Surge in Gulf applicants for US scheme offering citizenship amid price increase

Still remarkable cheap sale of citizenship, even with the increase. Absolute numbers are small:

There has been a huge surge in Gulf residents applying to take part in an American scheme offering the chance to earn citizenship, ahead of new reforms due to come into effect on November 21, which will increase the cost of applying by 80 percent, according to industry experts in Dubai.

The EB-5 visa for Immigrant Investors was created by the US Immigration Act of 1990 as a way of encouraging foreign investment in projects across the United States.

At present, for a minimum investment of $500,000, investors can apply to be part of the scheme, which can lead to a green card and the chance of full American citizenship after five years.

Last month, the EB-5 Modernisation regulations were introduced, meaning that, from November 21, the minimum investment amount for projects classed as targeted employment areas will increase from $500,000 to $900,000. At the same time, the minimum investment for non-targeted employment area projects will increase from $1 million to $1.8 million.

This has led to a surge in applications as potential investors look to get their paperwork filed before the November 21 deadline.

“I have seen almost more than 100 percent surge in applications as it has been out there now for nearly a month,” Preeya Malik, managing director of Step America, a Dubai-based firm which offers the EB-5 visa scheme, told Arabian Business in an interview on Wednesday.

“People are getting to know about it and it is the first time since 2015 they have written a price increase into legislation. If we were getting five applications every week, now we are getting five people almost every other day. People who have been sitting on the fence, this has been the deciding factor to move forward,” she added.

Higher cost bracket

The majority of applicants coming from the GCC are in the higher cost bracket, which are projects in metropolitan districts – or those classed a ‘non-targeted employment areas’ – which are keen to use the scheme to encourage overseas investments.

Targeted employment areas are classed as areas in the US which are economically challenged and have an unemployment rate more than 150 percent of the federal average.

There has been talk over the last few years of an increase in the cost of participation in the EB-5 scheme, which led to a dramatic increase in the number of approvals from the GCC, which collectively rose 564 percent to 93 approvals – a majority of them expats – in 2018.

A total of 54 UAE residents were approved for the programme in 2018, a 350 percent jump from the year before. Neighbouring Saudi Arabia, which saw just a single approval in 2017, recorded 15, a 1,400 percent increase.

Malik said the nationalities looking to take part varied a lot, but the motivation was usually the same, to support their families and children and help them to obtain a green card or passport in the US.

“We have a lot of Arab clients, Pakistani, Indian, but definitely the same in that they are wanting to do it for their children, that is the same no matter the nationality,” she said.

Source: Surge in Gulf applicants for US scheme offering citizenship amid price increase

Greece preparing citizenship by investment scheme similar to Cyprus’

More on competition among countries:

Local land developers but also service sector professionals are becoming concerned by reports that Greece’s new government is planning to launch a  citizenship by investment scheme similar to that of Cyprus.

The scheme provided by Nicosia in recent years has substantially contributed to the recovery of the Mediterranean island’s economy.

The new right-wing government under Kyriacos Mitsotakis is drafting its own citizenship by investment programme which resembles the Cypriot one and, thus, will be quite competitive, according to informed sources.

One source told Phileleftheros that the new programme is expected to be implemented after the first quarter of 2020 and may involve investments of €2.5 million. Cyprus’ investment limit is €2 million, plus VAT. In the case of Greece, the plan is for VAT payment to be deferred for a period of three years. This basically means that at the time of the investment the cost will essentially be the same as that in Cyprus.

Undoubtedly, the implementation of such a programme by Greece will create strong competition for Cyprus. Greece, as a brand name, is stronger and more versatile. So are some of its areas or islands as well. This means that far more investment opportunities will be on offer, especially in the sector of ​​land development. The areas that will fall under the scheme’s criteria have not been disclosed yet.

At the same time, as a larger country that has been in recession for many years it offers more investment opportunities, plus connectivity is also an important factor for foreign investors. Another advantage of Greece taken seriously in consideration by foreign investors is that one does not need a visa to travel to the US.

Source: Greece preparing citizenship by investment scheme similar to Cyprus’

Citizenship [by investment] scheme risks are flagged in EU terror report

Not surprising:

A report about EU-wide money-laundering and terrorism financing risks has again zeroed in on citizenship schemes like the one operated in Malta.

The controversial scheme, introduced by the Labour government after sweeping to power in 2013, allows passport buyers access to an EU passport against payments and investments totalling over €1 million.

Misuse of such schemes, which the European Commission notes are deliberately marketed as a means of acquiring EU citizenship, together with all the rights and privileges associated with it, create a range of risks for the EU.

The Commission’s report was highlighted on the Financial Intelligence Analysis Unit’s website this month.

Among the risks identified by the Commission are the possible infiltration of non-EU organised crime groups, as well as money-laundering, corruption and tax evasion possibilities.

Just last week, Identity Malta, the government agency that runs the scheme, confirmed it had initiated the process to withdraw the Maltese citizenship of Mustafa Abdel-Wadood, who has pleaded guilty to fraud and money-laundering in the US.

Another passport recipient, Chinese national Liu Zhongtian, was recently indicted in the United States amid allegations he avoided paying $1.8 billion in aluminium tariffs.

Concern about lack of transparency and governance of the schemes

The Commission says risks associated with citizenship schemes are exacerbated by cross-border rights associated with EU citizenship or residence in a member state. There is also a concern about lack of transparency and governance of the schemes.

Malta’s scheme has been criticised by the Opposition and international bodies for failing to clearly identify who has bought their passport.

