Foreign nationals who make an EB-5 investment with a view to obtaining U.S. Green Cards know that they are taking on a degree of risk—both from a financial and an immigration perspective. There is no guarantee that their investment will result in high returns or that they will immigrate successfully. Still, investors deserve to subscribe to transparent EB-5 offerings that comply with United States Citizenship and Immigration Services (USCIS) criteria. In many cases, the EB-5 funds can represent a family’s life savings—an unconscionable amount to invest in a suspicious or excessively risky offering.
After many years of failed legislative attempts, substantial changes to improve the transparency and safety of the EB-5 investment industry were finally made on March 15, 2022, when U.S. President Joe Biden signed the EB-5 Reform and Integrity Act into law. The Reform and Integrity Act increases the level of accountability for regional centers and EB-5 business owners in several areas.
Closer Oversight of Regional Centers
Investors have the right to know how their regional center-sponsored projects are performing and whether they are adhering to the business plan. Their job creation is especially crucial since this factor largely determines whether an EB5 investment is successful from an immigration perspective. To this effect, the Reform and Integrity Act requires regional centers to issue annual reports to the Department of Homeland Security (DHS) and to their investors. In addition, all regional centers will have to submit a project request to USCIS before their investors can file Form I-526. This measure will give USCIS the opportunity to evaluate all regional center-sponsored offerings early on.
The agency will also carry out in-person site visits, giving at least 24 hours’ notice. And all material changes—that is, significant deviations from a project’s business plan—must now be reported. Since USCIS can disqualify an EB-5 project if it determines that a material change has taken place, project developers will be more inclined to follow through on their business plans.
Innocent Investor Protections
For most of the EB-5 program’s history, investors whose projects or regional centers were terminated had no opportunity to obtain their visas—even if the investors themselves had followed USCIS guidelines. The Reform and Integrity Act prevents this unfair scenario by allowing investors in terminated projects to reinvest in a different EB-5 offering. What is more, investors can keep their processing priority dates and thus avoid further delays.
Fund Management
From now on, all EB-5 projects must employ a third-party fund administrator or procure audited financial statements from a certified public accountant (CPA). Fund administrators in the EB-5 investment industry generally have very high standards for the kinds of clients they accept, so any offerings that are not high quality are unlikely to succeed.
The importance of these integrity measures is all the more important due to the higher investment amounts required of EB-5 investors: $800,000 for projects in targeted employment areas (TEAs) and $ 1,050,000 for non-TEA projects. Foreign nationals who make such substantial investments can now rest assured that their funds will be handled responsibly and that every effort will be made to ensure transparency and compliance with USCIS guidelines.
