USCIS can sanction or terminate regional centers that violate the rules – here’s how to avoid these harsh penalties.
The passage of the EB-5 Reform and Integrity Act of 2022 (RIA) was welcomed by many in the industry not only because it renewed the regional center Program for five years, but because it instituted needed integrity measures meant to combat fraud and abuse within the program.
High standards are meaningless without enforcement, which is why the bill also included provisions to “establish a graduated set of sanctions based on the severity of the violations.” These sanctions could range from fines or temporary suspension to a “permanent bar from participation in the program” and “termination of regional center designation.”
In July of 2024, U.S. Citizenship and Immigration Services (USCIS) released new policy guidance regarding these sanctions, right as we got word that many regional centers were receiving notices of USCIS’ intent to terminate them. Here’s what we know about these pending terminations and how regional centers can avoid sanctions.
What the updated guidance says about regional center sanctions and termination
Released July 16th, 2024, the USCIS guidance “interprets the provisions related to sanctions, including terminations, debarments, and suspensions, for noncompliant regional centers, new commercial enterprises, job-creating entities, investors, and others.”
According to a USCIS policy alert, “the reforms add new authority for USCIS to sanction regional centers at various levels for noncompliance with statutory requirements, such as paying the EB-5 Integrity Fund fee. The reforms also provide new protections for good faith investors.”
Vol. 6, Part G, Chapter 8 of the Policy Manual now includes a detailed description of penalties and how they may be applied:
- Suspensions: a suspension involves “temporarily disallowing the suspended individual or entity from some or all forms of participation in the EB-5 program.” A suspension will typically last for a specified period, or until the violation has been “cured”. Associated I-956F petitions could be held or denied during the period of suspension.
- Terminations: the most succinct section, it states, “When USCIS terminates a regional center, that entity is no longer designated under the program and may not file project applications or solicit investors.”
- Debarments: a debarment “typically prevents individuals or entities from participating in the EB-5 program, precluding all future involvement of the individual or entity with the EB-5 program.” This is the most severe type of sanction, as it means individuals could be prevented from ever participating in EB-5 again, even with a different regional center.
What kinds of violations are resulting in regional center termination?
The issue of debarments is given further attention in terms of what might bring about such a severe penalty:
“In general, USCIS debars individuals or entities based on noncompliance with or prohibited conduct under applicable statutory provisions and does not debar individuals or entities for merely failing to establish investor eligibility for visa classification or removal of conditions, such as not creating sufficient employment, or upon receipt of requests for debarment.”
The Policy Manual lists a few discretionary reasons that may be cause for debarment, including “threats to the national interest and fraud, misrepresentation, deceit, and criminal misuse,” along with examples of behavior that may constitute fraud.
In July, USCIS issued notices of intent to terminate (NOIT) to regional centers deemed no longer compliant with the RIA. Most, if not all, of these NOITs were related to a failure to pay fees, and in many cases, this failure to pay RIA integrity fees was intentional because the regional centers were planning to cease operation.
According to the Policy Manual, “USCIS typically provides 30 days for response after issuing a notice of intent to sanction and may, in its discretion, consider responses received after 30 days.” regional center However, it seems only responses which are able to prove that the missing fees had been paid timely will stand any chance of success. Notably, an opportunity to respond is not the same as an opportunity to cure. Practitioners fear that some regional centers may have simply made a mistake in interpreting the requirements to pay these first fees, or missed a step in the process resulting in a mistakenly missed payment and they will be left without recourse.
Another area where USCIS penalties may come into play are the USCIS audits of regional centers that began in 2024. According to the RIA, “The Secretary shall terminate the designation of a regional center that fails to consent to an audit under subclause (II) or deliberately attempts to impede such an audit.”
While regional centers that refuse to participate in an audit or attempt to impede auditors will be terminated, the RIA doesn’t indicate that termination is a penalty for a failed audit. Even if failed audits may not result in termination when the regional center willingly participates in the audit, that doesn’t mean there will be no penalties for violations uncovered during an audit. It would be fair to expect fines, suspensions, and orders for corrective measures to be imposed where infractions are uncovered.
What does this mean for investors?
As far as how investors of penalized regional centers might be affected, it depends largely on the type of sanction that has been imposed:
Suspensions: if a regional center is suspended, “USCIS may continue to adjudicate Immigrant Petitions by Regional Center Investor (Form I-526E) for investors affiliated with an approved Application for Approval of an Investment in a Commercial Enterprise (Form I-956F).”
The word may in the above paragraph should give one pause. Another section of the Policy Manual says, “In general, during the period a new commercial enterprise or job-creating entity is suspended, where USCIS has approved a Form I-956F application, USCIS holds adjudication of investor Form I-526E petitions associated with that project.”
Obviously, EB-5 investors don’t want to pin their green card success on the hope USCIS continues to adjudicate petitions associated with suspended entities. But it’s possible that investors in these projects will have the ability to remain in the original investment, which cannot be said of the other types of sanctions which may lead to the investors needing to reinvest in a second project in order to continue the EB-5 process.
Terminations: if a regional center is terminated, investors will be notified, and “upon notification, affected investors have 180 days to reassociate with a new regional center or new commercial enterprise.”
The RIA’s innocent investor protections allow investors to redeploy their investment funds to a new project, which is a good thing, but that may not be as easy as it sounds. A regional center being terminated may have been mishandling investor funds or deployed the funds into an unfinished project, so there may be no funds for them to redeploy and complete their applications.
Debarments: the section regarding debarments is a little bit trickier, stating that “good faith investor protections only arise upon either the termination of a regional center or debarment of a new commercial enterprise or job-creation entity. Consequently, termination of a new commercial enterprise or job-creating entity other than debarment might not trigger these investor protections, contrary to Congressional intent. USCIS therefore interprets its authority to terminate the participation of new commercial enterprises or job-creating entities in the program as equivalent to debarment and debars such entities as appropriate under applicable authorities permitting their termination from the program.”
This interpretation is meant to broaden the applicability of the innocent investor protections. But just as with termination, USCIS can only allow investors the opportunity to redeploy, not guarantee them ability to access their originally-invested capital. The risk of losing invested capital is a requirement for participation in an EB-5 offering, but the chances of it happening are very real, which is why investors need to perform proper due diligence in order to have the best chance of success.
How regional centers can avoid termination or other sanctions
Ideally, regional centers would like to steer clear of all types of sanctions from USCIS. The easiest ways to do that are 1) comply with the RIA, 2) pay all necessary fees, and 3) consent to and pass audits.
Staying on top of RIA rules, including all interpretations thereof, and keeping track of necessary forms and fees is a major part of regional center compliance. As a third-party fund administrator, JTC works to help its clients remain compliant under RIA rules, storing required documents and making them easily accessible through our 24/7 online portal.
JTC can also help with the audit process. We’ve learned much of what regional centers are being asked to provide during USCIS audits, and store this information on our secure portal so it can be accessed by our clients when the time arises. JTC can make audit preparation and participation easier by working with regional centers to make sure they have everything they need in order to prove they’re doing right by the RIA, USCIS, and their investors.
Learn more about JTC’s EB-5 fund administration services here.