Another problem with EU citizenship schemes identified by the Commission is that the procedure of screening applicants is often outsourced to private companies, where there is a permanent risk of conflict of interest and corruption.

It also raises fears that competition between European Union countries could result in a race to the bottom over standards of due diligence and transparency.

In a direct reference to Malta’s scheme, the Commission says Maltese citizenship is popular with wealthy Russians. Saudi Arabians have also invested in the scheme.

It says one Maltese passport buyer, Waleed al-Ibrahim, chairman of the Middle East Broadcasting Centre, was arrested in November 2017 as part of a corruption purge.

The government insists the scheme complies with the highest standards of due diligence.

Source: Citizenship scheme risks are flagged in EU terror report

Why Vanuatu’s lucrative ‘passports for sale’ scheme is popular among Chinese nationals

Yet another example of citizenship-by-investment and related abuses:

Are you in the market for a second passport? One that can get you into scores of countries — including Europe, the UK, Hong Kong, Singapore and Russia — without needing a visa?

Key Points:

  • Applicants can become a Vanuatu citizen without needing to set foot in the country
  • It costs about $220,000 for a single application and more for couples and families
  • More than 4,000 passports have been sold under the scheme, with most to Chinese citizens

Or perhaps you’d like to park your money in a tax haven where there are no personal or corporate income taxes.

Maybe you’d just like to get away from the rat race and live on a picturesque tropical island in the South Pacific.

Vanuatu, then, could be the place for you.

These are some of the selling points of Vanuatu’s citizenship by investment scheme, or cash-for-passports as it’s also known locally.

Sales have been booming in recent years, providing the Government with an unexpected but lucrative source of revenue.

But not everyone is happy about the scheme, with several prominent locals — including former presidents and high-ranking chiefs — saying it undermines the value of Vanuatu citizenship and the country’s fight to gain independence from its former colonial masters, the French and British.

The recent deportation of a group of Chinese nationals, some of whom had obtained Vanuatu citizenship, focused even more adverse attention on the scheme.

So how does it work?

Many countries have citizenship by investment schemes but often applicants are required to become permanent residents first and then only after a number of years do they become eligible to become a citizen.

Under Vanuatu’s scheme, successful applicants can become citizens within a matter of months, and there’s no requirement to reside in the country or even set foot on Vanuatu soil at all.

It costs around $US150,000 ($220,900) for a single application and more for couples and families.

Vanuatu citizenship for sale

Interested parties submit their applications through agents who’ve been approved by the Citizenship’s Office and Commission, which oversees the entire process.

The job of screening an applicant’s criminal and financial backgrounds is performed by the Government’s Financial Intelligence Unit.

If their client’s application is successful, the agent pockets around a third of the application fee.

Once approved, freshly minted citizens can then apply for the real prize, a Vanuatu passport.

Why does the Vanuatu Government sell passports?

Pure and simple: to raise revenue. There have been several iterations of Vanuatu’s citizenship by investment scheme since it was first introduced in 2014.

The aim of one of them was to raise money to rebuild the country after Cyclone Pam caused widespread devastation in 2015.

Despite the rising tide of domestic criticism, the Government has largely remained tight-lipped about how many passports have been sold and how much money has been raised.

But in June, a parliamentary committee told local media that more than 4,000 passports had been sold under the scheme.

The Vanuatu Daily Post newspaper examined government financial statements and found that sales sky-rocketed last year, with 1,800 passports sold in 2018 alone.

Most have been sold to people from mainland China even though it’s technically illegal to hold dual citizenship under Chinese law.

What does the deportation of six Chinese nationals have to do with the scheme?

Six Chinese nationals were arrested in the capital Port Vila in late June and later deported back to China at the request of Beijing law enforcement officials.

The group was allegedly running an online financial scam targeting people back in China.

Before their deportation it emerged that four of them had successfully applied for Vanuatu citizenship and obtained passports.

Critics of the citizenship by investment scheme said the incident validated their concerns that undesirable people were buying passports for nefarious purposes.

Vanuatu’s founding president Ati George Sokomanu said the sale of Vanuatu citizenship was demeaning to those who had struggled to achieve the country’s independence.

“The Government needs to state clearly how many passports have been sold, who they’ve been sold to, and how much revenue the sales have generated,” Mr Sokomanu said.

The Financial Intelligence Unit later said none of the deported Chinese nationals had a criminal record and Chinese officials informed local authorities of their investigation after they had been granted citizenship.

Source: Why Vanuatu’s lucrative ‘passports for sale’ scheme is popular among Chinese nationals

Egypt considers pros, cons of foreign citizenship changes

Another citizenship-by-investment approach with explicit political involvement :

The topic of granting foreigners Egyptian citizenship has long been controversial, and proposed amendments to the Egyptian Nationality Law are no exception.

The recent proposals have stirred up many questions since the Egyptian government submitted them to parliament in April. They received initial approval June 9 of the parliamentary Defense and National Security Committee, which will discuss them further and then submit them to parliament’s general assembly for final voting.

Article 2 of the amendment bill would entitle the prime minister to grant nationality to foreigners who buy real estate owned by the Egyptian state or other public entities; it also establishes an investment project in Egypt in accordance with the investment law or deposits a sum of money in foreign currency in Egyptian banks.

Article 3 stipulates forming a Council of Ministers unit to examine naturalization applications. This unit will comprise security authorities and representatives of the ministries of Foreign Affairs, Interior, Investment and International Cooperation. The same article states foreigners would submit naturalization applications after paying $10,000. The unit would examine applications within three months while considering national security. If the prime minister grants initial approval, an applicant would be granted residence in Egypt for six months to complete the required procedures.

