PUBLISHED: 9:09 PM 28 Mar 2017

Obama’s EB-5 Program Receiving Focus From Trump Congress, Legislators Hammer $500k Loophole

Trump has taken a strong stance on cleaning up loopholes in the immigration system left by the Obama administration. The EB-5 Visa is one such program.

Trump has taken a strong stance on cleaning up loopholes in the immigration system left by the Obama administration. The EB-5 Visa is one such program.

Trump has taken an active stance on cleaning up loopholes in the immigration system left by the Obama administration. The EB-5 Visa is one such program.

President Trump has become well known for his strict approach to immigration. Much of the media focus has been on the border with Mexico. The activities of ICE agents to deport illegals and the pushback from sanctuary cities is taking the attention away from all the efforts being made. He is also working to close loopholes that allow citizens from other countries to skirt the immigration process quietly. One such program, left over from the Obama administration, has become the “golden ticket” to quick citizenship.

The EB-5 Visa has become a main access point for some wealthy immigrants as it puts citizenship for sale. Guidelines for the program outline how one can use a monetary investment to become a legal resident. Starting a business within the United States becomes a gateway to becoming a citizen. President Obama signed a single extension for the program in December of 2016. The EB-5 program, in its current form, is only valid until April 28, 2017.

In its present state, the program requires an investment of $500,000. China is one of the countries with the highest level of utilization of the EB-5 Visa. The thousands of yearly EB-5 application coming out of China account for 85% of the entire program.

Utilization of the EB-5 Visa program has spiked in recent years.

Utilization of the EB-5 Visa program has spiked in recent years.

The Chinese government has strict laws concerning money leaving the country and being invested on foreign soil. They only allow relatively small amounts of money to be sent overseas. If one attempts to immigrate through legal channels and activities, it would take ten years to gather the money needed.

To work around the system in China, the wealthy are advised to transfer funds via “smurfing.” This means that they find creative ways to make multiple accounts in order to get the money out. Examples would include setting up accounts in friend’s names and using offshore accounts. It has essentially become an illegal way to skirt the financial constraints of the Chinese government.

“Our suggestion to the client is to open three to four personal accounts in the U.S. or line up three to four friends’ accounts, so they can split the money and wire it to different personal accounts without being put on a blacklist by the Chinese authorities,” said a Shanghai-based real estate agent who gave the surname Dong. “It may require a trip to the States to do so to facilitate the process.”

The EB-5 program did not start out to give the wealthy a way to work around the usual immigration standards. Its start was tied to business creation in the neediest areas within the United States. The idea was to reward investments in poor and rural areas with special immigration considerations. Sadly, the program throughout the Obama administration became a system that was too easy to beat.

The lose of capital is troubling for banks in China as their economy falters.

The loss of capital is troubling for banks in China as their economy falters.

“EB-5 has been a key program for capital flight that has been abused by Americans and Chinese people seeking to game the system,” said Andrew Collier, an independent analyst in Hong Kong and former president of Bank of China International USA.

As it stands now, the system is a shell to sell citizenship to the rich. Across China there is a sense of urgency to take advantage of this “golden ticket” because it may be getting much harder to use. More than 900 agencies in China depend on the program as their primary source of income. The popular program brings in significant gain to those working in emigration services. Emigration is the process of preparing to leave one’s home country to move abroad. It seems that it has become big business to help clients work the system to leave China.

The Trump administration is pushing for a system overhaul to swing the benefits to the American public. The demand for rush services has spiked.

Chinese emigration has become big business. Services and demand are only increasing as Trump looks to close loopholes.

Chinese emigration has become big business. Services and demand are only increasing as Trump looks to close loopholes.

While it is unclear if there has been any misuse of the program funds once the investments have been made in the United States, it was announced that the new administration would be auditing the program. Trump’s current tightening of all immigration abuse includes making sure this program was used within the legal guidelines.

The overhaul would significantly increase the investment level needed to qualify for the program. Instead of raising $500,000 to invest, the new threshold would start at $1.35 million. This will help focus the program on pure business ventures and move away from only buying citizenship.

The increased level of investment for the EB-5 Visa would also mean jobs. It is estimated that this program would create 200,000 jobs. Improving the EB-5 program instead of eliminating it could bring in over $3.8 billion in new business.

In addition, a better EB-5 program would focus on business growths that supports American jobs. This would mean more money coming into support new construction. The influx of new residents looking to become permanent also means money in the local economy. Investors from China are surpassing Canada as the top foreign home buyers.

The problems with the EB-5 program are being weighed against the on-going benefits to find a way to fix the loopholes. Increasing the money needed to invest is a way to still encourage investment with a focus on significant projects. Shifting the attention from those using smaller accounts to “smurf” the Chinese government will help to improve the program for all parties. Whether it is stopping illegal activity at the border or via loopholes needing to be closed, immigration policies are being improved.