Homeland Security (DHS) rules represent the first significant changes to the fraud-plagued program in decades.
While a total elimination of EB-5 investor visas is certainly merited, the Trump administration’s decision to take regulatory action is welcome, particularly for Americans living in the targeted employment areas (TEAs) which the program was intended to serve.
The rules, which must go through a 60-day public comment period, would raise minimum investment amounts and revise the standards for TEA designations. These regulatory revisions would help to ensure investments are directed to rural and high unemployment areas, rather than to the wealthy, urban centers reaping most of the rewards today.
When Congress created the program in 1990, the idea was to spur investment in low-income areas by letting foreign nationals get green cards in exchange for investing at least $1,000,000 in a new commercial enterprise. Today, it has been appropriately described as a program “which essentially allows foreign investors to trade capital for visas.”
Rampant fraud and abuse have been rooted out by the Securities and Exchange Commission (SEC), Department of Justice, and U.S. Customs and Immigration Services (USCIS) even had to dedicated to a page on its website to reporting EB-5 fraud.
The Government Accountability Office (GAO) warned in 2015 that “fraud risks in the EB-5 Program are constantly evolving, and they continually identify new fraud schemes.” But the program’s failings extend beyond financial fraud.
And Sen. Chuck Grassley (R-Iowa) noted when calling for finalization of the rules earlier this month that a 2017 internal USCIS fraud assessment “found 19 cases of national security concern within the EB-5 program” related to “terrorism, espionage, and information and technology transfer.”
In March, Grassley and his Democratic colleague Patrick Leahy of Vermont called on the Trump administration to implement the rules “without delay or interference.”
Despite the blatant abuses and the betrayal of Americans living in impoverished areas, the EB-5 visas have their advocates among wealthy real estate investors, at the Chamber of Commerce and on Capitol Hill.
When the Democratic-controlled House of Representatives voted on July 10 to pass a measure to lift per-country caps on green cards (which was heavily backed by tech giants), the bill included a provision to end caps on the EB-5 category, but no provisions to reform it. The companion Senate bill contains similar language, but has yet to receive a vote.
Since Congress has shown once again that it cannot be trusted to act in the nation’s interest, implementation of the rules carries even greater importance – and urgency.