Let’s Get the Truth Straight: Correcting Common Misconceptions about EB-5

by Reid Thomas and Kaitlin Halloran

As the EB-5 program has grown, increased scrutiny from the SEC, several high-profile fraud cases, and [pending] Congressional renewal of the EB-5 Regional Center Program have demonstrated that new standards for security, transparency, and compliance will be required of the EB-5 program.

The EB-5 industry itself has advocated extensively for reform and for best practices to protect investors and ensure program integrity.

The EB-5 program is a highly effective job creation engine and delivers many economic benefits to the U.S. economy at no expense to the taxpayer. However the program’s rapid growth has prompted increased public attention on EB-5, and misinformation abounds. Unfortunately, misconceptions about the EB-5 program damage its reputation and undermine its positive impacts.

Common Misconceptions about EB-5



The EB-5 program allows foreign nationals to “buy” American citizenship.

The EB-5 program does not offer citizenship for a price.  Instead, it provides foreign investors the opportunity to qualify for conditional permanent residency by making a $500,000-$1 million at risk investment in a business that will create American jobs.


If the investment meets job creation and other requirements at the end of a two-year conditional residency period, investors can then qualify for permanent residency, and subsequently apply for citizenship.

Immigrants can use EB-5 as a shortcut to “buy their way” to the front of the visa line.

While EB-5 may be a quick path to a green card for many investors, lengthy USCIS processing times, a visa backlog for Chinese-born investors, and a mandatory two-year conditional residence period extend the EB-5 timeline to upwards of five years for most investors.


Use of EB-5 visas does not impact visa backlogs for other visa categories: while unused EB-5 visas can be reallocated to other employment-based immigration categories, visa numbers allocated to EB-5 form such a small segment of all available employment-based visas (10,000 out of 140,000, or about 7 percent) that reallocation is unlikely to significantly impact visa availability for other categories.


Though both EB-5 and H-1B visas are related to employment, EB-5 visas have no impact on H-1B visa availability. H-1B is a non-immigrant visa category, and availability is not impacted by issuance of employment-based immigrant visas, like EB-5.

EB-5 is an easy way for terrorists to enter the country.

EB-5 investors are subject to significant scrutiny throughout the EB-5 process from the USCIS—which is itself run by the Department of Homeland Security (DHS).


The EB-5 vetting process includes the most detailed and thorough review of the immigrant of any visa category.  The process includes a comprehensive review of the documentation of a legal source for the investor’s funds, in addition to background checks, in-person interviews, health and biometrics.  Moreover, this detailed review occurs twice in the process, once upon application for conditional residency, and then again two years later at the removal of conditions phase.


In addition, investors are subject to Office of Foreign Asset Control (OFAC) requirements. The OFAC Specially Designated Nationals (SDN) list specifies individuals, businesses, and countries with which U.S. entities are prohibited from doing business based on foreign policy or national security concerns. All U.S. persons, including banks and EB-5 issuers, are subject to OFAC regulations, and are required to block transactions involving, on behalf of, or in the interest of entities on the SDN list, and must reject any transactions in violations of other sanctions.


For a person included on or linked to the SDN list, attempting to participate in the EB-5 program would be unsuccessful; the funds would be blocked before the initial investment was ever made, and the foreign individual involved would lose access to those blocked funds.

EB-5 enables money-laundering

In addition to the detailed source of funds review performed by DHS, the US banking system is regulated to ensure that money laundering does not occur and to identify potential threats. 


U.S. banks accepting foreign funds must comply with Know-Your-Customer (KYC), Anti-Money Laundering (AML), and Bank Secrecy Act (BSA) requirements.

EB-5 developers “gerrymander” census tracts to allow projects in affluent areas to qualify as high unemployment areas for EB-5.

Though projects in economically prosperous areas may not seem to meet Targeted Employment Area (TEA) criteria, these projects typically draw workers from nearby high unemployment areas.


When taking into account commute patterns, these projects create jobs for high unemployment communities—just as the statute intended. Linking together census tracts is a common practice used by the Bureau of Labor Statistics to evaluate employment regions and statistics for the federal government.


Industry norms surpass regulatory requirements

A report released in August 2015 by the Government Accountability Office (GAO) has raised concerns for many regarding the USCIS’ ability to reliably oversee the EB-5 program.

The information in the report indicates that the USCIS lacks the capacity to reliably verify EB-5 investors’ source of funds, an EB-5 project’s receipt of the investment, or the project’s information itself—key components of meeting EB-5 program requirements.

Additionally, the report noted that USCIS fails to track investor and Regional Center data accurately. The report stated that USCIS “databases have limitations that reduce their usefulness for conducting fraud-mitigating activities”; tracking information “such as the applicant’s name, address, and date of birth” is considered “unnecessary”; and data fields are not standardized to enable basic search functionality.[1]  Because EB-5 program data is not readily available, the USCIS’ fraud detection unit has been unable to develop a strategy for assessing fraud risk, and instead relies on random site visits.[2]

However, bureaucratic challenges in the program’s administration do not reflect the true nature of the EB-5 market. Where the USCIS has failed, the EB-5 industry itself has stepped up, setting high standards for security, transparency, and compliance.

Not only do EB-5 issuers perform due diligence on a project’s potential investors, as more and more projects have flooded the investor market, investors have become more selective. After several isolated incidents of issuer misconduct, investor due diligence has continued to increase. Appropriate controls, clear compliance programs, and measures to protect investors have become essential parts of project marketability as this flight to quality has occurred, resulting in widespread adoption of best practices by the EB-5 industry.

Many of the USCIS’ administrative challenges arise from the complexity of the intersecting immigration and investment processes. In response to this complexity, industry stakeholders have developed innovative solutions to meet the unique needs of EB-5. For example, our own solutions have been implemented on more than 400 EB-5 projects, providing increased investor security, streamlined tracking, a complete audit trail, and third-party loan and fund administration—much more than the statute requires.

The truth about EB-5: 30,000+ jobs at no cost to the taxpayer

At its core, EB-5 is a job creation program, and a highly successful one at that.

An independent report commissioned by the EB-5 Coalition estimates that the EB-5 program is currently creating over 30,000 jobs per year.  On an annual basis the industry is contributing more than $1.6 billion in foreign direct investment and contributing over $2.5 billion to GDP.

The EB-5 program creates these jobs at no cost to the U.S. taxpayer. In contrast, each job created or preserved under the American Recovery and Redevelopment Act of 2009 was estimated to cost taxpayers between $185,000 and $278,000.

Critics of EB-5 often fail to recognize the successes of the EB-5 program; in reality, its benefits far outweigh its flaws.

[1] GAO, Additional Actions Needed to Better Assess Fraud Risks and Report Economic Benefits , GAO-15-696 (Washington, D.C.: Aug. 12, 2015) at 25-26.

[2] Ibid, 29.

Reid Thomas

Reid Thomas

Reid Thomas serves as the executive vice president for NES Financial. Responsible for global sales and marketing, he brings over 20 years of experience from both private and public Silicon Valley technology companies. Thomas’s expertise includes escrow and fund administration. He is a frequent author and speaker in the EB-5 community.