By Amos Wittenberg

In the field of NFC readers and facial recognition technology, passports seem a little old hat: delicately constructed, a relic from an ink and paper time.

But the documents — or at least the citizenship for which they are proxy — are tremendously powerful.

A passport from Singapore or South Korea gives its owner visa free access to 162 countries, while a passport from Afghanistan offers only 26, less than one sixth as many.

Holders of EU passports can live, work and retire in any of the Union’s 27 member states.

Recently, the practice of “citizenship by investment” has been back in the spotlight, with a full European Commission report due later in the year.

Countries all around the world operate citizenship by investment schemes, but in Europe, the current disquiet centers on Malta.

After the murder of Maltese journalist Daphne Caruana Galizia in October, MEPs argued that the “so-called sale of passports” by the island nation poses a threat to the rule of law not just in Malta but throughout the Union.

Passports are a prerequisite and primary identification document for a host of financial services, including credit and bank accounts.

There are also, of course, vast differences in tax regimes between jurisdictions, and tax loopholes of various degrees of legality for those with multiple citizenships.

Finally, a customer’s country of origin is an important data point in due diligence screening.

Alternative citizenship could help individuals remove red flags from their profiles.

For all these reasons, compliance professionals should be aware of citizenship investment schemes and the opportunities they present to criminals.

Golden sands, golden passports

In the mid 80s, St Kitts and Nevis, a two-island state of about 50,000 people in the middle of the Caribbean, came up with an innovative fundraising initiative: it would sell citizenship.

For the first couple of decades, the scheme wasn’t much of a moneymaker. But in the mid noughties, the numbers began to grow. Only 6 passports were sold in 2005.

In 2009, the figure was around three hundred. From then on the numbers doubled year-on-year, stabilising at around 2,000 per annum from 2012 onwards.

As of January 2016 the island had issued 10,777 passports—a figure equivalent to almost a fifth of its entire population.

The idea caught on, and those in the market for a passport now have a glut of options. But the St Kitts and Nevis programme remains popular, thanks to the country’s no-tax regime and the power of its travel document, which offers visa free access to 128 countries.

One country no longer in that number is Canada. When the Iranian businessman Alizera Moghadam was found to have entered Canada on a Kitts and Nevis diplomatic passport he purchased for $1 million, Canada ended its Kitts and Nevis visa waiver.

There is no need to reside in or even visit St Kitts and Nevis to qualify, and the programme is one of the world’s cheapest: under a time limited offer closing 30th March 2018, a donation of only $150,000 to the country’s Hurricane Relief fund will buy passports for a family of four.

Finding the right passport for you

Numerous countries, including the UK, Canada, the US, several EU member states and Switzerland, now offer some form of citizenship by investment.

The schemes vary in price from a few hundred thousand to several million dollars, and differ in the time it takes to achieve full citizenship. Unlike St Kitts and Nevis, most require investors to live in the country for a period of time.

Here are some of the more popular programmes, ordered roughly from most to least demanding in application criteria.

 

Country Form of investment Price (US$) Timeframe
United Kingdom Investment in equities or government bonds – 280k (entrepreneur investor)

– 2.8M (tier 1 investor

Citizenship after 5 years. Permanent residence required (absent no more than 180 days per year). Can be accelerated with additional investment
United States Job creating investment 1M, or 500k in rural or high unemployment areas Citizenship after 5 years. Permanent residence required (absent no more than 180 days per year).
Canada Government guaranteed investment 620k Citizenship after 3 years. Permanent residence required
Australia Investment in designated bonds 1.2M Citizenship after 4 years. Regular visits required (40 days per year). Can be accelerated with additional investment
Switzerland Job creating investment 1.1M Citizenship after 12-15 years. Permanent residence not required.
Greece Investment in real estate 310k Citizenship after 3 years. Permanent residence required
Netherlands Investment in equities or bonds 1.55M Citizenship after 5 years. Permanent residence not required. Must visit for a few days per year.
Malta Donation + real estate 800k + 435k Citizenship after 1-1.5 years. Permanent residence not required.
Cyprus Investment in real estate 435k or 2.5M Permanent residency (435k): visit once/2 years

Citizenship (2.5M): EU passport after six months. Permanent residence not required.

St Lucia Donation / investment in real estate / investment in designated bonds 100k / 350k / 500k Citizenship in 3 months. Permanent residence not required.


Sources:
Corpocrat Magazine, Henley and Partners, Malta Immigration

This list is certainly not exhaustive. A few countries have “specialist” citizenship offers: Grenada, for example ($200,000, permanent residence not required), has a rare visa waiver with China. And a recent report advised Armenia to consider selling its citizenship for as little as $50,000—priced to account for its good relationship with post-Soviet states and Iran on the one hand, and its closed borders with Turkey and Azerbaijan, low GDP, and corruption on the other.

Degrees of diligence

Cost and wait time might not be the only factors that matter to those looking for a new passport. Countries allegedly also differ in the rigour of their due diligence procedures for applicants.

According the OCCRP, which has covered this topic extensively, specialist citizenship consultants advise that checks in Malta are strict, that Cyprus is more lenient, and that Greece might not “check the identities of applicants for residence permits at all”.

On the whole though, say the consultants, a criminal record or uncertainty about the origins of funds are a barrier to approval, as is politically exposed person status.

Levels of transparency vary too. Malta publishes an annual list of individuals who have received citizenship—although the 2016 list did not distinguish patrons of the investment scheme from those who become citizens by regular means.

A number of Caribbean schemes advertise that they do not disclose new citizens in any capacity, either publicly or to other national registers.

Customer profiling

According to firms that specialise in high-end “residence and citizenship planning”, clients seek their services for a range of reasons.

Countries like China, India and Pakistan have large numbers of high net worth citizens with business interests around the world, but travel-restrictive passports (giving visa free access to 65, 57 and 30 countries respectively).

A passport might, in some cases, be a first step to setting up shop in a lucrative market like the US or EU.

“Back-up planning” is another common motivation, especially for individuals operating in volatile jurisdictions, or whose success is dependent on uncertain business or political relationships.

For the Caribbean schemes, tax planning is a frequent driver. And then, as several recent investigations have highlighted, there are some whose purposes may be even less savoury.

In the shadow of Europe’s migrant crisis, and with the global number of displaced people at its highest since the end of World War II, the trade in passports for the ultra-rich is uncomfortable. But the motives of some investors are clearly more legitimate than others.

Not all passports are equal, and for successful entrepreneurs from countries with weak travel documents, alternative citizenship might make good business sense.

But the lax due diligence regimes some citizenship-by-investment schemes allegedly operate are concerning. For those looking to obscure their identity, launder money, evade tax or circumvent sanctions, golden passports could be a golden opportunity.

Amos Wittenberg is a freelance writer and former editor of KYC360. He is currently studying in Beijing.

 

Read more:

Gangsters jailed over £37 million copycat website scam

Sanctions in 2018: Watch out for new Magnitsky method targeting individuals

UK: Banks start immigration checks of account holders in crackdown