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Citizenship by Investment (CBI) and Residency by Investment (RBI) programs, popularly known as "golden visas," have become a vital strategy for countries to attract foreign capital and drive economic growth. These schemes allow individuals to gain citizenship or residency through financial investments, but they also pose significant risks, particularly related to money laundering. Without adequate regulations, golden visa programs can become conduits for illicit funds and tools for exploiting regulatory loopholes to avoid scrutiny.
Europe: Shifting Approaches to Golden Visas
In Europe, numerous nations have implemented CBI and RBI initiatives to boost investments. However, increasing concerns about money laundering and national security have prompted some countries to scale back or reform these programs.
Spain: Since launching its golden visa program in 2013, Spain has issued over 15,000 visas, offering residency to investors spending a minimum of €500,000 on real estate or financial instruments. However, starting January 2025, the Spanish government will eliminate the real estate option to curb housing speculation and promote fairness in the market. Investments in government bonds and businesses are also under review.
Portugal: In October 2023, Portugal followed suit, removing real estate investments from its golden visa program to address surging property prices and housing shortages. Despite this change, the country continues to accept investments in entrepreneurial and cultural projects.
Greece: Greece remains a fast-track destination for residency seekers, issuing permits within 60 days. The minimum investment threshold, previously set at €250,000, has been raised to €800,000 in prime locations like Athens and Mykonos to combat housing shortages. Other regions now require a €400,000 minimum investment to redirect funds to underdeveloped areas.
Italy: Italy's RBI program, introduced in 2017, offers residency for investments starting at €250,000 in Italian companies, alongside tax incentives for applicants and their families. After 10 years of continuous residency, participants may apply for Italian citizenship.
Netherlands: The Netherlands discontinued its golden visa scheme in January 2024. This decision aligns with a broader European trend to mitigate the risks associated with such initiatives.
Hungary: In contrast, Hungary reinstated its golden visa program in 2024. Known as the "Guest Investor Program," it grants residency through real estate investments of at least €500,000, donations of €1 million to educational institutions, or stakes in local investment funds.
Malta: Malta continues to provide citizenship through an investment of at least €690,000, coupled with a mandatory residency period of 12-36 months. However, the program faces criticism for its lack of transparency and potential for abuse by financial criminals.
Caribbean: Economic Dependence on CBI Programs
In the Caribbean, CBI programs are crucial sources of revenue for small island economies.
Dominica: Dominica offers citizenship for a minimum investment of $100,000, granting visa-free travel to numerous countries. However, the lack of stringent oversight raises concerns about the program's susceptibility to misuse by illicit actors.
St. Kitts and Nevis: Similar to Dominica, the St. Kitts and Nevis CBI program channels foreign investments into economic development but has faced criticism for weak transparency measures and oversight.
Middle East: Golden Visas in the UAE
The United Arab Emirates operates one of the largest golden visa programs globally, issuing approximately 50,000 visas annually. The primary pathways to residency include real estate investments and significant donations. However, concerns over lax oversight have sparked fears about the program’s security vulnerabilities.
Asia, Oceania, and Australia
Malaysia and Thailand: Both countries offer CBI programs with relatively low investment thresholds. While attractive, their insufficient verification processes leave them open to exploitation by criminal actors.
Vanuatu: Vanuatu provides citizenship through direct contributions to the government. However, due to concerns over security and passport misuse, the European Union suspended its visa-waiver agreement with Vanuatu.
Australia: Australia abolished its golden visa program in 2024. Initiated in 2012, the scheme required a minimum investment of AUD 5 million in local funds for residency. The government terminated the program due to concerns about money laundering and its failure to generate substantial economic benefits, noting that most applicants were Chinese nationals.
The 1MDB Scandal: A Stark Warning
The 1MDB scandal highlights the vulnerabilities of CBI and RBI programs. Jho Low, a financier implicated in the case, exploited Cyprus’s golden visa program to obtain multiple passports, enabling him to transfer illicit funds globally. Using offshore companies and accounts, Low concealed over $4.5 billion embezzled from Malaysia's sovereign wealth fund. Weak verification procedures allowed him to exploit jurisdictions offering golden visas, exposing the systemic risks of these schemes.
Strengthening Transparency and Governance
A 2023 joint report by FATF and OECD underscored the urgent need for improved governance and transparency in CBI and RBI programs. The report stated, “Insufficient governance and lack of transparency in CBI/RBI programs enable crimes such as money laundering, corruption, and tax evasion.” It recommended robust measures, including multilayered due diligence, better coordination between national and international authorities, and active involvement of Financial Intelligence Units (FIUs).
Despite their economic potential, golden visa programs face mounting criticism. Without stricter regulations, enhanced accountability, and global cooperation, these programs remain at risk of being exploited for illicit purposes, jeopardizing the credibility of the countries offering them.
By fLEXI tEAM
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