Tue, Jun 05, 2018 - Page 9 News List

Citizenship for sale: How tycoons can go shopping for a new passport

Citizenship-by-investment programs offer the super-rich an opportunity to acquire a new nationality

By Jon Henley  /  The Guardian

Illustration: Yusha

It is the must-have accessory for every self-respecting 21st-century oligarch, and a good many mere multimillionaires: a second — and sometimes a third or even a fourth — passport.

Israel, which helped Russian billionaire Roman Abramovich out of a spot of bother last week by granting him citizenship after delays in renewing his expired UK visa, offers free nationality to any Jewish person wishing to move there.

However, there are as many as two dozen other countries, including several in the EU, where someone with the financial resources of the Chelsea soccer club owner could acquire a new nationality for a price: the global market in citizenship-by-investment programs — or CIPs as they are commonly known — is booming.

The schemes’ specifics — and costs, ranging from as little as US$100,000 to as much as 2.5 million euros (US$2.93 million) — might vary, but not the principle: In essence, wealthy people invest money in property or businesses, buy government bonds or simply donate cash directly in exchange for citizenship and a passport.

Some do not offer citizenship for sale outright, but run schemes usually known as “golden visas” that reward investors with residence permits that can eventually lead — typically after a period of five years — to citizenship.

The programs are not new, but are growing exponentially, driven by wealthy private investors from emerging market economies including China, Russia, India, Vietnam, Mexico and Brazil, as well as the Middle East and more recently Turkey.

The first launched in 1984, a year after young, cash-strapped Saint Kitts and Nevis won independence from the UK. Slow to take off, it accelerated fast after 2009 when passport-holders from the Caribbean island nation were granted visa-free travel to the 26-nation Schengen Area.

For poorer countries, such schemes can be a boon, lifting them out of debt and even becoming their biggest export. The IMF reckons that Saint Kitts and Nevis earned 14 percent of its GDP from its CIP in 2014, and other estimates put the figure as high as 30 percent of state revenue.

Wealthier countries such as Canada, the UK and New Zealand have also seen the potential of CIPs (the US EB-5 program is worth about US$4 billion a year to the economy), but sell their schemes more around the attractions of a stable economy and safe investment environment than on freedom of movement.

Experts from the many companies, such as Henley and Partners, CS Global and Apex, now specializing in CIPs and advertising their services online and in inflight magazines, say that unlike Abramovich, relatively few of their clients buy citizenship to move immediately to the country concerned.

For most, the acquisition represents an insurance policy. With nationalism, protectionism, isolationism and fears of financial instability on the rise around the world, the state of the industry serves as an effective barometer of global political and economic uncertainty.

However, CIPs are not without their critics. For example, Malta has come under sustained fire from Brussels and other EU capitals for its program run by Henley and Partners, which saw more than 800 wealthy individuals gain citizenship in the three years following its launch in 2014, according to the IMF.

Critics said the scheme was undermining the concept of EU citizenship, posing potential major security risks and providing a possible route for wealthy individuals — for example from Russia — with opaque income streams to dodge sanctions in their own countries.

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