GENEVA, SWITZERLAND — The multi-billion dollar investment migration industry, which sees governments
offering visas and citizenship to people in return for investments in local businesses and property, is surfing the crest of a wave.
Having ridden a boom in demand from newly affluent citizens from China and Russia seeking new lives in the West, some in the industry are now warning that the wave could be about to break.
“We are as a group on extraordinarily thin ice, because one bad apple who obtains a second passport or citizenship, who commits a heinous crime despite the vetting that was done, will bring these programs to an absolute collapse,” Peter Vincent, an assistant director general at BORDERPOL, a global borders agency, said in a speech at the Investment Migration Forum in Geneva, Switzerland on Wednesday.
“In this particular environment there’s a great deal of scepticism and paranoia among global counter-terrorism experts, and a deep desire to shut things down before someone gets hurt,” he said.
A sudden crackdown on immigration loopholes in response to a criminal act is not unprecedented. The industry is concerned that it could happen again in the near future, at a stroke crippling the consultants, lawyers and accountants who earn their fees by assisting clients looking to gain a second citizenship.
Dmitry Kochenov, a professor of European law at the University of Gronigen and chairman of the industry’s Investment Migration Council pointed to the shift in passport policy that happened after Italian national Felice Orsini attempted to assassinate Napoleon III at a theatre in Paris in 1858.
Orsini had travelled to France on a UK-issued passport, with the resulting crackdown leading to the shift to the nationality-based passport system in the world today.
“The outcry was such that the whole passport system of the world was changed. This is something that can occur in a week or in a month. If an act of terror were to be committed by someone in one of these programs then all the programs would be ended,” Kochenov told the assembled conference of investment migration specialists.
Napoleon III said at the time that “passports are an embarrassment and an obstacle to the peaceable citizen but utterly powerless” to stop those that wish harm.
“Some day someone will dictate to you, perhaps it will be the Financial Action Task Force, and they will say ‘OK, you’re going to have to get a reporting agency.’
The investment migration industry is both large and unregulated. Figures on the size of it are hard to come by. But a source told Business Insider that the program of Cyprus, which requires a €2 million investment in the country in return for citizenship and access to the other 27 European Union countries, earns as much as €4 billion a year, or around 25% of its GDP.
The system works well on the most part. It connects countries that want to boost foreign direct investment with the jet-setting rich who want ease of travel through places like Europe and the USA, or access to better schooling and public services for their families.
When done right, it services a need that is mutually beneficial to both country and consumer.
But, while the IMC has had a Code of Ethics in place for two years, there are no global, binding rules on how the companies that assist clients through the immigration investment process should operate, leading to Vincent to call for companies to come together and make sure they “are doing enough to establish the identity of individuals and their motives.”
“There is a pernicious misconception that your clients operate in secrecy, in shadows, representing shady operations or shady governments,” he said.
As with banking, which has faced tougher anti-money laundering and compliance requirements since the financial crisis, now the investment immigration industry is starting to recognise the need to either self-regulate or accept rules imposed on it.
“I think the same thing is going to happen in this industry,” Kim Marsh, the global head of the immigration practice at Exiger Due Diligence, said in a speech. “Some day someone will dictate to you, perhaps it will be the Financial Action Task Force, and they will say ‘OK, you’re going to have to get a reporting agency.’
“It started with the banks, then came precious stones, real estate and they even threw in lawyers,” he said. “I think eventually it will come. Now have to focus on the regulatory part and get the consistency right through from beginning to end, from the agent who finds the client to the end process.”
The industry also faces a more subtle, but no less dangerous, existential threat. The wave of populist nationalism that carried Donald Trump to US election victory and will take the UK out of the European Union could cut immigration of all types and hamper public support for the programs.
“There is also a, frankly less dramatic worry, among governments and academics that these programs commodify nationality. Certain governments hold nationality extraordinarily close and the view that somehow those passports and that citizenship is somehow being watered down causes them great concern,” Vincent said.
Vincent’s warnings to the industry may be harsh but he is used to hostile environments.
“I spent two and half years in Colombia, where I was in charge of extradition of Colombian war lords, narco kingpins and FARC terrorists. People wanted to kill me,” he said.
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