USA: Citizenship for Sale – US Plans to Amend EB-5 Regulations

The US Congress has concerns about fraud and abuse of the so-called “golden visa” EB-5 green card program.  Amendments to the regulations are expected soon just as Europe investigates its own “golden visa” programs.

Amendments to the regulations for the EB-5 immigrant investor program increasing investment minimums, among other changes, has moved to the Office of Management and Budget (OMB) for review. This means the final rule might become effective in months.

The EB-5 program allows wealthy individuals to apply for and obtain green cards by investing from $500,000 to $1 million in U.S. enterprises. Like any other green card holders, after five years, program beneficiaries can apply for citizenship. In June 2018, Congress held a hearing on “Citizenship for Sale: Oversight of the EB-5 Investor Visa Program.” [Link] Congress had concerns about fraud, abuse, and national security risks related to the program. [Link] At that hearing, L. Francis Cissna, Director of the USCIS, explained that while legislative reform was necessary, USCIS was taking steps to improve the integrity of the program. He listed the following:

• Using the Fraud Detection and National Security Directorate (FDNS) to visit project sites;
• Expanding security checks;
• Partnering with the SEC, FBI, and ICE;
• Publishing revised forms to improve vetting;
• Creating a Compliance Division to review annual certifications of regional centers; and
• Publishing regional center termination notices.

Subject to publication of the final rule, the expected changes include:

• Raising minimum investment amounts from $1 million to $1.8 million for standard direct investment and from $500,000 to $1 million for targeted employment areas;
• Allowing certain EB-5 petitioners to retain older EB-5 priority dates; and
• Changing the designation process for targeted employment areas.

The increase of investment amount and the silence on the reduction of current processing times and the extremely long visa number availability backlogs appear to discourage investment.

On the other side of the Atlantic, the European Commission has expressed similar concerns about lack of oversight of “citizenship-by-investment” plans throughout the EU. It is planning to establish a team to review the risks. Similar to the EB-5 program, these programs actually provide European passports to wealthy individuals from anywhere in the world in exchange for hefty investments. Having these passports can provide individuals with free movement and work authorization throughout much of Europe, as well as visa waiver travel to the United States. The identified problem is that these “golden visa” programs are regulated inconsistently at the country level and, like the EB-5, can become vehicles for fraud, such as money laundering and tax evasion.

The European Commission expects to publish a report by the end of 2019 aimed at developing more consistency among the member states so that “[t]here should be no weak link in the EU, where people could shop around for the most lenient.” [Link]

For information about strategies in the changing EB-5 landscape, please reach out to your Jackson Lewis attorney.