In today’s Finshots, we tell you why countries are clamping down on schemes that offer citizenships and residence permits in return for cash.
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Now let's dive in.
The Story
Money can’t buy you happiness but it sure can buy you a spanking new citizenship that’ll probably provide visa-free access to over 150 countries in the world! It’ll give you a newfound freedom to travel like you’ve never done before.
And that’s fairly close to happiness, wouldn’t you say?
We’re talking about Golden Passports and Golden Visas.
If you can splash anywhere between $100,000 to $1 million, there are plenty of countries queuing to take your money as a ‘donation’ or an investment into real estate or infrastructure. And voila, you become the proud owner of a new passport, or a residency permit in another country. Heck, you don’t even need to live in that country to enjoy the benefits.
Indians love this too. Nearly 10% of applications for golden visas and passports are from Indians. Every year, thousands of Indians are flocking to give up their navy blue passports in exchange for other ones — the US, Australia, Portugal, and Malta.
And we already told you why they might be doing this — ease of travel, being able to settle down elsewhere for a better quality of life, and access to countries to set up businesses more easily. It’s quite an enticing prospect if you’ve got the cash.
But you might be wondering — what’s in it for countries?
In most cases, it’s about the money. Yup, even for the US. Their government website says that the country created the golden visa programme in 1990 “to stimulate the U.S. economy through job creation and capital investment by foreign investors.”
Sure, the US might not be raking in big bucks with the scheme. But in other cases, it’s a big money spinner.
Take the example of the Caribbean Island of Saint Kitts. It won its independence from the British in 1984. And then found that it didn’t have much cash to run the country anymore. It had to import everything, and it didn’t have many natural resources to sell. And it thought the way out would be to trade its citizenship in return for money.
Today, the scheme accounts for over 50% of the government’s $377 million revenues.
So you would imagine that this gained popularity across the world too. Over 80 countries in the world had some sort of similar arrangement.
But in the past few years, some countries have grown increasingly concerned about these schemes too.
The European Union believes there’s a ‘trade’ in golden passports happening under their nose.
A few months ago, they looked at the island of Dominica in the Caribbean which sells citizenships to people who have $100,000 to spare. And they found that for a country of just 70,000 people, Dominica was being quite generous in welcoming foreigners. They’d issued 34,500 passports and that was 4 times more than what the government itself had declared.
That’s quite fishy, no? Why would a country even underreport these numbers?
And that’s when the EU realised that people from areas they’d label high-security due to corruption were lapping up the citizenship. We’re talking about countries like Iran, Russia, China, Nigeria, and Libya. These folks would get visa-free access to most EU countries for a certain number of days every year. They could travel in and out as they pleased. And the EU began to worry about organised crime and money laundering activities too. But it wasn’t just that. Since people who took these citizenships could then change names and identities and evade border controls and any sanctions or arrest warrants too, it would become an even greater threat.
And if you want an example of that, just think of India’s very own Mehul Choksi, the founder of Gitanjali Gems.
He’s alleged to have defrauded Punjab National Bank (PNB) of crores of rupees. And then ran away to the island of Antigua and Barbuda where he’d taken up citizenship. So, India couldn’t quite bring him back to the country for justice.
So yeah, these sorts of things happen.
And to combat that, the EU wanted a power ― the power to suspend visa exemption for countries that sell citizenship to buyers who do not have a “genuine link” to the country. Make them go through the rigmarole of submitting all their information.
Or in their words, “Visa-free access to the EU should not be used as a commercial commodity to be sold and bought.”
And with the scrutiny rising in the past few years, countries have been tightening the screws.
Montenegro and Cyprus have wound up the citizenship-by-investment route. Some of the Caribbean islands and Greece have increased the minimum amount that needs to be invested. And others in Europe such as the UK and Spain have ended their Golden Visa.
Maybe money alone isn’t going to buy happiness anymore, eh?
Until then…
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