In 2017, the previous administration inattentively promised to end the EB-5 visa investment program. The legislation it endorsed to replace America’s green-cards-for-sale scheme, like most everything else in the previous administration’s legislative agenda, went nowhere.
In 2019, the previous administration tried to at tighten up EB-5 by issuing reasonable rules the Obama Administration had proposed to reduce the kind of fraud and abuse the EB-5 engendered in South Dakota, Vermont, Florida, and elsewhere. But San Francisco/Silicon Valley EB-5 peddler Behring Companies got a federal court to block those rules because the rulemakers were illegally appointed by the previous administration:
A federal district judge has struck down the 2019 EB-5 “modernization” regulation, finding the rule was invalid because it was enacted by DHS officials who were appointed to their posts in violation of the 1998 Federal Vacancies Reform Act (FVRA). Behring Co., the operator of Behring Regional Centers, brought suit against USCIS in 2019 in response to the modernization rule. Ultimately, Behring succeeded in showing the acting DHS secretaries succeeding Kirstjen Nielsen (including Kevin McAleenan) were not properly designated in the order of succession in accordance with the FVRA, and therefore they did not hold the authority to promulgate and ratify the 2019 modernization rule. At this moment, the minimum investment amount in a Targeted Employment Area is $500,000 [Jackson Lewis PC, “EB-5 Investor Visa Update,” JDSupra, 2021.06.28].
It wasn’t until Joe Biden became President that Congress evidently found the will do rein in the EB-5 program. That will is expressed in an odd way: they still lack the will to stand up to wealthy special interests and pass the EB-5 reforms Senators Chuck Grassley and Patrick Leahy have been proposing for years. But Congress’s weakness cuts both ways: the failure of the reform package in June left the EB-5 Regional Center program without an extension, meaning it expired on June 30, shutting down the primary avenue through which big wheels turned green-card-buyers’ cash into American investment schemes:
At the moment the EB-5 program is largely in disarray. The Regional Center part of the program has expired as a result of the automatic sunset provision that was part of its operation until June 30th, 2021. For some 20 years the program was renewed by Congress each year and in that way the program never sunset. But this time the Regional Center program was detached from regular Congressional budget renewals and was thus sidelined to await further developments. The result is that only the Direct Investment EB-5 Program is still in play. The significance of this is that well over 90 % of the investors who took part in the EB-5 program in the past chose the Regional Center option which was preferable because the investment amounted to a five year loan to a Regional Center project and was repayable at that time.
Now EB-5 investments can only take the form of equity with a purchase of shares in an EB-5 project with the requirement that the investment also create a minimum of 10 jobs. There are two sorts of Direct Investment EB-5 projects: ones in which the foreign investor maintains control and the other in which he or she is a minority shareholder. In the former, supervision of the employment component and compliance with business plan approved by the USCIS are the responsibility of the investor and can be complicated. In the latter, the investor surrenders control and trusts the project managers to ensure the project complies with all immigration requirements. In either case, the projects are smaller in size than Regional Center ones, involve fewer investors and may require more investor care to ensure compliance [Andy J. Semotiuk, “USCIS Appeal Sparks Speculation About the EB-5 Foreign Investor Program,” Forbes, 2021.08.30].
This is one situation where Republican obstruction and xenophobia could work in our favor. Anyone who wants to holler about vetting newcomers should be screaming about the opaque EB-5 process and the bad actors it has let sneak into America on “golden visas”:
Decades after its inception, “almost nothing is known about the backgrounds of applicants for the EB-5 program,” the analyst Belinda Li wrote. “The only information made available to [American authorities] is provided by applicants themselves on their application forms.” Thanks in large part to U.S. immigration authorities being stretched thin, Washington has disregarded the increasing ranks of kleptocrats looking for entry into the United States—and finding the EB-5 program open to whatever money they can provide, regardless of the source.
…As such, it’s no surprise that the United States’ golden visa program has already attracted the kinds of fraudsters and transnational money launderers saturating similar programs elsewhere. One Chinese kleptocrat, Jianjun Qiao, gained American residency courtesy of the EB-5 program—despite laundering funds via foreign banks and parking that laundered loot in American real estate. Other members of China’s “100 Most Wanted List” have been connected to EB-5 schemes. One of the key figures linked to the sanctioned Ukrainian oligarch Ihor Kolomoisky’s efforts to launder hundreds of millions of dollars across the American Midwest also oversaw EB-5-related investments—and ended up jailed for large-scale fraud.
A recent study from Transparency International Russia uncovered just how easy it is for foreign nationals drenched in dirty money to access one of these American golden visas. Disguised as potential investors, members of the transparency organization uncovered American lawyers and Russian intermediaries more than willing to help along the application process—despite clear signs that the wealth of the poseurs was of “illegitimate origin.” A range of U.S. lawyers—who have proved time and again to be the best friends a kleptocrat could ask for—detailed ways to disguise the wealth’s origin, including creating contracts with relatives and providing work documents from friends.
The strategies have clearly proved successful; as the group uncovered, some 150 Russian nationals have successfully obtained EB-5 visas in just the past few years. But because the U.S. government “does not publish the names of these investors, the Russian public can only guess who they are.” And since all of the financial information is provided by the supposed investors themselves, the rest of us can only guess at the source of the funds as well [Casey Michel and Paul Massaro, “Oligarchs’ Favorite U.S. Visa Might Not Last,” Foreign Policy, 2021.07.16].