Corruption is the Real Risk

In conversation with Kieron Sharp, CEO of FACT Group

The EU has pointed repeatedly towards possible negative side-effects of investment migration, including money laundering, tax evasion and corruption. In your opinion, does investment migration pose a security risk?

I think it’s worth to take a step back at first and consider that people have always invested in other countries as a means to be able to live there or to improve their freedom of lifestyle. The only thing that golden citizenship and golden visa programmes have done is to formalise the process. Any form of migration presents a potential security threat and, therefore, security must be a major factor for investment migration programmes. No country wants convicted criminals amongst their new residents or citizens and increased measures are being put in place to ensure that the people who are going to become citizens or residents are ‘fit and proper’ individuals. The programmes that we at FACT work with all have very high standards and processes in this regard, which are reviewed continuously.

Cyprus has stopped its citizenship-by investment (CBI) programme after a report by Al Jazeera alleged high-ranking politicians were willing to issue passports to convicted criminals. What’s your reaction to this recent development?

All efforts to screen applicants fall apart if there are corrupt individuals who are in a position to influence decision-making so that people who are clearly unacceptable can become citizens. That’s why it is important to have checks and balances built into the programme, but it’s even more vital to ensure that there are checks and balances on the influence that politicians and senior government officials have on a programme. You would like to think that governments are always trying to ensure that their systems prevent undue influence, but the problem with corruption is that it’s a secret offence. You can put everything in place – all the laws, regulations and safeguards – but it can still happen. A corrupt act is usually between two people – so it’s very difficult to spot. All forms of economic crime usually involve an insider because large scale fraud rarely happens completely from the outside. The moment there are corrupt individuals involved, it presents an opportunity to destabilise an entire system or government.

What about the money laundering risk?

Money laundering is often thrown into the discussion because it is a catch-all term for any economic crime that doesn’t fit in a specific category. It is a simple fact that people who are involved in any criminal activity will have to clean their money at some point. In some countries it is completely unnecessary because it doesn’t seem to matter that they got the money from an illicit source, but in the majority of countries it does, so they need to find a way to make that money clean. Money laundering is actually a big part of a criminal lifestyle. There are not many people who commit a crime once and then need to launder money just once. So, using a CBI programme as a means of laundering money is not a very effective way. The main reason is that you don’t get your money back. Laundering money means you are taking dirty money and you get clean money back. When it comes to investment migration, that’s not the case. Additionally, you can only do it once as you can’t keep on investing in different programmes. It doesn’t really help when you have got criminal profits coming from your criminal enterprise. It’s not the most obvious thing that people would want to use a CBI programme for. The same can be said about the tax evasion argument. CBI programmes require one-off payments, so, you are only tax evading once. It may be that you become a citizen of a country with a more attractive tax regime, but that’s not tax evasion, not even tax avoidance necessarily.

Is there anything that could be brought in from a European security perspective, such as another layer of checks and balances, that would give comfort to member states and EU institutions that the new citizens are fit and proper persons?

I recall that some 25 years ago there were discussions on a variety of security issues, such as co-operation between national police forces and the harmonisation of criminal laws. Very little of it actually happened, and I think one reason for it is that in areas such as security, policing and criminal justice, countries still feel the need to protect themselves as individual countries first and foremost, with the intention of maintaining their own sovereignty in such key areas. This is the argument that EU-based CBI schemes make.

How do you think the investment migration industry’s relationship with the EU will develop?

The sector has definitely recognised that it has come under scrutiny, but I think nobody is scared of that. What the industry wants to do is to make sure that it can withstand the scrutiny. Based on my experience, I can say that the programmes we work with are improving their processes, standards and checks all the time.