Passports for Sale: Why We Should Worry about Golden Visa Programs

In 1984, the government of the small Caribbean island state of Saint Kitts and Nevis had a bright idea for attracting foreign capital: the country would grant permanent resident status to any foreign national who invested a sufficient amount in the country. The idea caught on, and now dozens of countries around the world—including not only small island states, but also major developed economies like the United States and the United Kingdom—have so-called “golden visa” programs. Golden visa programs have proven especially attractive during times of economic hardship, as demonstrated by the spread of these programs across Europe in the wake of the 2008 recession. These European programs are especially notable, as getting a visa in one country in the Schengen visa zone provides access to the other 25 as well. Some states—including EU members Austria, Bulgaria, Cyprus, and Malta—even offer investors outright citizenship, rather than simply residency status, in exchange for sufficiently large investments. And due to pre-existing visa waiver agreements, these “golden passports” may allow access to other countries as well. Those with Maltese passports, for example, can travel to the US visa-free.

According to a recent Transparency International-Global Witness report, in the last decade alone, countries with these sorts of programs have “sold” (that is, traded for investment) more than 6,000 passports and nearly 100,000 residency permits. Yet these policies have always been controversial, and are becoming more so. Canada terminated its golden visa program in 2014 (though it continues in Quebec). Last June, the Trump Administration demanded that Congress either terminate or reform the US investor visa program. And the UK abruptly announced it would suspend its program on December 6th, although it reversed course six days later.

Part of the reason for the growing disillusionment with golden visa programs is that their supposed economic benefits haven’t lived up to expectations. Rather than stimulate economic growth and job creation, the investments used to qualify for golden visas are often passive, such as government bonds or real estate. In Portugal, for example, 95% of total investment has been in real estate—6,141 investments compared to just 12 in employment creation. Real estate investments not only offer limited benefits, but may also distort housing markets. In the US, investments have been, in the words of US Senator Chuck Grassley, funneled towards “big moneyed Manhattan interests” rather than “direct investment to rural and high unemployment areas.” Hungary even managed to lose money on its program—$221 million—as it offered investors discounted bonds that were then fully repaid after five years with an additional 2% interest.

But the bigger problem with golden visa programs is their potential to both facilitate and stimulate corruption and money laundering. This problem, which was highlighted both by the TI-Global Witness report mentioned above, as well as another report from the European Commission, takes several forms. Continue reading

Guest Post: The European Commission’s Response to “Golden Passport” and “Golden Visa” Programs

Today’s guest post is from Anton Moiseienko, a research analyst at the London-based Centre for Financial Crime and Security Studies of the Royal United Services Institute.

 Investor citizenship and investor residence programs, known colloquially as “golden passport” and “golden visa” schemes, have a less than sterling reputation. Much of the disapproval comes from anticorruption organizations like Transparency International and Global Witness. Those two organizations published a joint report last year that criticized these programs for offering a “safe haven” to figures associated with corruption.

The European Union has also expressed concern about these programs in several of its Member States. For example, back in 2014 the European Parliament adopted a resolution that accused some Member States, in particular Malta, of an “outright sale of EU citizenship [that] undermines the very concept of European citizenship.” And this past January the European Commission published a report on golden visa and golden passport schemes that will do little to improve their battered reputation. The Commission report raises a number of worries about these programs, and expresses particular concern about golden passport programs, since citizenship in an EU Member State automatically confers EU citizenship with its attendant rights, including free movement.

There are at least three ways in which golden passport and golden visa programs threaten to undermine the fight against corruption. Continue reading