Opinions on the amendments vary among parliament members, political and economic observers, and citizens.

The Egyptian Businessmen’s Association (EBA) praised the amendments to the Egyptian Nationality Law, also known as Law No. 26 of 1975.

EBA vice chairman Fathallah Fawzi said in a June 17 press statement the proposed amendments to that law and a bundle of others — most notably the unified Investment Law — will help grow the real estate sector in Egypt and create a more attractive business climate for foreign investors.

But speculation abounds. Some critics see the proposed amendments as a move to pave the way for the US plan for peace between Israelis and Palestinians, dubbed by US President Donald Trump the “deal of the century.” That deal is being discussed this week at an economic summit in Bahrain.

Many Egyptians were concerned the US plan will include an offer to establish a place for Palestinians in parts of the Sinai. But US officials denied this, and Yahya al-Kadwani, a member of Egypt’s parliamentary Defense and National Security Committee, told Al-Monitor that’s not likely to happen.

He noted that in 1959, Egypt ratified an Arab League recommendation exhorting Arab countries not to grant nationality to Palestinians so as not to weaken the Palestinian movement to establish a homeland.

Talaat Khalil, a member of the parliamentary Planning and Budget Committee, said some Egyptians, himself included, also fear amendments to the Egyptian Nationality Law would be used as leverage to get Palestinians to cooperate with the US peace plan by offering them Egyptian citizenship.

He said amendments aren’t necessarily even needed, as not having Egyptian nationality is unlikely to prevent foreign investors from establishing projects in Egypt. In a June 11 statement to BBC, Khalil said the current unified Investment Law already gives foreign investors many advantages and opportunities equal to those of Egyptian investors, in addition to almost open-ended residency permits.

Other critics claim the amendments aim to pressure refugees, especially Syrians, to invest more in exchange for citizenship. Reports by the Istanbul-based Arabic Post and Qatari Al-Jazeera news websites, which oppose the Egyptian regime, potentially linked the nationality law amendments to a campaign launched by Samir Sabri, an Egyptian lawyer close to the regime.

On June 9, Sabri filed a complaint asking the government to examine the funds of Syrian refugees to ensure they’re not used for money laundering or terrorist financing. The news reports said Sabri’s complaint might aim to pressure Syrians in Egypt to invest more in real estate or make greater bank and investment savings to obtain Egyptian citizenship.

Yet, Bahaa al-Ghamri, a political science professor at Suez Canal University, questioned the Arabic Post and Al-Jazeera articles. He told Al-Monitor the Egyptian state has always welcomed Syrian and other Arab refugees fleeing civil wars and security unrest in their country.

“The amendments to the Nationality Law will favor affluent Arab and Syrian refugees. Refugees in Egypt are prohibited from engaging in many business activities such as establishing pharmacies, newspapers and some other types of companies. Once the amendments are effective, many Syrians who wish to invest in these fields will be able to do so and get Egyptian citizenship in return,” Ghamri said.

Osama Rushdy, a lawyer specializing in the incorporation of companies and representing many foreign investors, denounced attempts to link the amendments to the “deal of the century” or the Syrian crisis. He argued that the amendments aim to promote the Egyptian investment climate and make investing easier.

“Many refugees in Egypt are unable to invest because of their status as refugees, since they don’t have permanent residency. Giving them Egyptian citizenship is the best way to secure permanent residency,” Rushdy told Al-Monitor.

“The old and current investment laws don’t allow foreign investors to incorporate specific types of companies except in cases of Egyptian partnerships such as those with limited shares, with 49% of the shares held by Egyptians. This [high] percentage of shares could force the foreign investor to accept interventions by one or more unwanted Egyptian partners,” he said.

Rushdy added, “It’s better for foreign investors to obtain Egyptian citizenship to facilitate investment and business procedures.”

Source: Egypt considers pros, cons of foreign citizenship changes

Should Citizenship Be For Sale?

While this article has a good discussion of citizenship approaches, I am not convinced by his closing arguments that “citizenship for sale” doesn’t matter, as Canada’s experience with various immigrant-investor program attests:

As the Investment Migration Council prepares to gather in Geneva for its annual Forum, it is worth inquiring into the legitimacy of the burgeoning industry of investment migration. Given that the idea relates primarily to some of the world’s wealthiest people, some have been skeptical. But is it wrong to sell citizenship to high bidders? An answer requires an exploration of what citizenship is.

We tend to think of citizenship in either mundane or exalted terms. In everyday parlance, citizenship simply refers to the country whose passport one carries. The more exalted notion goes back to the ancient Greeks, who regarded citizenship as forming the basis of civilized life. Citizens took turns ruling and being ruled.

More recently, citizenship has been understood as a gateway to various kinds of rights—civil rights (equality before the law), political rights (the vote), and social rights (education, social insurance, and social services). The political philosopher Hannah Arendt famously called citizenship “the right to have rights.”

But how does one acquire citizenship? Aristotle noted more than 2000 years ago that there were two principal methods: by descent from citizen parents and by birth on the soil of a given country. But it is important to note that the acquisition of citizenship is generally a mere accident of birth. In that sense, it is out of step with our modern notion that one’s status should be “achieved,” not “ascribed.” Citizenship is thus a deeply illiberal institution; it rewards some and punishes others on the arbitrary basis of where or to whom they were born.

Of course, there is a third route to citizenship: naturalization. Most of the debate about citizenship revolves around this path, because it is the only one that involves choice–on the part of both the individuals and the countries in question.

