China Sees Explosive Growth in Immigrant Investor Visas

UNCLAS SECTION 01 OF 02 GUANGZHOU 000671 SIPDIS STATE FOR CA/VO, CA/FPP, CA/P, EAP/CM E.O. 12958: N/A TAGS: CVIS CMGT KFRD ECON EFIN CH SUBJECT: China Sees Explosive Growth in Immigrant Investor Visas GUANGZHOU 00000671 001.2 OF 002 ¶1. (U) Summary: Guangzhou saw an increase of over 600 percent in the issuance of investor immigrant pilot program (EB5) visas from fiscal year (FY) 2008 to FY 2009, with total applicants issued rising from 245 to 1,732, giving China the highest volume of EB5 visas in the world. These applicants have invested over $280 million USD in targeted employment-creation projects in the United States. With the extension of the EB5 investor visa program and heavy marketing in China, Guangzhou, China's only immigrant visa (IV) unit, expects to see continued growth in this category. While this program represents a valuable opportunity to attract large amounts of Chinese capital to support U.S. job growth, lack of transparency in China's financial system and unreliable documents contribute to adjudication challenges and the possibility of fraud in this category. End summary. I Don't Want to Immigrate, I Just Want a Green Card -------------- -------------- ¶2. (U) Over the past three years, marketing of investor immigrant (EB5) visas in China has steadily intensified, resulting in high levels of public awareness and interest. China's burgeoning population of wealthy citizens, many of whom still perceive it difficult to obtain a U.S. visa, creates a natural market for U.S. green cards. Many wealthy Chinese applicants see the $500,000 investment cost for U.S. permanent resident status for the whole family -- with the possibility of seeing a modest financial return on the actual investment at some future point -- to be a fair price and a smart move. Conversations with many of these applicants indicate that they do not plan to relocate permanently to the U.S. Rather, they will continue to operate businesses in China and travel frequently. Many, if not most, have high school or university-age children, making access to U.S. education a strong motivating factor. ¶3. (U) Most of the U.S. regional centers approved to participate in the EB5 program are actively seeking investors in China. Several representatives have visited the IV unit to discuss their projects and visa application procedures, and the NIV units in Beijing, Shanghai, and Guangzhou have seen a proliferation of applications from groups going to explore potential investments. Guangzhou's Deputy IV Chief and Fraud Prevention Unit officer recently attended an EB5 investment seminar for a project in South Dakota. Prospective applicants asked a few questions about the investment, but most questions were directed towards immigration benefits. The presenter made a point of noting that just because an applicant received a green card through the program did not mean the applicant had to move to the United States. When an audience member asked whether or not the consulate would delve into applicants' finances, the presenter assured the audience that records would not be rigorously examined, and that most interviews took between three and ten minutes. ¶4. (U) Potential Chinese investors are served by a rapidly expanding industry of specialized visa brokers and consultants. Companies deemed qualified by the Chinese government to be EB5 visa brokers are registered through the Public Security Bureau (PSB). There are currently 524 entities which have been approved by the PSB. While the PSB approves these brokers, post is unaware of any mechanism by which the brokers' marketing activities or services are regulated. Recent conversations with a U.S.-based EB5 broker indicated that some brokers are attempting to thoroughly vet potential applicants. This particular broker maintained that it is possible to get a solid picture of an applicant through biographical information and personal financial documents. To make sure the applicant is legitimate, the broker follows the trail of wealth of the funds deposited, making sure they were derived from legitimate means. However, the broker noted that he does not look at all aspects of the applicant's wealth, only whether the funds deposited are legitimate. In cases where the EB5 application fees have been given as a gift, the broker will look at the trail of wealth for the person who has supplied the investment capital. The broker noted that complaints about the EB5 process in China tend to center on the high fees charged to applicants by brokers, including some accusations of brokers who have stolen funds intended for investment. Adjudication Issues -------------- GUANGZHOU 00000671 002.2 OF 002 ¶5. (U) EB5 applications present numerous adjudication challenges. While U.S. law requires that investments be made with "capital obtained through lawful means", in practice it is difficult to make this determination for Chinese applicants. Cases routinely include hundreds of pages of Chinese financial documentation, which is frequently unreliable and, even if legitimate, is beyond the expertise of IV staff to evaluate in detail. Additionally, due to the strict mandates of China's Foreign Currency Exchange Act, transferring investment funds out of China is a difficult task. To stay within the confines of Chinese law, yet satisfy the "investment or actively in the process of investment" provision of 8 CFR 204.6(j)(2),applicants often create an offshore escrow account to secure the investment funds before transfer to the U.S. enterprise once immigrant status has been granted. Applicants commonly establish the escrow accounts in Hong Kong. To transfer the required $500,000 investment to Hong Kong, applicants often use multiple transactions involving different individuals, thus confusing the trail of wealth and making even very legitimate cases hard to evaluate. Separately, post has limited information on the progress of job creation targets for the regional programs in the U.S. Post has contacted USCIS to learn more on its adjudication criteria in order to develop a training program for visa officers. ¶6. (U) While post has not yet detected any cases of outright fraud relating to the investment funds used to qualify for EB5 status, there have been some questionable cases. Some applicants have little knowledge of the program in which they are investing; some are even unaware of the rate of return on the investment. This lack of knowledge makes it more difficult to judge applicants' bona fides. And, as always, the allure of a U.S. visa has attracted other kinds of fraud. In one case, an investor visa applicant appeared for interview with his wife and four children. When suspicions arose about their relationship and the consulate suggested the possibility of DNA testing, the applicant admitted that two of the children were not his own. In a separate case, post assisted the Internal Revenue Service in a tax evasion investigation of an EB5 recipient. As the program becomes more and more heavily marketed, it is likely that more such problems will be detected. COMMENT -------------- ¶7. (U) Guangzhou expects to continue to see an increasing number of EB5 investor immigrant applicants and will seek to develop better means to evaluate these cases through more direct communication with USCIS on criteria, updates in the program, and reports on any fraud trends which have been discovered by USCIS. Guangzhou officers and LES will also continue to monitor reports on the EB5 program in China, including complaints about problems involving EB5 visa brokers or agents. End Comment. GOLDBECK