The Citizenship by investment (CBI) programs, also known as “golden passport” programs, allow individuals to obtain immediate citizenship in a country by making a significant financial investment. These programs have gained enormous popularity in recent years and small island generating millions in citizenship revenues.
But CBI industry changes quickly due to change in politics, regulatory policies, present a unique challenge with a limited opportunity for investors seeking investment. Increased global scrutiny on money laundering, tax evasion, and other financial crimes may lead to more rigorous due diligence procedures and higher standards for applicants in the future including increasing threshold of investments.
CBI is Evolving
- Increasing Number of Programs: The number of countries offering citizenship or residency through investment has been growing steadily. Several nations have recognized the economic benefits of attracting foreign investment and have implemented CBI programs to encourage it.
- Diversification of Programs: CBI programs now offer more diverse options to cater to different investor preferences. Some countries provide full citizenship and passport rights, while others offer residency or a pathway to citizenship after a specific period. Investors can choose programs based on factors such as investment amount, residence requirements, visa-free travel benefits, and lifestyle considerations.
- Flexible Investment options: Investors are given a number of investment routes such as donation, real estate, bonds, bank deposit, investment funds or job creation to acquire citizenship.
- Waivers – Investors and their family are waived the condition of residence, language, or military service to become a citizen based on purely investment. (Malta is an exception). The time frame for examination of investment applications on average have been cut to 70 days due to streamlined efficient process.
- Small countries: Small nations have benefited economically through the flow of revenues through CBI. The revenues were efficiently used for public projects (schools, hospitals), mitigate hurricane risks, social housing, climate resilence, pensions, social security and paying debt. CBI is not limited to small countries, global economies such as Turkey, Egypt, Jordan have also implemented investor citizenship schemes to boost foreign investment and property market.
- Expansion of Investor Benefits: Some CBI programs are expanding the benefits offered to investors beyond citizenship or residency. These benefits may include access to education, healthcare, business opportunities, tax advantages, and increased visa-free travel options to multiple countries.
- Focus on Sustainable Investments: There is a growing trend toward promoting sustainable investments through CBI programs. Some countries encourage investors to channel their funds into areas such as renewable energy, real estate development, infrastructure projects, or job creation initiatives that contribute to the country’s long-term economic growth and sustainability.
Challenges
The following factors play a key role in shaping the future of citizenship by investment programs for financial investments:
Fraud and Abuse – The risk of fraud and abuse in the citizenship by investment process poses unique challenges and loopholes. Some individuals may attempt to use these programs for illegitimate purposes, such as evading taxes or escaping legal issues. Illicit actors may obtain a visa or citizenship through investment programmes as an insurance policy before committing crimes (or before these offences are discovered) or as a tool to enable future crimes. Criminals may be able to take advantage of countries offering CBI/RBI programmes and which do not extradite their own nationals.
Backlash – There is a publish backlash citizenship investor schemes undermine the concept of national identity and citizenship. Selling passport to individuals who have no strong ties to the country.
Global Competition: As more countries enter the CBI market, competition among them has intensified. Nations with established programs are continuously refining their offerings to attract high-net-worth individuals (HNWIs) and investors. This competition has led to enhancements in program features, reduced investment thresholds, and improved processing times.
Emphasis on Due Diligence: Due diligence measures have become the heart of in CBI programs. Countries are placing greater emphasis on conducting thorough background checks and vetting applicants to maintain program integrity and ensure that no criminals, only individuals of good character and reputation are granted citizenship or residency.
Regional CBI Cooperation: Regional cooperation among countries offering CBI programs is on the rise. For example, several Caribbean nations have established the Caribbean Community (CARICOM) Citizenship by Investment Program, allowing investors to gain citizenship in multiple countries within the bloc. Such collaborations aim to enhance the attractiveness of the programs and create synergies between participating countries.
Enhanced Transparency and Regulation: Increased scrutiny and calls for transparency have led to efforts to enhance regulation and oversight of CBI programs. International organizations like the Organization for Economic Cooperation and Development (OECD) and the European Union (EU) have been advocating for stricter standards and increased transparency to combat money laundering, tax evasion, and other illicit activities.
Pressure on Visa waiver agreements – Countries run citizenship for investment schemes risk visa waiver suspension causing diplomatic tensions, with EU, UK and Canada for granting criminals, sanctions evaders, laundromats without proper security and due diligence checks. eg. Canada revoked visa waiver agreement nationals of St Kitts, Antigua and Grenada for sale of citizenship. Recently Vanuatu was hit with visa waiver fully suspended by EU for poor security checks.
Limited Shelf Life – The Global citizenship industry is estimated to be worth about $15 billion steadily growing every year. All citizenship for investment schemes have limited shelf life, as we have seen in the past due. Critics have pointed out lax security checks, tax evasion and money laundering concerns and growing pressure from European Commission calling for phasing out all citizenship for sale programs by 2025. Montenegro, Moldova, Bulgaria and Cyprus have already downed their shutters offering citizenship for economic investments. Nobody knows how long the CBI industry will thrive.
Criticism – The CBI industry has received widspread criticism in the international community, on improper vetting of applications, allowing criminals, laundromats, corrupt people abusing the scheme. OECD, FATF, IMF, European Commission, UK Home office have expressed serious defects with CBI prograrms. While it is true several thousand families benefited from a second citizenship opportunity, the issues outweigh benefits. The negative publicity and media attention has called for scrapping the schemes altogether.
No Genuine link – International agencies have expressed concern that citizenship granted without any residence requirement particularly with no genuine link to the country. Many of the investors, never make even a single visit to the country.
Wealth Inequality – Ethical concerns related to offering citizenship in exchange for financial contributions, as it may be seen as privileging the wealthy and undermining the principle of equal access to citizenship.
Exposing Names – Growing concerns with data security, and publication of names of citizenship buyers to public (eg. publishing in gazette). Governments has not adopted robust measures to safeguard sensitive information and prevent unauthorized access.
Real Estate Prices – CBI programs are blamed for huge increase in property prices and rents, making it unaffordable to local population well above their minimum wage. Lax property laws are abused by property developers, where the actual developments never take places, creating no jobs or tax revenue to governments.
Correspondent Banks – The US Correspondent bank relationships with CBI host nations are under pressure ,with increased scrutiny of funds received in US dollars causing delays or rejection of payments from high risk countries. IMF has recommended strengthened AML/CFT framework would mitigate risks associated with the CBI program and potential threats to correspondent banking relationships.
Corruption – Corrupt Public Officials operating in jurisdictions offering CBI/RBI programmes with inadequate programme integrity or governance provisions may be able to profit illicitly from these programmes (for example, by demanding or profiting from bribes, either monetary or any other undue advantages, in exchange for CBI/RBI-related services), said FATF report.
It is important to note that the specific trends in citizenship by investment can vary from as new and existing programs are shaped by local regulations, political considerations, and global economic factors. Prospective investors should thoroughly research and consider the requirements and benefits of each program before making any investment decisions.
