On March 20, 2017, United States Citizenship and Immigration Services (USCIS) announced new EB-5 regional center compliance audits.
Generally speaking, these audits are intended to enhance integrity within the EB-5 Program, to ensure that regional centers are operating in compliance with the law, and to determine whether they are promoting regional economic growth and job creation in accordance with the stated purpose of the EB-5 Immigrant Investor Program.
The new audit program will involve USCIS audit teams reviewing regional centers’ documents and interviewing their personnel to determine whether they remain eligible for participation in the EB-5 Program.
Overall, the new compliance audits are a positive step toward preventing fraud and abuse within the EB-5 industry. USCIS has not, however, published any standards or rules governing the conduct of its compliance audit teams. Furthermore, the EB-5 regulations and policies are unclear regarding any specific standards for regional centers.
USCIS tends to regulate and clarify policies via requests for evidence (RFEs) and notices of intent to terminate rather than through clear guidelines—and so the new compliance audits may come with a steep learning curve and high level of frustration as regional centers discover exactly how USCIS will handle the process.
As a regional center operator, EB5 Affiliate Network (EB5AN) is prepared for whatever these changes bring. We also provide a comprehensive guide for our regional center clients.
What is the purpose of the new compliance audit program?
According to USCIS, these audits represent another method to “enhance EB-5 program integrity” and to “verify information” related to applications filed by regional centers as well as their I-924A submissions. Case-specific data will be collected to verify the information submitted by regional centers to USCIS and ensure compliance with all applicable regulations and laws.
Many EB-5 professionals recognize the need for industry-wide improvements related to integrity and transparency. Bad actors within EB-5 have resulted in several fraud suits and some high-profile cases, all of which damage the credibility of the program and make it more challenging to market EB-5 investment opportunities to potential investors.
While these audits are voluntary, USCIS does have other methods of ensuring compliance with all relevant laws and regulations—but the audit program will give USCIS a new mechanism by which it can increase integrity and transparency in EB-5 and identify problems proactively.
When will these audits begin?
USCIS anticipates starting the new audits soon—but no exact date has been given. Regional centers will, however, be given advance notice of compliance audits. And according to USCIS, if at any time the regional center no longer wishes to participate, “the visit will be terminated.”
According to Law360, USCIS plans to conduct only “a limited number of compliance audits” in 2017, which will be in addition to approximately 250 site visits of new commercial enterprises (NCEs) and job creating entities (JCEs).
What will a regional center compliance audit entail?
In addition to the data requested as part of a compliance audit and information collected during a site visit, the audit process will involve reviewing various sources of information, including information held on government systems, commercial and public records, and evidence submitted by regional centers.
The following excerpt from the USCIS website lists the tasks an audit team will perform:
- 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;
- Review and analyze documents;
- Interview personnel to confirm the information provided with the application(s) and annual certification(s).
USCIS has indicated that a regional center will be given advance notice of an upcoming compliance audit, and that the notice will include a request for the production of specific records. This will enable the regional center to prepare for the audit. The audit itself is expected to take about one week.
During the compliance audit, the team from USCIS will be on site at the regional center’s office collecting data on the regional center and any related NCEs and JCEs.
While the exact nature and scope of these compliance audits are not yet known, the audits are expected to be relatively high-level, broad examinations of regional centers’ procedures, projects, and handling of investor funds.
How should a regional center prepare for a compliance audit?
USCIS offers some general guidance on how regional centers can prepare for the new compliance audits.
Prior to a site inspection, a regional center should gather all information related to applications or certifications already submitted to USCIS, any updates to those submissions, and any data specifically requested by the compliance audit team.
During a site inspection, a regional center should comply with requests from the audit team for documentation to verify any information provided in submitted applications.
After a site inspection, additional questions may arise, and a regional center should comply with any follow-up requests from USCIS to verify or update information.
What happens after a compliance audit?
Once a compliance audit is complete, the audit team will produce an audit report that will be added to the regional center’s record. The audit report will be used by USCIS to determine whether the regional center is in compliance with all applicable laws and regulations and remains eligible for participation in the EB-5 Program. If the report includes indicators of potential fraudulent activity, USCIS will then determine what additional investigative steps need to be taken.