Common Issues With Citizenship By Investment Program

You don’t have to be an expert to realize the fundamental problems with citizenship through investment programs or ‘golden visas.’ A standard golden visa scheme or citizenship by investment program provides for permanent residence and, ultimately, citizenship in consideration of investments in the economy. These schemes provide for a fast-track application process and quicker resolution of issues. These schemes were uncommon during the 1980s when they were first introduced but are presently an attractive way to draw in investors.

However, as they say, all glitters are not gold. Such is also the case with these programs. These programs have been formally structured and are monitored under the necessary rules and regulations. Yet, they have attracted a lot of problems that are making it difficult for countries to back them up. The substantive operation (even procedural at times) of these programs remains in question, and we will explore what they are in today’s discussion. Let us see what problems these programs commonly face. 

Is it ethical?

The most common allegations thrown in the way of these programs concern their ultimate outcome: they grant citizenship in exchange for money. If I were to argue from the side of the opponents, you are basically telling people that they can show their true allegiance to the country simply upon investing. Many hardened arguments come from those with very strong, conventional notions of citizenship and its role in maintaining and encouraging national pride and integrity. To them, these programs sell citizenship. Hence, there are many ethical concerns about these programs. 

Poorly undertaken due diligence

Generally, these programs do not restrict applications from any foreign national. A country may place a few oversight measures on those coming from select countries. However, these restrictions are limited to very few countries. Even so, due diligence is nevertheless in place. That is, of course, not the problem. The problem lies in the way due diligence is carried out. High-risk profiles need to be filtered out, but many countries fail to do so. While documentary proofs have been mandated, they are not assessed as a standard procedure. To gain as much investment as possible, countries maintain opaque due diligence systems to bypass regular procedural requirements. 

Encouraging corrupt activities

Approving high-risk profiles, providing channels to launder money across the globe, and encouraging corruption are major negative impacts of these programs. If we keep aside the arguments on the ‘sale of citizenship’, these programs can operate smoothly and properly, provided their implementation is done right.

For example, Hungary suspended its Golden Visa program after allegations that certain dubious companies were granted the right to sell residence bonds without a transparent procurement process. These companies reportedly amassed over $600 million during the course of 4 years. Why does this happen? There can be several reasons. For instance, lack of verification of the source of funds or limited information on how the investments are contributing to the economy. 

Too lax requirements

Many Caribbean countries operate some of the world’s easy-to-access citizenship by investment. Dominica, Saint Lucia, and Antigua and Barbuda, for example, do not impose minimum residence requirements, require very low levels of investment, and offer ultra-fast processing time. While the idea behind these programs is indeed to grant citizenship through a faster and easier route of investment, these requirements invite more suspicion than approval. Why? The answer is obvious: these programs offer safe havens to criminals who run away to these countries to evade the criminal justice system. The evasion of tax is another example.

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