Imagine for a moment that you are an unscrupulous businessperson with close ties to the government in a country with higher than average levels of corruption.
You make more money than you know what to do with from lucrative public contracts (awarded in procedures that are not exactly competitive). Other friends of yours own the media, so the problems that happen every now and then at your facilities don’t get much air-time. And you don’t come under much pressure from activists or non-governmental organisations because your corrupted politician friends keep them in check.
But do you actually want to spend all your time in a country racked with corruption?
Wouldn’t it be nice to have the option to easily travel and even live somewhere else?
Say, somewhere in Europe?
What if we told you that you can forget about the annoying queues and interviews at the embassy for a Schengen visa? With enough cash, a multitude of European Golden Visas -residence permits or passports – are at your disposal. But first, some background.
What exactly is a Golden Visa?
The idea is simple: governments trade citizenship or residence rights for investment. Arrangements differ from country to country and requirements may include investment in business, real estate or government bonds.
Over 20 countries or territories currently offer Golden Visa programmes worldwide, including 13 in Europe: Austria, Belgium, Bulgaria, Cyprus, Greece, Latvia, Lithuania, Malta, Monaco, Portugal, Switzerland and the United Kingdom. Hungary ran a controversial Golden Visa programme between 2013 and 2017, which it suspended.[i]
Freedom of movement, tax advantages, as well as access to the EU’s single market, legal system and social services are among the major selling points of the programmes of the EU Member States[ii]
Not surprisingly, the demand is high. Over the past few years the Golden Visa market has turned into a multi-billion-euro global phenomenon with price tags varying from country to country, costing anywhere between EUR 250 000 and EUR 10 million.[iii] In Portugal, for example, the applicant must purchase real estate worth between EUR 350 000 and EUR 500 000 depending on the type of the estate. In neighbouring Spain, the requirement is for minimum EUR 500 000 of investment in real property or government bonds.
The Organised Crime and Corruption Reporting Project (OCCRP) investigates the Golden Visa programmes of seven EU Member States – Austria, Cyprus, Hungary, Latvia, Lithuania, Malta and Portugal, as well as programmes which are currently under implementation in Armenia and Montenegro.
A shortcut to the Old Continent
If Malta’s government records are to be believed, scores of Russian millionaires are building new lives in gas stations and unfinished garages as proud new citizens of the Mediterranean country. Malta is among those EU governments that are selling passports to anyone who can afford them.
“It is an uncontrolled back door to Europe, and it’s institutional fraud,” says Malta journalist Manuel Della, calling Malta’s government “addicted” to the seemingly unlimited cash that that it can collect from Russian and Chinese businesspeople who would otherwise be barred from the bloc or at least have no other legitimate way to live in it.[iv]
And those are the best-scenario cases. In theory there’s supposed to be scrutiny. The law in Malta, however, is not very clear: if a terrorist or a criminal comes here, does the government have the right to give them passport – there are no precise instructions. Cyprus is another quick path to Europe for the well-heeled.[v] Russian oligarch Oleg Deripaska recently became the next celebrity who got a Cypriot passport. During the short-term programme in Hungary the government raised EUR 190 million in four years, however, it is completely unclear where all that money went. The cousin of the Syrian president Bashar-al-Assad got access to an EU passport despite being on the Washington sanctions list. Tatyana Yumasheva, the daughter of former Russian President Boris Yeltsin, got a passport from Austria.[vi]
Montenegro, which is currently engaged in EU-accession talks, has granted citizenship to people pressed charges against in other jurisdictions, such as the ex-Thai premier and the ex-Palestine security minister – both charged with counts of corruption and embezzlement.[vii]
Handing out citizenship in exchange for a sizeable financial investment is not in itself new or limited to the EU Member States. The so-called “Golden Visas”, born more than 30 years ago as a way to pump money into the faltering economy of the Caribbean island nation of St. Kitts and Nevis, have grown into a multi-billion-dollar global business involving more than 20 countries. Conditions vary between the countries selling citizenship but today’s boom in the Golden Visas market is generally the result of the 2009 global economic crisis. At that time, many governments urgently needed money while also trying to stabilise the falling real-estate markets. Rules vary from country to country and most governments try to keep the details under wraps. But the main idea is simple: for a sizeable investment, wealthy people can become immigrants in a growing number of countries, attractive for one reason or another, including some in the European Union.
When the European Commission was asked whether it’s concerned about the practice, it noted that citizenship is a matter of national governments but pointed out that there must be a “genuine link” between applicants and the passport-granting country. However, the Treaty of the EU contains nothing which Brussels could use to oppose La Valetta and stop the sale of passports. A key requirement for issuing citizenships to applicants is that they must have lived at least 12 months in the country. New Malta citizens acquire the right to live and work in EU-28 and travel visa-free to 69 non-EU countries, including the USA. In July 2018, Greece adopted an amendment expanding the Golden Visa programme which now includes investors with minimum EUR 400 000 in a Greek bank, including non-real-estate investors.[viii]
What do international and Bulgarian law say?