Countries must first determine who among non-citizens they are prepared to allow in. Most developed countries have shifted from privileging ethnic, racial, or family connections in their immigration policies to schemes that give preference to those with desired skills who can be expected to contribute to the economy. For example, Canada has a “points system” that determines whether a large share of would-be immigrants will be admitted into the country. The United States is an outlier in that it still gives about two-thirds of its immigration visas to family members of people already in the country.

Once the matter of who is allowed in is resolved, there is the question of who is allowed to naturalize and become a citizen. Typically, a minimum period of residency is required. Some countries also require knowledge of a dominant language, of the country’s political system, or of its culture. A country may offer a “fast track” to citizenship for those who perform military service. Finally, some countries offer the opportunity to naturalize to those who agree to invest in the target country. They would normally commit to investing a certain amount of money and/or to creating a certain number of jobs over a specified period of time. This is the so-called “investment migration” on which the meeting in Geneva focuses.

Such a scheme gives those with lots of money an unearned advantage over other would-be immigrants. And immigrants-by-investment may not feel much obligation to the country whose citizenship they buy. But then natives of a country may not do much to fulfill what we may think of as the obligations of citizenship, either.

Native-born citizens may not vote, for example. The United States does not require people to vote, and only 55% of eligible voters cast ballots in the historic 2016 presidential contest. Voting is thus more of a privilege than a duty of citizenship. As a result, some countries (such as Australia) may require citizens to vote on pain of a fine, but not all countries with compulsory voting laws actually enforce those laws.

Then there’s military service. The notion of the “citizen-soldier” has long been seen as close to the heart of what it means to be a citizen. But in the post-World War II period, many of the world’s wealthiest countries have abandoned conscription in favor of professional militaries. The citizen-soldier model has also declined in favor of techniques of warfare involving few warriors—the rise of special operations, the use of remotely-piloted drones, autonomous weapons, and the like.

Finally, citizens must pay taxes. But all workers, insofar as their economic activities are captured by the government, must pay taxes as well. In economic terms, presence on the territory is more significant than citizenship when it comes to tax obligations. In the United States, illegal immigrants pay substantial amounts of taxes every year; they even pay some $15 billion per year into Social Security, despite being ineligible for Social Security themselves. So immigrants often subsidize the native-born citizen population, even if they are in the country illegally.

Against this balance sheet, it’s not easy to see why investment migration should be regarded as a major problem. It has, to be sure, been used in small, poorer countries as a way to boost their economies without truly developing them. And there have been cases of fraud. But there’s plenty of that among native-born populations as well. Immigration and citizenship policies are part and parcel of a country’s broader array of concerns and tools regarding the well-being of its population.

What’s missing is the traditional concern with common citizenship—the institutionalized commitment to promoting a shared community of fate. With military service declining as an avenue for demonstrating such solidarity, it may be time to pay more attention to ideas regarding national service. Those have in the past done much to help sustain a sense of common membership, and they could do more in the future.

Source: Should Citizenship Be For Sale?

PEI’s immigration record in spotlight after family caught in crackdown left picking up pieces of their lives

The day started out as an ordinary Wednesday. Ping Zhong was doing the breakfast dishes. Her daughter, about to leave for work, opened the front door. What awaited on the other side shocked Ms. Zhong.

The step was crowded with armed, dark-clothed officers. They wanted in.

Panic began pounding so hard in her ears that Ms. Zhong, then 58, could hardly hear the explanation for why she was being arrested. “I do have good English, but I really did not understand their words – ‘abetting’ and ‘inducing,’ ” said Ms. Zhong, who has lived in Charlottetown for nearly 30 years. “A lady showed me the paper. I was so shocked and confused and terrified.”

The paper was a judge-issued warrant giving federal officers permission to arrest Ms. Zhong and search her home, vehicles and the Sherwood Inn and Motel, which her family runs for secondary income. Officers led Ms. Zhong to an unmarked car and she buried her hands in her winter coat, hoping to hide her handcuffs from the neighbours.

Ms. Zhong said her 2016 arrest was a bewildering experience.

On that day in February, 2016, federal border-security investigators believed they had uncovered the biggest immigration fraud scheme in Prince Edward Island’s history. More than 500 immigrants who applied for permanent residency had used street addresses traced to Ms. Zhong and her hotel on their government immigration forms. The reason for doing so was to create “the illusion they are living in Canada” while actually living elsewhere, according to allegations outlined in the warrant.

Ms. Zhong and her brother, Yi, appeared to be “integral players” who made “a business” out of helping pull off the hoax, investigator Lana Hicks wrote.

Criminal charges were filed against the Zhongs; when their case became public last spring, its revelations exposed the province’s vulnerability to immigration abuse. Specifically spotlighted was an arm of PEI’s immigration program that allowed qualifying immigrants permanent-residency cards before they actually moved to the island. It also raised questions about whether locals – including the Zhongs – were cashing in by helping permanent-resident immigrants skirt provincial rules that required them to live in PEI, rather than elsewhere in Canada.

The Zhongs pleaded not guilty. PEI nonetheless shuttered the suspect arm of its immigration program. It was the third time in a decade the province closed an immigration stream subject to allegations of abuse.

Then, four days into the Zhongs’ December trial, a federal prosecutor unexpectedly asked for a stay of proceedings. The Crown has the rest of this year to decide whether to pursue its charges. However, PEI Premier Wade MacLauchlan said the case, which has raised concerns about the treatment of immigrants on the island, “probably should have been thrown out.”

