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GAO report summary part 3: USCIS data collection on EB-5 fraud and national security must evolve

This is the last article in a three-part series on the recent report that summarizes the comprehensive EB-5 study conducted by the United States Government Accountability Office (GAO). 

This article focuses on the report’s findings on USCIS data collection — the challenges, upcoming changes, and concerns. 

The GAO study analyzed data from fiscal years 2016 through 2021 and information shared by USCIS officials and staff.

USCIS data collection in the past

USCIS efforts to assess fraud and national security concerns since 2016

In response to a GAO recommendation in 2015 to make regular EB-5 assessments, since 2016, IPO has conducted several assessments of fraud and national security concerns. In 2016, in response to a GAO recommendation that same year, IPO conducted a comprehensive program-wide EB-5 risk assessment.  

From 2017 through 2021, IPO conducted at least one assessment of EB-5 fraud and national security concerns per year, focusing on a specific aspect of the program. These reviews included a national security concerns assessment in 2017, a fraud-trend analysis in 2018, and analyses on EB-5 petitions.

The IPO assessments reviewed potential threats to the program, including high-risk countries, entities posing a risk, and the program’s largest petitioner groups.

GAO recommends conducting regular risk assessments, especially when there are changes to the program. 

Comprehensive EB-5 review in 2018; no such reviews since

USCIS’s Fraud Detection and National Security (FDNS) Directorate is the agency body responsible for preventing, detecting, and responding to allegations of fraud and national security concerns in EB-5. In 2018, FDNS performed a year-long manual review of fraud and determined that source of funds was the most common type of fraud.

IPO officials acknowledged the usefulness of the 2018 analysis in identifying fraud and national security trends and risks in the EB-5 program. However, due to system limitations, they have not conducted a similarly comprehensive study since then, despite admitting that the 2018 study does not account for evolving risks in the program.

Past GAO recommendations and USCIS action in response

GAO, in August 2015 and September 2016, reported on USCIS issues with data collection and how this limited the agency’s ability to address fraud. At those points in the past, GAO recommended that USCIS expand its data collection. In response, in 2017, USCIS published revised EB-5 forms to improve data collection.

IPO says a review of regional center denials and terminations requires an extensive manual review

IPO officials stated that a systematic examination of the reasons for regional center application denials and termination would require a time-consuming manual review of paper files. It would also, in many cases, require a review of supporting documents such as requests for evidence, FDNS statements of findings, or notices of intent to deny or terminate.

Furthermore, officials stated that files adjudicated more than 12 or 18 months ago, would have to be procured from storage at the Federal Records Centers, a time-consuming process.

The problem: the IPO data system hinders the ability to identify fraud and national security trends

USCIS’s Fraud Detection and National Security Directorate (FDNS) collects data on the number of its fraud and national security investigations. 

The Fraud Detection and National Security Directorate's Data System (FDNS-DS) is the main system utilized by FDNS to document data related to EB-5 fraud and national security concerns.

However, the system lacks easily accessible data concerning the detailed attributes of fraud concerns and trends; the system only includes fields regarding general immigration-benefit fraud. This is because the agency does not collect reasons for the denial of petitions and applications, or for the termination of regional centers, even when fraud or national security concerns are involved.

As the tools used to collect this data are limited, USCIS does not have automated information to monitor trends and evolving risks. IPO FDNS perform time-consuming manual reviews and other means to acquire this information.

Working groups exchange information about fraud and national security

To compensate for the limitations of the FDNS-DS in tracking and monitoring specific EB-5 fraud and national security concerns, IPO officials use various communication channels to exchange information about fraud and national security issues related to the EB-5 program. A common way to do this is through IPO, interagency, and DHS-level working groups.

IPO collects additional info on national security concerns 

The GAO report critically states that “IPO FDNS has also taken steps to collect additional information related to EB-5 program national security concerns that is not readily available in FDNS-DS, such as the type of national security concern and referral reason.” The report does not state how such information is acquired; an educated guess might suggest through the working groups or perhaps collaboration with federal law enforcement agencies.

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How USCIS needs to improve data collection 

IPO staff in 2022

At USCIS, the Immigrant Investor Program Office (IPO) is responsible for evaluating and processing petitions and applications, ensuring that program participants adhere to program requirements. As of August 2022, the IPO employed approximately 45 adjudication officers who review petitions and applications, along with 20 economists who review business plans and proposals for regional center projects. 

Additionally, within the IPO, Immigration Officers and Intelligence Research Specialists from the Fraud Detection and National Security Directorate (FDNS) investigate EB-5-related fraud and national security concerns.

GAO recommendations to USCIS

GAO's Fraud Risk Framework states that effective management of fraud risks involves the collection and analysis of data to enable real-time monitoring of fraud trends and the identification of potential control weaknesses. 

To achieve this, FDNS should take measures to systematically collect and track data on the types and characteristics of EB-5 program fraud. The GAO report states this could happen within an existing data system or through a separate system.

