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Banking and Finance

Hard-Hitting Negative ICE Memo Slams EB-5 Leaked, Recommends Draconian Changes to EB-5 Program

 As the EB-5 program continues to flourish and develop, with around 4 billion dollars being invested into US projects, changing the very infrastructure of certain areas (for example Brooklyn, New York) as well as creating much needed jobs, yet again the program is attacked, this time by the Homeland Security Investigations (HSI) unit of DHS.

HSI is part of Immigration and Customs Enforcement (ICE), a law enforcement agency; and U.S. Immigration and Citizenship Services (USCIS) is the benefit-granting agency that runs EB-5 and many other visa-producing programs. The two agencies are independent of each other and are bureaucratic equals.

A leaked memo[1] reveals that HSI fears that Iranian operatives may have infiltrated the program. Sen. Chuck Grassley (R-Iowa), renewing a detailed attack on the program begun by Sen. Thomas Coburn (R-Okla.) dropped a bombshell by releasing a hitherto secret memorandum on EB-5 written by the Homeland Security Investigations (HSI) unit of DHS. For the text of both the senator's letter to the department and the leaked memo, see here.

The key paragraph in Grassley’s letter & ICE’s Memo:

One section of the memo outlines "concerns that this particular visa program [EB-5] may be abused by Iranian operatives to infiltrate the United States...." Two of the operatives allegedly "facilitate terrorism and are involved in an illegal procurement network that exports items to Iran for use by 'secret' Iranian government agencies."

According to the memo, one of the operatives acted as a representative in the U.S. for an Iranian front company allegedly run by an individual associated with Iran's Islamic Revolutionary Guard

Corps. Although the section of the internal memorandum dealing with the Iranian challenge was heavily redacted, the parts addressed to EB-5 policy were not, and showed a sharp difference within the department on the conduct of the program.

According to the HSI memo, ICE identified seven main areas of program vulnerability with the EB-5 visa:

1) Export of sensitive technology/economic espionage;

2) Use by foreign government agents/espionage;

3) Use by terrorists;

4) Investment fraud by regional center;

5) Investment fraud by investors;

6) Fraud conspiracies by investors and regional center; and

7) Illicit finance/money laundering.

Ice’s Recommendations:

The ICE memorandum recommends that the visa fees in EB-5 be doubled, that there be much more careful scrutiny of the aliens given these visas, and that the regional center portion of the EB-5 program, which allows the $500,000 investments in allegedly depressed areas in the United States, be repealed.

In addition, ICE recommended that induced jobs should not be used as a measurement of job creation; only direct jobs, and indirect jobs created from suppliers, partner entities, and direct support could be considered. Indirect jobs must be verifiable in the targeted geographical area. The ICE memo further stated that induced jobs based on an increase in economic activity should not be used toward the requirement of creating 10 jobs. The memo suggested that jobs created directly are easier to verify and substantiate by both the RC and USCIS.  Interestingly, the way that USCIS has managed the requirement that 10 additional jobs for citizens or green card holders be created with each investment, a point that many critics have made in the past.

Are Ice’s Recommendations Reasonable?

The draconian measures listed in the ICE memorandum appear to transpire as a result of the cited Iranian operative, who acted as a representative in the U.S. for an Iranian front company, allegedly run by an individual associated with Iran's Islamic Revolutionary Guard Corps. 

If the $500,000 threshold is completely eliminated, it will dramatically curtail the amount of investors currently interested in parking their money in US projects, often at 0% interest for 5+ years. 

Can Senator Grassley and others of like mind deny the benefits brought about by the EB-5 program? As far as investment immigration programs go, the US is well behind other countries such as Canada, who certainly have made astute use of investment capital.

Changes to EB-5 in the Horizon?

Last year USCIS (and the Obama administration) successfully opposed such recommendations along with demands that the program be allowed to sunset.  However, will this undated, unsigned memorandum swing the vote against the present moderate outlook of the EB-5 program?

Further changes could come to the EB-5 program simply through Chinese politics. Presently close to 80% of the investment capital comes from China. As explained in an article by Yi Song, Esq.[2] the Chinese leadership is expected to maintain a "prudent" monetary policy in 2014. The Economic Reform priorities would include making preparations for freeing up bank deposit rates, including the establishment of a deposit insurance system. It is widely believed that the new law will target high net worth individuals in the private sector, government officials and the executives of state-owned enterprises and individuals who have monetized government connections. Their assets outside of China will be subject to strict scrutiny. Chinese nationals who transferred assets overseas and the financial institutes who facilitate such transaction will be obligated to report to the State Administration of Foreign Exchange. Will this mean that in the next three years even more high net worth individuals in China will immigrate to the US and Europe before this new law is fully implemented on the state and local level?  It remains to be seen whether or how the economic policy and the reform priorities will affect the already loosened foreign currency exchange rules in China.  


It is hardly reasonable to base the accusation that the EB-5 program "facilitates terrorism" and that it involves an "illegal procurement network" on one isolated case. Is this really a national security issue that would weigh more heavily in the realm of EB-5 rather than any other area of immigration? Does this random case outweigh the symbolism of tolerance and diversity in the United States? The real impact of the ICE memo is yet to be seen in the EB-5 practice.

 Mona Shah, Esq. is the principal of Mona Shah & Associates in New York City. The firm has assisted many Regional Centers and Investors in navigating this complex, nuanced and constantly changing area of immigration law. Mona has more than 18 years of legal experience in immigration law and extensive knowledge in EB-5 law. Mona's substantial litigation background includes her representation of clients in both state and federal courts. She has handled complex immigration law appeals before the US Circuit Courts of Appeal nationwide.  Before coming to the US, Mona was a crown prosecutor in the UK. Mona has authored and published numerous articles and has spoken extensively both in the US and overseas.

Mona Shah & Associates reserve and hold for their own use, all rights provided by the copyright law, including but not limited to distribution, producing copies or reproducing, sales of this document. This article is a general summary of complex legal issues. No legal advice is provided in this article. Please consult the securities attorney for advice applicable to your particular circumstances.

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[1] Source from David North, December 13, 2013

[2] China’s Economic Policy for 2014 – How is it going to affect the EB-5 Investors? By Yi Song, Esq.