“It was like the Crown didn’t want to admit that they can’t win,” said Lee Cohen, Ms. Zhong’s Halifax-based human-rights lawyer. Meanwhile, he said, “Ping and Yi are left holding the tatters of their lives.

While PEI recently boasted the country’s top immigration rate, the province has historically struggled to retain immigrants who are attracted to the opportunities and diversity in more populated regions.

In 2012, to combat the drain, the province created a new immigration stream for higher-net-worth immigrants that would grow to be its most popular means of entry. Called the “100% Ownership Stream,” the program granted its nomination for residency to immigrants who paid a $200,000 escrow deposit. The nomination is technically made to the federal government, which has final say on immigration approvals.

PEI’s program was then unique in Canada. Other provinces commonly require immigrants to work via a permit for one year before granting a permanent-residency nomination. PEI’s program allowed immigrant investors to get that status early and without proving they had moved to the island.

The caveat was this: Immigrants in the Ownership stream could only get back their $200,000 deposit if, after two years, they could prove they resided on the island and had opened a business.

Results were mediocre.

Between 2014, when the province began issuing refunds, and 2018, when the program was shuttered, more deposits were forfeited by newcomers than refunded, according to data provided to The Globe and Mail by Island Investment Development Inc. (IIDC), the Crown corporation that manages immigration on PEI.

“Some of those defaults were for people that were not residing here, unfortunately,” said Jamie Aiken, executive director of the IIDC.

The upside, though, was a $40-million boon to provincial coffers.

But Mr. Aiken said that the revenue gains pale in comparison with the positive effect that having more immigrants stay long term would achieve. The reason the province shuttered the program last fall, he said, was that a program review deemed its high default rate ineffective. The new program that replaced it only awards permanent-residency status after immigrants have spent a year on PEI.

The province made this change not long after the Zhongs were charged with defrauding the system. However, Mr. Aiken said the Zhong case did not affect the province’s decision, dismissing the timing as coincidence.

Nevertheless, the timing raised suspicions on the island. Perceptions of PEI’s immigration program have been darkened by long-standing accusations of improprieties that have stretched over more than a decade.

“The waters are really muddy on PEI because people can’t get past what happened 10 years ago,” said Andrew Sprague, a senior communications official with PEI’s Department of Economic Development and Tourism.

Then, PEI was offering provincial nominations for residency to a different stream of entrepreneurial immigrants who agreed to invest roughly $200,000 in an island business – one they did not own or have any part in choosing – and live in the province for one year.

The program was criticized as a cash grab that lacked transparency (the province never disclosed which Islanders’ businesses received immigrant money). Many immigrants who came through the program left the island when their one-year pledge expired.

In response to the criticism, Ottawa announced plans to tighten the program’s rules. PEI approved a plan to rush through a final set of 2,000 applications, flooding businesses with $400-million in foreign cash. Provincial legislators refused to release a list of which Island businesses benefited. But in a 2009 report, the province’s auditor-general expressed concerns many of the companies that did have ties to elected provincial officials, deputy ministers or their families.

Whistle-blowers and the federal government called for an inquiry, leading both the RCMP and the Canada Border Services Agency (CBSA) to launch investigations. But in 2012, both agencies announced there was insufficient evidence to lay charges.

The province shuttered the suspect program that year. In its place, they brought in the escrow deposit system.

Having what law enforcement calls an “address of convenience” is “an essential element” of any provincial nominee’s scheme to commit residency fraud.

Lana Hicks, a 20-year investigator with the CBSA, explains this in an application filed last year in PEI for a search warrant to raid one such suspect address. She also sets out how she uncovered what appeared to be the biggest cases of immigration and residency fraud in PEI’s history.

She stumbled onto it by accident. In 2015, in the midst of an investigation into a suspected watch smuggling, Ms. Hicks dialled a phone number linked to a PEI address that a pair of Chinese immigrants had given border-security agents.

Ms. Hicks assumed she was dialling the residential address of her person of interest.

“A male answered the phone: ‘Sherwood Inn,’ ” Ms. Hicks reported.

Her curiosity piqued, Ms. Hicks went on to discover that 566 immigrants who had applied for permanent residency on PEI had given border-security agents the same two street addresses as their places of residence. Ms. Hicks traced one of the addresses to the Sherwood Inn and Motel and the other to Ms. Zhong – one of the motel’s co-owners.

The sheer volume of people who used the addresses was “extremely high and suspect,” Ms. Hicks wrote in her application for a warrant to search for more clues. “Based on my experience, the numbers go well beyond assisting a couple of friends,” she wrote, adding that her findings appeared to indicate “a very well-established, organized fraud.”

An advertisement for the hotel on a Chinese-language website Ms. Hicks found offered “pick-ups, bank procedures, medical care” as well as help with schooling, housing contacts and more. In her warrant, Ms. Hicks raised this as a red flag, because it “advertises services outside the scope of what is ordinarily seen for a motel.”

To collect information for the warrant, Ms. Hicks had placed surveillance on the Sherwood, Ms. Zhong and her brother, also a part-owner.

Covert investigators followed Mr. Zhong as he picked immigrants up at the airport, chauffeured them around Charlottetown, delivered them to the provincial immigration offices, to Service Canada for driver’s licensing, to banks and schools. Mr. Zhong routinely stopped his van to allow guests to get out and take pictures, including in front of Holland College, where immigrants take English language courses, and other landmarks.

