Putting our House in Order

 

The development of global standards for the investment migration industry needs to be an urgent priority for the sector. Long-term success will only be brought about if international institutions and civil society have confidence in the industry, writes Bruno L’ecuyer, Chief Executive of the Investment Migration Council.

 

Investment migration is a $2 billion industry responsible for significant investment, job creation and societal development, and it accounts for billions of direct and indirect revenues in some smaller sovereign states.

However, there are currently no established global standards for investment migration. Setting such standards has always been of exceptional importance for the Investment Migration Council (IMC), while having a clear and coherent framework is now probably more important than ever. There are at least two reasons for that. Firstly, all involved parties should follow a set of harmonised and well-established rules which would certainly contribute to better compliance with global financial regulation. Secondly, having global standards would contribute to an improved understanding of the investment migration industry and improve trust by the outside world.

 

The lack of global standards and good understanding of both citizenship and residence programmes may not only be confusing, but also a source of distrust towards the entire industry. Money is a sensitive topic. When brought into connection with citizenship, which is perceived by many as something which money shouldn’t buy, but also with wealthy individuals who, unlike many of us, can afford to pick and choose their nationality, the investment migration industry is easily yet unfairly stigmatised. A number of studies testify that an enhanced transparency and better regulatory framework for the industry would mark a significant development in addressing concerns related to investment migration programmes.

 

“The most recent attempts of the European Commission to initiate a wider discussion on the topic by inviting experts, civil society and industry representatives is a major step forward to a better understanding of the industry and, hopefully, setting appropriate standards in the near future.”

 

Finding the Right Balance

While well-designed investment migration programmes imply that the interests of the clients and those of the governments are aligned, this is where key issues usually arise. Plenty of mistakes can be made, undermining the interests of both the government and the clients. For example, the due diligence requirements established by the government eager to cash in on the programme could be too lenient. While this can be presented as a positive feature, since a visa or a nationality is easier to acquire, this is highly problematic in the long run. When such leniency is discovered, it undermines the trust of other states in the nationalities granted, reducing the value of investment for all clients and, ultimately, under- mining the financial viability of the programme. Similarly, programmes lacking transparency, or where rules are not sufficiently clear and strict, can suffer from corruption, undermining trust and value of investments.

 

On the other side of the coin, the attractiveness of a most diligently designed programme can be radically different from real life. Studies show that the added value of some reputable programmes is far from clear, as the investments they generate are not providing sufficient added value to the countries’ economies in order to justify the level of resources required to run the programmes. All in all, very serious individual scrutiny of the components of each residence and citizenship-by-investment programme is required before any conclusions are drawn.

 

Addressing Criticism and Contributing to Professionalism
The investment migration industry has been loudly criticised by several international institutions and organisations. Aiming to contribute to various improvements in the field of investment migration, the IMC takes criticism seriously. It is fair to say that most criticism is largely due to the lack of global standards under which the entire industry should be operating, as well as lack of understanding of the application and assessment procedures. In such circumstances, the European Commission’s view of citizenship programmes as a ‘risk to security’ should not come as a surprise.

 

In fact, the most recent Report on ‘Financial Crimes, Tax Evasion and Tax Avoidance’ of the Special Committee on financial crimes, tax evasion and tax avoidance at the European Parliament (TAX3 Report); the Report of the European Commission on ‘Investor Citizenship and Residence Schemes in the European Union’; and the Study of the European Parliamentary Research Service on ‘Citizenship by Investment and Residency by Investment Schemes in the EU’, have shed a light on a number of aspects which could indeed be problematic in the absence of global investment migration rules. The integrity of the applicants’ background checks and due diligence are highly prioritised by the European Union. This has been discussed along similar lines in all three documents. Thus, the Special Committee on financial crimes, tax evasion and tax avoidance noted in the TAX3 Report that ‘citizenship or residence could be granted through these schemes without proper or indeed any customer due diligence having been carried out by the competent authorities’. The EPRS’s Study emphasised that CBI/RBI schemes ‘enable false statements to be made on residency and can thereby undermine due diligence procedures’. Finally, the European Commission also expressed its concern noting inter alia that ‘in most Member States the family members of investors are not subject to enhanced due diligence, which could entail security risks’. Other problematic aspects emphasised by EU institutions include transparency issues and governance of the programmes, risks of money laundering, corruption and tax evasion, lack of genuine link etc.

 

All concerns deserve proper attention and deeper clarification. The most recent attempts of the European Commission to initiate a wider discussion on the topic by inviting experts, civil society and industry representatives is a major step forward to better understanding of the industry and, hopefully, setting appropriate standards in the near future. The IMC has addressed criticism directed towards the industry on multiple occasions. We will participate constructively in future discussions aimed at the clarification of citizenship migration and at the building of trust and confidence with international institutions and civil society.

Furthermore, the IMC has built a strong platform for formal education of those working in the investment migration industry. The new framework for Education and Training that has been created by the IMC will provide for all levels of background and experience. The courses aim at promoting integrity, ethics, transparency and best practices, and will be delivered by IMC Education and Training. A good education is the foundation of qualified professionals. The IMC’s goal is to shape future professionals by helping them improve their understanding of the industry and enabling them to develop valuable skills and knowledge.

 

Author: Bruno L’ecuyer, Chief Executive, Investment Migration Council, Switzerland

Source: IM Yearbook 2019/2020