Controversy about programmes enabling HNW individuals to get citzenship and or residency in return for investments refuses to go away.

The industry group speaking for practitioners in the market for so-called “golden visa” programmes has locked horns again with critics of this industry, saying attacks are largely unjust.

A few days ago the Organisation of Economic Co-operation and Development, the Paris-headquartered “club” of wealthy industrialised nations, said these residency programmes create “potential for misuse”. Dozens of nations, such as Portugal, the UK, Spain and Malta, offer passports and residency to people willing to invest into these countries, with certain tests applied.

With several European Union states - such as Denmark, Malta and Latvia - hit by money laundering claims and scandals, the OECD said the programmes are a gap that crooks might exploit. The EU Commission has also recently flagged its worries about the matter. The IMC responded to this criticism (see here). The market for golden visas is now big business. The most prominent advisory firm in this space is Henley & Partners, and recently ranked passports around the world on how many visa-free/visa-on-arrival benefits they give. It showed that Japan recently overtook Singapore in opening the most doors.

However, the OECD criticism prompted a response from the Investment Migration Council, a Geneva-headquartered group seeking to push best practice in the space and represent the interests of industry practitioners, such as law firms and advisors.

The IMC said only a “very small percentage of residence or citizenship statuses legitimately obtained” through these programmes are at issue. “For the vast majority of applicants seeking alternative residence or citizenship through these programmes, tax is not in fact an issue, as most applicants either do not in fact change their tax residence or move completely to their new place of residence and then are tax residents there”. 

The IMC added that these programmes are “only a fraction of the immigration options available to individuals”. 

“Most residence permits and citizenships are in fact obtained under options other than investment migration programmes. For example, while in Europe on average about 800 citizenships are granted annually under CBI [citizenship-by-investment] provisions (mainly in Austria, Cyprus and Malta), the 28 member states of the European Union grant nearly one million citizenships every year for other reasons, including ancestry, residence, special merit, marriage, etc,” it said.

“All of these [permits, citizenships] can be equally used or abused for circumventing CRS, while citizenships obtained through EU CBI programmes account for less than 0.1 per cent of all the citizenships granted in the EU. It would be good to understand what is being done to assess the risk, and to take appropriate measures, with regard to potential CRS abuse under other immigration and citizenship options,” it continued. 

“Of those nearly one million citizenships granted by the EU each year (and a similar number in North America), among the top non-EU origin countries are many high-risk nationalities, and in far greater numbers than through CBI programmes. These include Pakistan, Ukraine, Algeria, Russia, Nigeria, and Somalia, which pose a much more real danger to the international community in terms of criminal activity in the financial system, including money laundering and terrorist financing, which in our opinion should be the main focus of enhanced due diligence by financial institutions,” it added.

Residency programmes also operate outside the EU, in countries such as the US, Canada and parts of the Caribbean. In Canada’s case, it has from time to time put its programmes on hold because of political controversy. In 2014, Canada suspended its system, amid protests that a heavy influx of mainland Chinese persons hadn’t contributed much to the Canadian economy. In some cities, such as Vancouver, high residential prices have been blamed, unfairly or otherwise, on such an influx. Canada still operates the the Quebec Immigrant Investor Program.

The US has its EB-5 investor visa programme and this also has attracted demand from China, not always without controversy. Singapore, to take another case, has a Global Investor Program.