Mr. Zhong sometimes took guests to other hotels instead of the one he owned, an act that raised surprise and suspicion in Ms. Hicks, who questioned Mr. Zhong’s motivation given “it doesn’t even appear that the owners are benefiting from permanent residents staying at their motel.”

When he took one family that was not staying at the Sherwood Inn for a short visit to his hotel on their way back to the airport, it was another red flag to investigators. They believed, Ms. Hicks wrote, that those short stops – which involved some immigrants who had already gained permanent-residency status – were for the purpose of allowing the permanent residents to arrange to have their mail forwarded to the hotel – an “address of convenience” – while they actually went to live elsewhere.

Bolstering this hunch was the fact that investigators’ garbage grabs had found discarded envelopes addressed to a range of individuals.

“I believe that the Sherwood Motel and the owners have made a business of providing this service,” Ms. Hicks wrote, describing her theory. That included the belief that Mr. Zhong’s downtown tours with immigrants – and the photo stops he repeated with so many families – were to help those who had permanent residency, but planned to live elsewhere, collect “some photos in case they were questioned as proof of residency.”

With her search warrant granted, Ms. Hicks had part of her team arrest Ms. Zhong at her home on the morning of February 17, 2016, while others went in search of her brother, who lived at the Sherwood Motel. After breaking down one of the hotel doors, the officers would learn that Mr. Zhong was in China for an annual visit.

What they did find in the motel’s office, though, were a few documents they later submitted as evidence to bolster their theory that immigrants were coming to the hotel for more than rooms to stay in.

Written in Chinese, applications for “Basic Settlement Services” were found printed with names of some former guests and branded by a Vancouver-based immigration consultancy called “Can-Achieve.” While the forms did not actually list the Sherwood Inn or the Zhongs, telephone numbers printed beside the heading “Prince Edward Island Hot Line for Meeting Plane” belonged to the Sherwood and to Ms. Zhong’s husband, Cheng Dong.

More than two years after the February raids, the siblings were charged with helping seven permanent residents and their families commit residency fraud between 2010 and 2013.

That number was far fewer than the 500 or so investigators suspected the Zhongs of helping in their initial search warrant. Still, the evidence underpinning the charges, filed as part of the trial proceedings last December, numbers in the thousands of pages.

Most of those documents are permanent-residency applications that belong to families the Zhongs are alleged to have assisted. They are partly redacted to protect the privacy of some of those applicants. However, they shed light on the wide spread of “immigration intermediaries,” agents and consultants that immigrants hire to help with various points of their journey to become permanent residents in Canada. Ms. Hicks noted in her warrant application that “there are many opportunities in the process where misrepresentation or fraud can occur.”

What the file does not contain, despite its heft, are any documents that show contracts or formal agreements between the Zhongs and the families they stand accused of helping. No documents show a deal between the Zhongs and the immigration consultancies listed in the files, nor do they show evidence that the Zhongs ever received money from anyone for anything other than the rental of their hotel rooms.

The siblings’ trial lasted just four days before Crown prosecutor Caroline Lirette asked the judge to stay proceedings. Ms. Lirette said in an e-mail that her office “does not provide reasons” for requesting a stay.

But to Mr. Cohen, the Zhongs’ lawyer, the explanation is simple. “The reason is there are no dots they can connect that would get a conviction,” he said. “They can’t prove it because there is no evidence. It does not exist. They simply relied on the optics.”

If she’d had the chance to testify in court, Ms. Zhong would have told the story of what it was like when she came to Canada.

There were very few Chinese people in Charlottetown when Ms. Zhong arrived as a temporary teacher in 1989. She loved the island, though, and three years later, her husband, a university professor, and their young daughter left the eastern Chinese city of Zhenjiang to join her. A dozen or so members of her extended family trickled out afterward.

Ms. Zhong worked then (and does now) as a teaching assistant with special-needs students; her friendship with another teacher led to a joint purchase of the Sherwood Inn and Motel. Ms. Zhong said she is proud that it made her the first Chinese immigrant to own a hotel on the island.

Through the hotel, Ms. Zhong said her family was determined to show newcomers the same sort of kindness that they once received. Some even asked the Zhongs to pick them up at the airport, but deliver them to competing hotels – nicer properties than the bare-bones Sherwood – and to translate for them, which the Zhongs did, usually for free.

Ms. Zhong said her family never refused a request and never charged anything extra for their services beyond the cost of their hotel rooms.

“We appreciated the help we got when we arrived on the island. We thought this was something we could do to make newcomers feel welcome … to make their lives easier,” she said.

When newcomers began to ask if they could use the hotel’s address to receive mail, including citizenship documents and permanent-residency cards, while they were in other parts of Canada or out of the country, Ms. Zhong agreed. Ms. Zhong even allowed the use of her personal home mailing address to some immigrants who felt concerned about having their mail sent to the hotel.

“You know, [I] didn’t think much of it,” Ms. Zhong told Ms. Hicks during their initial, 2016 interview. “We trust people so much.”

The opportunity to make a little bit of extra money from helping needy newcomers arose when a man Ms. Zhong described as Taiwanese showed up at the Sherwood some time in the late 2000s. Ms. Zhong cannot recall the man’s name, but said he told her he was affiliated with an immigration agency called Can-Achieve, based in Vancouver, which had a stream of clients moving from China to Charlottetown and who needed settlement help. (An e-mailed request for comment to Can-Achieve was not met with a response.)

“He said, ‘Maybe we can send you some people,’” Ms. Zhong said, recalling the man said he could pay her $100 to $150 a family. It was a handshake deal; nothing was written down.

