Investment migration: an opportunity to improve and gain trust

As it often happens in life, bad news can draw more attention than good news, and criticism gets to linger longer than compliments — a conundrum officials working in the investment migration field are closely familiar with.

Investment migration — a $21.4 billion global industry — helps create jobs, protect climate-vulnerable nations, boost infrastructure investments, widen social programs and lead to economic growth. But it’s not without risks — proven cases of things gone wrong have led to growing concerns of misuse. Yet it’s the same concerns that open the door for industry, the EU and the wider community to introduce harmonized regulation in our increasingly globalized world.

Investment migration is a form of legal migration used by over 80 countries around the world, including several EU countries, the U.S., Australia, New Zealand and Caribbean nations. It allows individuals to gain citizenship or residence rights in return for investments in their host countries. The investment frameworks differ based on countries’ needs, but they can encourage entrepreneurship or take the form of real estate purchase, donations to national development funds or business investments.

European benefits

Today, Europe hosts the largest number of such frameworks in the world: 19 of the 27 member states use investment migration frameworks offering residency status for third country nationals in return for an investment, while three offer citizenship. Portugal, Greece, Malta, Spain, Italy and Austria are among the key beneficiaries of investment migration flows.

Socioeconomic benefits in Europe

For many host countries, such as those in the Caribbean, investment migration is critical in funding key government activities such as disaster relief and social programs in line with U.N. Sustainable Development Goals.

How the program helped Antigua and Barbuda

Research by the International Monetary Fund shows that investment migration is critical to attracting foreign investment and government revenues in smaller states — in some island nations it can account for 10 to 40 percent of GDP.

Christian Kälin, chairman of Henley & Partners, said all well-run investment migration programs create societal value.

“During times of economic stress, the injection of liquidity into small and isolated economies reliant on tourism and trade can, literally, be a life saver,” he said.

Managing risks

The growth of investment migration, coupled with a few unfortunate situations created by ill-intentioned individuals, have led to greater scrutiny from the EU, NGOs and the media. Citizenship and residence investment programs, due to the high level of investment flows, are not without risk — and the stakes are even higher across the EU where people enjoy freedom of movement.

A 2019 report from the European Commission found that a lack of transparency in how investment migration schemes are operated and a lack of cooperation among EU countries increase risks as regards security, money laundering, tax evasion and corruption.

Investment migration programs are run independently by national governments and granting investor residence permits is not regulated at the EU level.

This reality highlights the need to set up minimum standards for regulating this booming industry, which can help countries and professionals involved in running the programs manage inherent risks.

That’s also the goal of the Investment Migration Council (IMC), the Geneva-based body representing the industry that works to set standards worldwide, and which started outreach work in the EU capital two and a half years ago.

“We’ve been engaging with the policymakers, NGO organizations and our peers in IM sector to see how best the risks related to the programmes can be mitigated and what would be the appropriate due diligence standards. We are keen to continue this discussion with the EU policymakers”, said Sylwia Wolos, a member of the IMC and risk management expert at Refinitiv.

James Swenson, senior vice president and head of international for risk-management company Exiger Diligence, added that “setting up due diligence standards also help governments boost the reputation and functioning of the investment migration schemes.”

IMC argues it is crucial to sharpen the processes that enable to verify an individual’s identity, background, associations and reputation and to understand whether his/her wealth has been acquired through legitimate means. It is also calling for more transparency in how application decisions are made, and for more information to be shared among countries, players in the financial services industry and other professionals. Specialized training, based on approved regulatory standards, should be a key part of the process, according to IMC CEO Bruno L’ecuyer.

Investment migration is a highly lucrative economic tool for many EU countries, which — at its core — aims to improve quality of life and wellbeing of its citizens.

What it needs now is an upgrade that fine-tunes its vulnerabilities and increases trust.

Published: 6 May 2021

Pin It on Pinterest

Skip to content