Specifically, GAO’s latest report makes the following two recommendations:

1. Systematic fraud data collection: GAO recommends that USCIS systematically collect and monitor data regarding the various types of fraud occurring within the EB-5 program.

2. Process to collect and assess investor petition denials and regional center termination: GAO suggests that USCIS develop a structured process to gather and evaluate the reasons behind investor petition and regional center application denials, as well as the termination of existing regional centers.

DHS has agreed with these recommendations.

IPO staff cited the need for greater data efficiency

Most of the IPO staff members interviewed flagged issues associated with USCIS data systems related to adjudication and investigation processes. Specific problems included data entry errors, the absence of fields for certain data points, and the inability of different internal systems to worth together.

IPO officials admitted that its data system is outdated compared with most USCIS offices. 

Where USCIS is headed with data collection 

IPO transitioning I-526/I-526E and I829 forms into new electronic database

IPO officials claim they are currently transitioning to a new electronic database for forms I-526/I-526E and I-829. With USCIS's increased ability to deny petitions and applications, the new system may have the capability to track denial reasons. However — and this is one of the most shocking revelations in the GAO report — IPO is unsure if a data field for denial and termination reasons will be included in the new system.

Much like the limitations of the FDNS-DS tracking system, an omission of the ability to track these reasons would be a glaring shortcoming. 

The new electronic database is expected to be ready in fiscal year 2023.

The upcoming FDNS system may still lack crucial fields

FDNS intends to replace FDNS-DS with a new case-management system. However — and this seems inexplicable given the attention that EB-5 fraud and national security have commanded — the new system may not include all the necessary data fields for capturing various types of fraud or national security concerns specific to the program. 

The deployment of the new system has been postponed and is expected to occur in the second quarter of fiscal year 2023.

Where digitization is today

In September 2016, GAO reported that USCIS’s reliance on paper files limited the ability to improve fraud management. At that time, USCIS had taken preliminary action to digitize its paper files, yet that digitization process is still ongoing today.

IPO officials have hired a contractor to digitize pending I-829 forms. In June 2022, there were approximately 11,500 pending I-829 forms. In fiscal year 2022, officials transferred around 6,100 of the files to a contractor for digitization. 

Officials also expected the intake of new I-829 and I-526 forms into the USCIS-wide Electronic Immigration System to start in 2022, and that other forms would follow suit over the next couple of years.

But GAO reminds us that the Immigration Service has had long-term delays in implementing a new digital system. 

Furthermore, regarding the upcoming FDNS-DS system, officials admitted that complete digitization and other features will take a significant amount of time. 

Conclusion & concerns 

GAO report conclusions

The GAO report notes that EB-5 has granted lawful permanent resident status to approximately 31,000 immigrant investors and their family members from fiscal years 2016 to 2021. This has benefited the U.S. economy through investments in job-creating activity. This has resulted in over $15 billion of investment in the U.S. economy.

However, the program also creates inherent fraud and national security risks that require USCIS's attention. 

While IPO has taken measures to address these risks — and the Reform and Integrity Act grants IPO the authority to deny petitions, applications, and terminate regional centers due to the threat of fraud or national security risks — this is not enough.

USCIS does not collect data on the reasons for denying EB-5 petitions and applications, as well as terminating Regional Centers. This hinders the Immigration Service’s ability to monitor and respond to emerging fraud trends. 

The Immigration Service needs this data to be systematically collected and tracked for IPO to monitor and evaluate fraud trends, respond to evolving risks, and identify areas for program improvement.

Our comments and concerns

The most recent GAO report highlighted that back in August 2015 and September 2016, GAO identified issues with USCIS data collection — and how the situation compromised the Immigration Service’s ability to monitor and respond to fraud and national security concerns. 

At that time, GAO recommended that a new data collection system that could track denial and termination reasons would be vital to monitor and address fraud and national security risks.

Almost eight years have passed since then, and while there are promises of new systems that will improve data collection, the GAO report should cause a collective shiver in the EB-5 industry and investor communities: Yes, IPO is upgrading its Fraud Detection and National Security Directorate's Data System — but the new system may not include all the necessary data fields for capturing various types of fraud or national security concerns. 

Further, there is a transition to a new electronic database for forms I-526/I-526E and I-829. The new system may have the potential to track denial reasons. Yet IPO is uncertain if the new system will include a data field for denial and termination reasons.

This uncertainty is inexcusable. There have been problems in the EB-5 program for years. A government audit in 2015 gave clear and simple recommendations on how to address these problems. Yet the better part of a decade later, IPO is unsure if it can follow these recommendations. 

The GAO did its job with this comprehensive report on EB-5. Let’s hope DHS does its job and turns its supposed agreement with the executive recommendations into real action.

Read GAO report summary, part 1: EB-5 filing, adjudication, and regional center trends

Read GAO report summary, part 2: EB-5 fraud and national security concerns

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