“I didn’t see any problems,” Ms. Zhong said. “I was already doing this for people for free.”

The agreement with Can-Achieve turned out to be poor and short-lived.

Ms. Zhong, who manages the hotel’s account book, only recouped some of the money from her brother’s efforts ferrying around the newcomer clients that came via the company (she said she does not have a record of exactly how much). Her final call to Can-Achieve was some time in the late 2000s, a follow-up on hundreds of dollars’ worth of unpaid tabs.

“They refused to pay us. The woman on the phone said they changed ownership,” Ms. Zhong said, adding that she has no record of whom she spoke with or when the call took place.

This, too, she would have liked the chance to explain in court.

She also would have said that when newcomers’ mail was coming to her house and the hotel, she never considered that the people who asked her to forward their mail might be committing residency fraud.

“I was too naive,” she told The Globe. “I should not have let them use our address. There are always some bad apples that will take advantage, but we did not know.”

Ms. Zhong will have to wait out the year to see whether the Crown will make another attempt to test her in court. Business has suffered as word of the case spread to China; plans to expand the Sherwood are on hold. Memories of the raids come back to Ms. Zhong in nightmares, she said. Her brother, too, struggles with sleep.

Mr. Cohen, the lawyer, said the case is a reminder that appearances are not always what they seem.

“Looking suspicious is not the standard of proof,” he said. “But for the fact that their motel address was used – and there are easy explanations for that – there is no evidence whatsoever connecting Ping or Yi to any kind of collaboration.”

His clients were “mischaracterized,” he said, adding: “What they have done is absolutely legal and generous and noble.”

Led by Ms. Hicks, the CBSA conducted more raids last summer in Charlottetown on a pair of homes owned by a Chinese immigrant and business person. The warrant application contains similar allegations to those made against the Zhongs, including the suggestion that the individual provided a “homestay” and addresses of convenience for more than 400 new immigrants.

More than six months later, no charges have been filed (for this reason, The Globe has chosen not to name the individual, who declined to be interviewed), and it is not clear if they will be. In a statement, the CBSA told The Globe the agency does not discuss its investigations.

Source: PEI’s immigration record in spotlight after family caught in crackdown left picking up pieces of their lives

Number of UAE expats prepared to spend a fortune for a second passport surges 30%

More on citizenship-by-investment and the incentives for expatriates in the Gulf who have no pathway to citizenship to pursue options:

There has been a huge increase in the number of wealthy expatriate residents in the UAE who are willing to spend hundreds of thousands to millions dirhams in exchange for a second passport — and the privilege to travel the world freely — despite allegations of fraud against some immigration firms.

In 2018, requests made in the UAE to obtain an alternative citizenship went up by 30 per cent compared to the previous year, according to Citizenship Invest, a Dubai-based company.

The bulk of these applications are from Asian and Middle Eastern nationals residing in the UAE, with Syrians topping the list and accounting for 14 per cent of total demand.

Many Pakistani nationals are also interested in acquiring residency rights from other countries, with their applications accounting for 12 per cent, followed by Indian residents at ten per cent and Egyptians at nine per cent.

Gulf News reported this month that some agencies that facilitate applications for Caribbean passports have been accused of forging documents and circumventing legal requirements to obtain a citizenship.

Second passports, particularly those that provide visa-free entry to over a hundred destinations, including those in the Schengen and European Union states, have gained popularity in recent years.

They don’t just enable holders to enjoy much more global mobility or travel freedom, but tax privileges and better security as well. They are particularly in demand among citizens in certain countries who face a lot of passport restrictions

Second passports are being offered by countries like Cyprus, Malta and those in the Caribbean in exchange for an investment in the local economy, including real estate.

Many of such programmes enable investors to legally obtain residency or citizenship rights in less than six months without having to move outside the UAE, but they come with a hefty cost, and in many cases, an applicant needs to set aside between Dh360,000 to more than Dh5 million.

According to Citizenship Invest, second passports remain an attractive option for many foreigners based in the UAE, especially since some states offering alternative citizenship have slashed their fees.

Veronica Cotdemiey, CEO of Citizenship Invest, said that while the Caribbean citizenship programmes are still popular, many applicants in the UAE are also exploring options in other countries, such as Moldova and Cyprus.

“Since its launch in late 2018, Moldova has been receiving a lot of interest from expats residing in the UAE. As for European citizenship, Cyprus is still the most attractive fast-track option for the ultra-rich,” Cotdemiey said.

St. Kitts & Nevis and Antigua & Barbuda have recently reduced their application costs by 50 per cent. Those who want to obtain a St. Kitts passport will now be required to make a financial contribution of $150,000 for a single applicant, and $175,000 for a couple. In Antigua, an investment of $125,000 for a family of up to four members is required.


  • Expatriates in the UAE who have money to spare are not just splurging on cars, yachts or apartments – they’re spending a fortune on a second citizenship

  • Second passports are increasingly being sought after in this part of the world, as expatriates seek more global mobility or travel freedom

  • Those who have been fortunate to secure a second citizenship are saying goodbye to a life of queues at immigration counters and consulates, and most importantly, from the constant fear for security

Source: Number of UAE expats prepared to spend a fortune for a second passport surges 30%

Arton Capital Partners With EnterPH, Enticing More Filipinos To Global Citizenship

Arton keeps expanding its services and trying to spin its services as “shaping a sustainable and responsible environment.” Who writes this kind of puffery? And does anyone actually believes it?:
“With the growing number of Philippine companies entering business in different parts of the world, we are very honored to work with Arton Capital to empower Filipinos with the flexibility and mobility to become global citizens,” said EnterPH President Atty. Rocky Chan.
The partnership between the two bodes well for future clients, who can expect the best of both worlds. Arton Capital brings its international knowledge and experience to the table, while EnterPH possesses a mastery of the local business landscape.Arton Capital was founded by Armand Arton, who also serves as the company’s president. A visionary entrepreneur and philanthropist, Arton has extensive background serving the specialized needs of high net worth investors around the world. Arton is a staunch ambassador of the global citizen movement, seeking to involve global citizens in shaping a sustainable and responsible environment.

