Earlier this month, USCIS put forth an announcement regarding EB-5 regional center audits. Under the EB-5 Reform and Integrity Act of 2022 (RIA), USCIS is required to audit each designated regional center at least once every five years. United States Citizenship and Immigration Services (USCIS) recently released crucial information regarding EB-5 Regional Center Audits, signaling a significant development for participants in the EB-5 Immigrant Investor Program. This announcement, dated April 9, 2024, outlines key provisions mandated by the EB-5 Reform and Integrity Act of 2022 (RIA) to enhance the integrity and oversight of the EB-5 program.

Unlike H-1B site visit audits, which are voluntary and individuals and companies can decline to participate in, the EB-5 site visits are mandatory and have harsh repercussions for non-participation. While EB-5 regional center audits are not new, it is important for EB-5 regional centers to understand the announcement from USCIS as well as what is required during these audits.

Statutory Requirements for EB-5 Regional Center Record Keeping

Under the new provisions of section 203(b)(5)(E)(vii) of the Immigration and Nationality Act, USCIS is now required to conduct audits of designated regional centers at least once every five years. These audits aim to scrutinize documentation maintained by regional centers and review the flow of immigrant investor capital into capital investment projects. By doing so, USCIS seeks to verify information provided in regional center applications and annual certifications, as well as associated investor petitions, bolstering the integrity of the EB-5 program.

There are statutory requirements for record keeping associated with EB-5 regional centers. This can be found in 8 U.S.C. § 1153(b)(5)(E)(vii). Every EB-5 regional center is required to create and maintain records for a 5-year period beginning on the last day of the fiscal year in which any transactions occurred. Put in layman’s terms, if you do a transaction on December 1, 2024, you must keep records for 5 years from September 30, 2025. These records include books, ledgers, records, or other documentation used by the entity that is used as evidence to support any claims, evidence, or certifications contained in the mandatory regional center annual statements. Additionally, documentation must be kept of the documents used as evidence associated with petitions by individuals in the I-526 or their removal of conditions.

Implications of Site Visit Participation

During site visits conducted as part of an audit, regional center representatives are expected to cooperate fully. In the announcement, USCIS emphasizes that any refusal or reluctance to participate in the site visit or audit will result in the cancellation of the visit. In such cases, USCIS will complete the audit report using available data, noting the cancellation at the regional center’s request. Furthermore, deliberate attempts to impede an audit or even refusal to consent may lead to termination of the regional center’s designation, as per INA 203(b)(5)(E)(vii)(III).

Yellow Book Standards Implementation

Effective April 23, USCIS will generally adopt Generally Accepted Government Auditing Standards (Yellow Book) when auditing EB-5 regional centers. The Yellow Book provides standardized procedures and guidance for auditors, ensuring consistency and rigor in the auditing process. Utilizing these standards enables USCIS to verify information provided by regional centers, assess compliance with applicable laws, and evaluate continued eligibility for designation. Regional center managers and directors should be aware of these standards and ensure they can comply with audits utilizing these standards.

Consequences and Compliance of EB-5 Site Visits Audits

USCIS clarifies that, aside from cases where regional centers refuse audits or obstruct the process, there are typically no direct adverse consequences solely due to a negative audit result. However, findings from audits may inform decisions regarding a regional center’s ongoing eligibility and compliance with program requirements. It’s essential for regional centers to understand their obligations and cooperate fully during the audit process to maintain their designation and uphold program integrity.

Accessing Resources to Prepare for EB-5 Regional Center Site Visits

To support regional centers through this process, USCIS has launched a dedicated EB-5 Regional Center Audits webpage. This resource provides comprehensive information on the auditing process, the role of audit teams, preparation guidelines, and participation instructions. The website created discusses the tasks assigned to EB-5 audit teams, how to prepare for an audit, and the audit process. Regional centers are encouraged to familiarize themselves with these resources to ensure a smooth and compliant audit experience.

Importance of Regulatory Compliance in EB-5 Regional Centers

Ensuring compliance with regulatory requirements is paramount for EB-5 regional centers to maintain their designation and uphold the integrity of the program. Beyond the immediate consequences of failing to comply with audit requests, there are broader implications for regional centers that do not adhere to regulatory standards. Non-compliance can erode investor confidence, jeopardize ongoing and future projects, and ultimately undermine the viability of the regional center. This may result in legal action against the regional center that goes beyond the immigration scope.

Enhanced Due Diligence and Risk Mitigation

In light of the heightened scrutiny and regulatory obligations imposed by the EB-5 Reform and Integrity Act of 2022, regional centers must prioritize due diligence and risk mitigation strategies. Implementing robust compliance frameworks, conducting thorough background checks on project developers and principals, and regularly assessing project viability are essential steps to mitigate potential risks and safeguard investor interests.

Investor Communication and Transparency

Transparent communication with investors is crucial for maintaining trust and confidence in the EB-5 program. Regional centers should proactively communicate updates on audit processes, compliance measures, and any material changes that may impact investors’ interests. By fostering open dialogue and transparency, regional centers can strengthen investor relations and mitigate potential concerns regarding regulatory compliance.

Conclusion

 The USCIS announcement regarding EB-5 Regional Center Audits underscores the agency’s commitment to enhancing transparency, accountability, and integrity within the EB-5 Immigrant Investor Program. By implementing regular audits and adopting standardized procedures, USCIS aims to strengthen oversight, verify information provided by regional centers, and ensure compliance with program requirements. Regional centers are encouraged to engage proactively, cooperate fully during audits, and leverage available resources to navigate this evolving regulatory landscape effectively. With proper understanding and adherence to audit requirements, EB-5 regional centers can maintain their designation and contribute to the continued success of the program.

Reddy Neumann Brown PC located in Houston, Texas, has been serving the business community for over 25 years and is Houston’s largest immigration law firm focused solely on U.S. Employment-based immigration. We work with employers, employees and investors helping them navigate the immigration process quickly and cost-effectively.

By: Steven Brown

Steven Brown is a Partner at Reddy Neumann Brown PC where he works in the Non-immigrant visa department and leads the Litigation Team. His practice covers all phases of the non-immigration visa process including filing H-1B, L-1, E-3, H-4, and H-4 EAD petitions. In the last two years, Steven has successfully handled over 1,000 non-immigrant visa petitions including filing petitions, responding to any necessary Requests for Evidence, and drafting motions and appeals. He has also become a key resource for F-1 students that seek guidance on properly complying with the F-1 visa regulations and any OPT or CPT issues they may have. Additionally, Steven holds a weekly conference call for companies that are part of one of the largest organizations for IT Services companies in America.