Expect a clamp down on passport schemes for investors – The Economist

EDINBURGH — It's relatively easy for a rich person to buy citizenship – regardless of how he or she acquired their funds. This is evident from the increase in the number of so-called investment migrants. Respected financial magazine The Economist dissects the trend, cautioning that EU and OECD countries have the citizenship industry on the radar as they explore ways to clamp down on tax evasion and money laundering. – Jackie Cameron.___STEADY_PAYWALL___.By Thulasizwe SitholeSelling citizenship is big business for small countries, with deposed politicians and criminals gaining easy access to safe havens. That's the message in The Economist, which has published a feature on how the citizenship industry is coming under scrutiny.Thaksin Shinawatra, former prime minister of Thailand, became a citizen of Montenegro after being stripped of his Thai passport in 2006 following a coup. "At one point he seemed to be collecting them. A colleague once claimed he had six. His Nicaraguan one, he says, has lapsed," comments The Economist..The number of "investment migrants" is growing, the financial publication reports. "Thousands of passports are bought and sold every year, almost always by the wealthy. The number of commercially acquired residence permits runs into the hundreds of thousands.."A burgeoning "CRBI" industry (citizenship and residence by investment) — of consultants, lawyers, bankers, accountants and estate agents — is busy advising well-heeled investors, chafing at the constraints of their paltry single citizenship, on how and where they can acquire another, or at least a long-term resident's visa, it continues..For the European Union in particular, the issue is delicate, says The Economist. "It touches on one of the most 'national' of competences — who lives in a country and bears its passport — yet has Union-wide consequences. An EU-member-country's passport is also an EU passport; a 'Schengen' visa grants access to 22 EU members and four other countries.".Premium: Passports for cash: Citizenship bargains galore in the CaribbeanCitizenship has become a commodity, with about 100 countries offering a "residence by investment" programme. Over a dozen offer citizenship — including five Caribbean island-states, Vanuatu, Jordan and, within the EU, Austria, Cyprus and Malta."The latest entrants to this market are Moldova, which in July signed a contract with a consortium that will design its citizenship-by-investment scheme, and Montenegro itself, which in the same month announced it would in October launch its own formal programme.".Other countries that have sold passports include:The Kingdom of Tonga in the South Pacific, which in 1983 began selling passports for a few thousand dollars with few questions asked;Tiny St Kitts and Nevis, which offers citizenship to foreigners who make a "substantial" investment;Canada, which in 1986 Canada introduced a residence-by-investment programme. It proved a magnet for Hong Kongers nervous at the impending handover to China in 1997. Canada withdrew its federal scheme in 2014, but, at the provincial level, Quebec continues to offer one. These days, mainland China remains the main market for most schemes;1990, America, which introduced EB-5 visas, requiring investment of at least $1m, or at least $500,000 if into a "targeted" area of high unemployment.The total size of the CRBI business is unknown, points out The Economist. "The Investment Migration Council (IMC), a lobby group, estimates that 5,000 people a year acquire a citizenship this way, investing some $3bn."Of the two most popular destinations, Canada's federal programme is closed, and America's EB-5 scheme has a waiting list for Chinese applicants estimated at 18 years.EU-member schemes have also been controversial. "In 2014 the European Parliament passed a (non-binding) resolution that EU citizenship should not have a 'price tag'."Malta's scheme, says the publication, has attracted the most scrutiny. "The assassination in a car-bombing last year of Daphne Caruana Galizia, a campaigning journalist, drew attention to her multifarious allegations of government corruption. Of the many legal actions (including 47 libel suits) she faced at the time of her death, one was a letter from lawyers for Henley and Partners, architects of the citizenship programme."Read also: How to get a second passport: "Citizenship by investment" is boomingBoth the EU and the OECD, a club of rich countries, are looking leerily at CRBI schemes, says The Economist. "Later this year, the European Commission, the EU's executive, is to publish a report on those offered by EU members. The industry fears the worst. In August Vera Jourova, the justice commissioner, told Die Welt, a German daily, that the Commission was 'extremely concerned'. 'We don't want any Trojan horses in the EU," she reportedly said.The EU also takes a dim view of other countries that use visa-free access to the EU as an inducement to investment migrants, points out The Economist. "It has yet to punish any country with the most obvious sanction – withdrawing visa-free access, as Canada has done with St Kitts, Antigua and Barbuda and others. But the EU is introducing online travel-authorisation requirements even for foreigners who do not need visas."The OECD is reportedly concerned that these schemes can be used to circumvent its efforts to crack down on tax evasion and money-laundering. "It argues, for example, that a tax evader can dodge reporting rules by taking citizenship or residency in a second country and opening a bank account in a third, claiming tax residence in the second, without mentioning any connection with the home country. Early this year it conducted a public consultation on what to do about CRBI schemes. The next article describes one such arrangement, in the United Arab Emirates."As ever more countries jump on to the CRBI bandwagon, the question of how to keep out the undesirable will become more urgent, adds The Economist.

Expect a clamp down on passport schemes for investors – The Economist

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