Investment Migration Council Defends “Golden Visas”, Says Ethics Code Vital
Responding to calls by European Union lawmakers and officials for tighter controls on so-called “golden visas”, a global body that says it champions best practice in this field has defended the growing market.
In recent weeks the noise level of criticism around these systems has increased amid concerns about how they allegedly might enable money laundering. The EU has seen a spate of scandals in jurisdictions including Denmark, Estonia, Latvia and Malta, although it isn’t clear that holders of such paid-for passports were involved in such cases. In Europe’s largest financial centre, London, there have been concerns down the years that the UK’s Tier 1 Investor Visa regime could be misused. (Source: Transparency International, October 2015).
“Having any unchecked investment migration programme is open to abuse, and without oversight and a rigid code of ethics it leaves itself open to claims of corruption, or the potential to circumvent global regulation,” Bruno L’ecuyer, chief executive, Investment Migration Council, told this news service.
“In order to avoid such issues in future, we believe that a universal code of ethics will create a worldwide framework for industry best practice. Issues such as integrity, objectivity, confidentiality and regulatory compliance, among several others, need to be included to ensure that this industry remains effective and ethical,” L’ecuyer continued.
There are about 40 jurisdictions operating such visa programmes, including the US, UK, Malta, Spain and Portugal. A new arrival to the market is Montenegro. Typically, such programmes require applicants to invest a minimum amount in either liquid securities, real estate or actual business, in exchange for a passport and residency rights. They can be politically controversial. Opposition Liberal Democrats in the UK have called for the regime to be suspended, saying the benefits to rich applicants far outweigh any help to the economy. In a small country such as Malta, with a population of around 400,000, sale of passports has brought in millions of euros of revenue. In Spain, the country introduced its golden visas to boost a property market hit by the 2008 financial crisis.
IMC’s L’ecuyer said his group is pushing to set standards.
“The IMC already has in place a Code of Ethics and Professional Conduct, which is a working framework for industry best practice. To create the code, we continue to consult with academia, security professional, professional practice consultants and governments. We are not so naïve to think that the code puts an end to the debate on the ethics of investment migration, because there are always, in any industry, people who seek shortcuts,” he said. “When that shortcut is exposed, the immediate reaction is to call for regulation, without understanding the impact regulation will have on the contribution investment migration has on the diversification and modernisation of economies,” he said.
“To put this into perspective, BORDERPOL has estimated that only 1 per cent of those who obtain citizenship through means of investment are human-rights violators, money-launderers or other fugitives from justice. And in Europe the total number of applications is roughly 700, which is less than 0.01% of the total number of naturalisations processed annually,” he said.
“There is no doubt that there is a protectionist perspective that dominates certain countries when it comes to investment migration. However, residence and citizenship-by-investment programmes raise valuable capital for sovereign states around the world, including also in the European Union. This permits governments, particularly of smaller countries, to reduce deficits and reliance on external funding partners and invest in vital infrastructure to diversify and future proof their economies,” L’ecuyer added.
The IMC hasn’t been afraid to get the gloves off where a country is deemed to fall short: it has condemned the programme of Hungary, for example, as being corrupt and badly run.
The market for golden visas is now big business. The most prominent advisory firm in this space is Henley & Partners, and last week it ranked passports around the world on how many visa-free/visa-on-arrival benefits they give. It showed that Japan recently overtook Singapore in opening the most doors.
The European Commission is due to publish a report on such programmes by the end of 2018. Last week, the executive arm of the EU said it will provide guidance to EU states on how to manage these schemes.
At the heart of the debate is one about globalisation, and whether citizenship/residency should a commodity that can be bought and sold. To some extent, the debate mirrors controversy about the role of “offshore tax havens” – to use a term employed by those hostile to such places – in facilitating cross-border exchanges of money. As with offshore centres, defenders of golden visas say they enable people targeted by rapacious governments to flee from harm’s way and invest their money where it can be more productively used. Historically, businessmen and women as varied as those from Jewish communities in Europe, Chinese expats in Southeast Asia, Indians in Uganda and further back, French Protestants (“Hugenots”), have been persecuted and their wealth looted. The issue remains, however, whether such passports are very effective if they are only open to high net worth people.
At a conference in January this year in Interlaken, Switzerland and attended by this news service, an English barrister, James Corbett, argued that if there is a need to enable wealthy people to flee persecution, asylum processes rather than golden visas make more sense. Corbett said such visas are more akin to luxury goods or a “fashion accessory”. (See report on his comments and the rest of that conference here.