Under international law, a bipatride is a dual national. This phenomenon is abnormal but it is also quite common. Some countries do not allow their nationals to hold a passport of another country, for others that is not a problem, there are also countries which only grant citizenship under the requirement that the person must renunciate its former citizenship. The fundamental regulation of Bulgarian citizenship is found in the Constitution and in the Bulgarian Citizenship Act. Citizenship is acquired by birth – automatically, if certain legal requirements are met and by naturalisation, as a result of steps taken on a voluntary basis by the individuals meeting the statutory conditions.
Naturalisation is a way for foreign nationals or stateless persons to become citizens of a country. Naturalisation is only possible if certain conditions are met by the individual and his wish is in line with the country’s willingness to grant him/her citizenship. While the person may satisfy the conditions or want to be granted citizenship, the country is not under an obligation to accede to his/her wish. Under the ordinary procedure, a foreigner may acquire Bulgarian citizenship if he/she has a place of domicile or permanent residence in Bulgaria in the course of at least five years at the date of submission of the application for citizenship. Under the law, six other conditions have to be met at the date of submission of an application for naturalisation in order for an individual who is not a Bulgarian national to acquire Bulgarian citizenship. The individual must:
have become of age
hold a residence permit since not less than five years
have income or occupation
have clean criminal record
have command of the Bulgarian language
have been released from his present citizenship.
Of particular interest is the requirement to have command of the language because it is both very common and often not strictly complied with.
In the case of golden visas governments trade citizenship or residence for typically sizeable investment. The regulations vary from one country to another and requirements may include investment in business, real estate or government bonds. Some countries have included in the criteria certain period of residence. In Bulgaria, for example, foreigners who invest at least one million euro in government bonds or deposit the money in a Bulgarian bank may apply for Bulgarian citizenship after 18 months together with their families.
According to information from the Ministry of Foreign Affairs under the Public Information Law, the number of foreigners who have been granted right of residence under the five-year programme totals 296 foreign nationals at October 2017, including 70 Russians, 38 Chinese, 32 Pakistanis, 27 Egyptians and 23 Lebanese.[ix]
Major points of the criticism of the practice
This way of unregulated granting of passports poses risks related to the absence of proper and systematic scrutiny of applicants. Not only do these golden visa schemes have downsides as regards the due scrutiny of candidates but they also seem to have system defects jeopardising the whole process of granting and cast suspicion on the golden visas as a potential for corrupted persons and money. The investigation in Portugal codenamed “Operation Labyrinth” resulted in detention in 2011 of 11 people involved in the administration, who were suspected of having received bribes to issue visas.[x]
Critics say the system is prone to corruption and unfair because it offers rich people freedom of movement which is denied to millions of refugees living in desperate conditions and furthermore it facilitates tax evasion. According to those who are not happy with the scheme, the refugee crisis has been caused by the same autocratic leaders and corrupted officials who use the Golden Visa programme. The investigating bodies believe that holding a second or third passport is a very useful tool for criminals, tax dodgers and money launderers.
While the Golden Visa programmes bring financial capital in the host country, they also represent a potential threat to the fight against cross-border corruption. Without sufficient integrity checks, they constitute an easy back door for the corrupt, as OCCRP’s recent investigations have revealed.
In light of the significant sums involved, governments need to scrutinise the source of foreign assets to ensure that Golden Visa programmes are not used to launder money.
Finally, governments should ensure the impartiality and integrity of the programmes, especially when they have outsourced their management to private companies which sometimes also advise clients on how to apply to them, that representing a conflict of interest. Ideally, a clear dividing line should be drawn between legitimate investors whose funds are really spent for socially useful purposes and individuals seeking “convenient” citizenship for personal benefit and for avoiding previous responsibilities in their own countries.
[i] ‘Golden visas’: EU offers the rich bigger bang for the buck, Deutsche Welle, available at https://www.dw.com/en/golden-visas-eu-offers-the-rich-bigger-bang-for-the-buck/a-42947322
[ii] Passport dealers of Europe: navigating the Golden Visa market, Transparency International, available at https://www.transparency.org/news/feature/navigating_european_golden_visas
[iii] 17 countries where money can buy you a second passport or ‘elite residency’, Business Insider, available at http://uk.businessinsider.com/countries-where-you-can-buy-citizenship-or-residency-2017-6
[iv] Ibid
[v] The billionaires investing in Cyprus in exchange for EU passports, The Guardian, available at https://www.theguardian.com/world/2017/sep/17/the-billionaires-investing-in-cyprus-in-exchange-for-eu-passports
[vi] European citizenship: sold to the super wealthy, Deutsche Welle, available at https://www.dw.com/en/european-citizenship-sold-to-the-super-wealthy/a-16756198
[vii] Montenegro to design citizenship by investment program in-house, wish to avoid Hungarian model, says Ministry, IMI Daily, available at https://www.imidaily.com/europe/montenegro-design-citizenship-investment-program-house-wish-avoid-hungarian-model-says-ministry/
[viii] Greece to extend ‘golden visa’ scheme to lure more investors, Hürriyet Daily News, available at http://www.hurriyetdailynews.com/greece-to-extend-golden-visa-scheme-to-lure-more-investors-134750
[ix] „Златните визи“ на България: пропуснати ползи и банкова вратичка, available at https://bivol.bg/bulgarian-golden-visas.html
[x] Portugal’s golden visas: All that glitters, The Economist, available at https://www.economist.com/charlemagne/2014/11/17/all-that-glitters
