A holder of a German passport can travel without a visa to the largest number of countries in the world
More and more people are seeking to move to another country – some in search of stability, some for new opportunities. But the strict immigration policies of many states, or even completely closed borders, are leading to the growing popularity of "citizenship for sale." A BBC correspondent explains why citizenship has become such a hot commodity.
During a recent flight, flipping through one of those magazines that usually sit in the seatback pocket, I came across a rather unusual advertisement. Its authors offered a "unique strategy to protect future prosperity and security." It was about obtaining "citizenship by investment."
I had heard about buying citizenship before, and seeing the ad, I wondered: do I need a passport from another country besides my American one? Can not only multimillionaires but also ordinary people afford it? And what advantages does additional citizenship offer besides tax optimization?
Since many countries today restrict immigration, a new service sector is rapidly growing and developing where you are offered to purchase citizenship. But, of course, this pleasure is not cheap.
Life without borders
The idea of investment citizenship is not new. Many countries have long used it to their advantage – primarily as a way to replenish the state budget. Canada and the Caribbean island nation of St. Kitts and Nevis introduced such programs in the 1980s, the US and the UK in the 1990s.
The conditions of investment citizenship vary from country to country. As a rule, foreigners are allowed to buy real estate or invest money in businesses, as well as make direct donations to the state budget – in exchange for a visa or passport.
The Federation of St. Kitts and Nevis adopted this initiative in 1984, a year after the country gained independence from the UK. The goal was to attract entrepreneurs interested in tropical beaches and low taxes.
At first, few took the bait. But after holders of the island nation's passports gained visa-free access to 26 Schengen countries, demand surged. The London consulting firm CS Global Partners notes that interest in such services has quadrupled over the past year.
"We are receiving applications from residents of countries that have never before been interested in citizenship by investment. For example, in March, requests from Turkey increased by 400%" (which is obviously related to the changing political situation in Turkey itself). Brexit and the outcome of the US presidential election have also heightened interest in the possibility of obtaining a second passport.
According to the IMF, investment citizenship is primarily of interest to wealthy private entrepreneurs from developing countries. Thus, 80% of requests for the US EB-5 visa, which allows foreigners to invest in real estate and obtain a green card on an accelerated basis, come from Chinese. In addition, in recent years, the number of applications from Vietnam, India, and Brazil has noticeably increased.
Citizenship – a hot commodity
The most popular investment programs are those of the Caribbean countries. Investors are attracted here by luxurious white beaches, low investment minimums, undemanding residency requirements, and fast paperwork. For example, to become a citizen of the state of Dominica, located on the island of the same name in the Caribbean Sea, between Guadeloupe and Martinique, you need to invest US$100,000. Living on the island afterward is not required.
Such programs have become important economic factors. The IMF notes, for example, that in 2014, revenues from investment citizenship accounted for 14% of St. Kitts and Nevis's GDP. However, in recent years, some wealthy countries have also begun to offer the "citizenship for money" option.
Participation in a similar program in New Zealand costs about a million dollars and has recently become popular among the high-tech elite of Silicon Valley. The cost of investment citizenship in the UK is $2.6 million, in the US – $500,000. The very popular EB-5 visa brings the US economy more than $1 billion quarterly.
Another 23 countries – from Cyprus to Singapore – offer various schemes for obtaining citizenship or residency in exchange for investments. Similar programs are emerging across Europe – now almost half of EU member states offer them.
The main thing is freedom of movement
So, now foreigners can obtain residency, work, and open bank accounts in a number of countries. There is a choice: from $50,000, which Latvia asks for this, to $10 million for the privilege of being a resident of France. An important bonus: along with citizenship or residency, you get the opportunity to travel the world without visas. The ranking of passport popularity is determined by the number of visa-free countries. "Currently, this list is topped by the German passport, with which you can travel without a visa to the largest number of countries in the world," notes Micha Emmett, head of CS Global Partners.
In a globalized world (where, paradoxically, isolationism is growing in popularity), freedom of movement is an important advantage. Andrew Henderson, an American entrepreneur and founder of the consulting firm Nomad Capitalist, as well as the author of the eponymous blog and podcast, has four passports and will soon receive a fifth. Multiple citizenships open up many entrepreneurial opportunities, he says. “Life around the world is becoming increasingly nomadic. People don’t want to stay put. They want to have several places of residence that match their lifestyle, and also pay reasonable taxes. And this opportunity is becoming available,” he adds.
Demand for investment citizenship can be seen as a barometer of global crises. “Many of our clients do not immediately move to the country in which they invest capital; for them it is rather a backup option,” notes Paul Williams from La Vida Golden Visas, a company specializing in second citizenship in European countries.
Is your country already for sale?
However, investment citizenship programs have not only advantages. After all, can the question of “selling citizenship” even be raised? Critics say no.
Earlier this year, two U.S. senators – Dianne Feinstein and Chuck Grassley – proposed a bill to abolish the EB-5 program, arguing that it has many flaws. “It is unfair that the process of obtaining citizenship is simplified for the wealthy, while millions of people have to wait in line,” Feinstein said. Critics of this program express concerns about possible money laundering, related criminal activity, and gaining access to the country bypassing legal immigration procedures.
Indeed, when it comes to large sums of money and international real estate transactions, many loopholes for fraud open up. For example, in May, the FBI uncovered a $50 million fraud involving Chinese investors under the EB-5 program. And the investment citizenship program of St. Kitts and Nevis ran into problems with the U.S. Department of the Treasury when several Iranians (suspected of being intelligence officers) were caught laundering money using St. Kitts passports for the benefit of Tehran banks (thus circumventing U.S. sanctions).
The bad reputation of the EB-5 program has even cast a shadow on the White House. The Kushner family real estate agency was accused of a conflict of interest because they used the name of Jared Kushner (the president’s son-in-law and senior adviser) to attract Chinese investment for construction in New Jersey.
But, despite all the costs, in a world where borders have been increasingly fortified lately, demand for such services is likely to grow.