Myths and Misconceptions of Investment Migration
We know that there are many misconceptions about investment migration, so we will be busting six of the most common myths about the sector. Use the facts, figures and insight provided in this article to reframe the conversation and highlight the positive evolution of IM. This is essential learning for agents, policy-makers, regulators and anyone involved in this transformative sector.
MYTH 1: Investment migration provides easy entry for criminals and the corrupt.
We all know that investment migration has had its fair share of scandals, mishaps and controversies. We acknowledge that, initially, safety systems failed at times, and we did not manage to identify individuals abusing investment migration with criminal intent. But much has changed since then. Investment migration has rapidly matured, professionalised and adopted best practice to reduce its vulnerabilities to crime and corruption. Greater attention is today being paid to the proper regulation of investment migration, with high standards of due diligence being imposed in most instances following the publishing of the IMC Due Diligence in Investment Migration Best Approach and Minimum Standard Recommendations.
These KYC- and compliance processes are geared to assist in identifying the proceeds of crime, as well as combating money laundering and terrorist financing. While the majority of immigrant investors are genuine people, enhanced due diligence processes filter out criminals and fraudsters. No country wants convicted criminals amongst their new citizens or residents, therefore, measures have been put in place to ensure that the people who are going down the investment migration route are “fit and proper” individuals. In addition, programmes continue to ramp up their risk assessments and security measures. Ongoing, real-time, and technology-enabled monitoring of applicants, even after the initial due diligence stage has been completed, is fast becoming standard practice and an essential tool for programmes.
MYTH 2: Investment migration is only for the rich.
Investment migration is today more diverse than it has ever been – both in terms of the supply and the demand side. The minimum investment required by programmes today ranges from $100,000 to more than $5 million. This shows that investment migration is no longer a luxury product but has firmly broken into the mass affluent market. The general trend is that the more expensive programmes are appealing to the ultra-high-net-worth individuals (those who have more than $30 million in liquid assets), while the more affordable products are attractive to high-net-worth (those who have a net worth of at least $1 million in liquid assets) and mass affluent clients (those with $100,000 to $1 million in liquid financial assets). However, beyond product and market segmentation, it is important to look at the reasons why investors are interested in investment migration. A second passport offers mobility, access to stable and lucrative economies and education systems, as well as a more secure future for an investor’s family. Amid geopolitical instability, investment migration is therefore increasingly appealing to a rapidly growing middle-class in fast-developing countries in South East Asia and Africa, where many people aspire to secure better economic opportunities and quality of life.
MYTH 3: Investment migration is a way to skip the queue.
Many critics believe investors are receiving preferential treatment and that RCBI is a fast way to gain entry. While it is certainly true that particular citizenship-by-investment programmes offer a faster way than citizenship by naturalisation (which can take 10 years or more in most countries), investment migration in general is not a quick process.
Processing times for golden visa and citizenship programmes generally range from a few months up to 2 years. The exact timeframe depends on a number of factors, including whether all necessary supporting documents have been submitted; how long it takes to perform required checks on the supporting information provided; and how long it takes to receive additional information from external agencies, particularly in relation to source of funds/ wealth and national security requirements. In some cases, investors also need to be prepared to wait several years as some programmes have strict limits on the availability of visas. The waiting time is then defined by the level of demand.
MYTH 4: The level of attention paid by the media and policy-makers to investment migration, as opposed to other migrant flows, is justified by the numbers.
Numbers feature prominently in most discussions on migration. Overall, the estimated number of international migrants has increased over the past five decades. In 2020, the World Migration Report published by the International Organization for Migration (IOM) estimated that 281 million people are living in a country other than their country of birth. The vast majority of people though continue to live in the countries in which they were born — only one in 30 are migrants. Investor migrants represent only a tiny proportion of international migrants. While exact data is hard to obtain due to different reporting standards and levels in programme countries, it is estimated that all citizenship-by-investment programmes worldwide receive a total of 5,000 applications per year. The number of golden visa recipients is higher – estimated to be in the tens of thousands yearly – but this number still represents a rather small group of international migrants. Recent EUROSTAT figures confirm this.
MYTH 5: Investment migration funds have little or no effect on improving the well-being of the population in the host countries.
The contribution from investment migration to a nation’s economic and fiscal health should not be underestimated. Programmes represent anything between 2% and 30% of GDP in some countries. Acrossthe world, governments have used investment migration funds to finance major infrastructural projects, such as harbours, airports, hospitals, office buildings, hotels as well as residential developments, which have an important multiplier effect in terms of job creation.
It is estimated that investment migration has delivered around €25 billion in foreign direct investment (FDI) to EU countries alone since 2010. In the Caribbean, the International Monetary Fund (IMF) continues to recognise the importance of investment migration as a significant contributor to revenues and has lauded CBI programmes for assisting with the reduction of national debt and the attainment of the UN Sustainable Development Goals (SDGs). Investment migration funds have also been used to rebuild critical infrastructure destroyed by hurricanes and other disaster relief measures.
MYTH 6: Only poor and developing countries need investment migration programmes.
More than 100 countries in the world have some form of investment migration programme, including many of the world’s richest countries, such as America, Australia, Britain and New Zealand. All countries in the world are competing to attract capital and talent, and investment migration has long been a powerful tool to achieve both. Investment migration can transform economies, ignite the development of new economic sectors and channel investment into large-scale projects that are difficult to finance though traditional measures.
Thus, it comes as no surprise that many large and developed nations are offering pathways for immigrant investors. Moreover, the Covid-19 pandemic and the associated economic fallout have highlighted the benefit of a ‘rainy day fund’. Many governments acknowledged the importance of investment migration income to keep their economies afloat during the pandemic. The opportunity to channel programme revenue into a reserve fund will remain a major motivation for developed countries to retain or introduce investment migration pathways.