© 2018 Arton Capital. This is not a legal document and is provided for information purposes only. Visa-free travel count is provided by the Passport Index. Cost estimates are for a family of 4 (MA+SP+2DEPs 12-17). Arton Capital is not responsible for any content or information illustrated in this document as market conditions are subject to change without prior notice. 2018-02
© 2018 Arton Capital. This is not a legal document and is provided for information purposes only. Visa-free travel count is provided by the Passport Index. Cost estimates are for a family of 4 (MA+SP+2DEPs 12-17). Arton Capital is not responsible for any content or information illustrated in this document as market conditions are subject to change without prior notice. 2018-02

The Global Citizen Foundation is committed to making a difference by reaching out to children and young people who are in need. They are focusing on education, but also lending a hand and contributing to the next generation of leaders and education policy worldwide.

“We live in the age of global citizens,” said Arton in a TEDx Talks session he gave recently. “As global citizens, the only boundaries we have are the way we see ourselves and the way we see each other.”

Arton Capital takes its leadership position in the global citizenship movement seriously. The company curates the Global Citizen Forum, a platform that brings together visionaries and global leaders.

The company is also a founding member of the Global Investor Immigration Council (GIIC), a group that whose mission is to establish best practices and foster sustainable and responsible industry governance; as well as a co-founder of the Global Citizen Foundation, which aims to contribute to the development of the next generation of leaders and enriching education policies worldwide.

“The place where we were born does not dictate who we are, where we can go, or what we can become. When we limit human mobility, we’re restricting the use of one of the most important growth tools humanity has at its disposal,” said Armand Arton.

Source: Arton Capital Partners With EnterPH, Enticing More Filipinos To Global Citizenship

Questions and Answers on the Report on Investor Citizenship and Residence Schemes in the European Union

Useful reference material on citizenship and investment immigration schemes:

Questions and Answers on the Report on Investor Citizenship and Residence Schemes in the European Union

1. Investor citizenship (“golden passport”) schemes

What are investor citizenship schemes?

Investor citizenship schemes are often referred to as “citizenships for sale” or “golden passports”.  They allow foreigners to be naturalised as a citizen of a country in return for an investment, provided certain criteria are fulfilled. Bulgaria, Cyprus, and Malta operate such schemes, where investors are required to invest between EUR 800,000 to EUR 2 million.

What is the EU’s competence in the area of nationality law?

It is for each Member State to lay down the conditions for the acquisition and loss of its nationality. However, these schemes are of common EU interest since every person holding the nationality of a Member States is at the same time a citizen of the Union. The European Court of Justice has found that, while it is for every Member State to lay down the conditions for the acquisition and loss of nationality, they have to do so with due regard to Union law. Member States must therefore take into account all rules that form part of the EU legal order, including international law, which requires a “genuine connection” between the State in question and the person that is granted citizenship.

The Commission’s report focusses on the naturalisation schemes that are classified as investor citizenship schemes, which are a new form of naturalisation that systematically grant citizenship based on an investment.

What is the problem with investor citizenship schemes?

Investor citizenship schemes create a range of risks for Member States and for the Union as a whole: in particular, security risks, risks of money laundering and corruption and tax evasion.  Such risks are exacerbated by the cross-border rights associated with citizenship of the Union.

The report found that applicants are often granted citizenship without any physical residence in the Member States concerned and without any genuine link to them.  The report also identifiesconcerns that the security checks applied to applicants for investor citizenship may not be robust enough and that Member States do not consult each other on applicants for investor citizenship, and do not inform each other of rejected applicants.  The report found certain grey areas in the application of anti-money laundering legislation, since agencies operating these schemes do not fall under the EU’s anti-money laundering requirements.

In addition, the transparency surrounding investor citizenship schemes is very limited: it is not always clear who applies for these schemes, who obtains the citizenship (and hence EU citizenship) and how the money raised by such schemes is spent.

How can such schemes pose money laundering risks?

The 4th Anti-Money Laundering Directive requires financial institutions and other entities (“obliged entities”) in the EU to perform customer due diligence checks. The 5th Anti-Money Laundering Directive, which entered into force on 9 July 2018, introduced an amendment requiring enhanced customer due diligence on nationals from third-countries who apply “for residence rights or citizenship in the Member State in exchange of capital transfers, purchase of property or government bonds, or investment in corporate entities in that Member State”.  Member States must transpose the Directive by 10 January 2020 at the latest and the Commission is working with them to ensure correct full and correct transposition.

Member States also have to ensure that the application of the EU rules on anti-money laundering are not circumvented under investor citizenship or residence schemes: Member States should ensure that funds paid by investor citizenship and investor residence applicants are channelled through bodies that qualify as “obliged entities” under the Anti-Money Laundering Directive.

In addition, Member States are encouraged to take into account the potential risks of money laundering linked to investor citizenship and residence schemes in their national risk assessments carried out under the EU anti-money laundering rules and take the necessary mitigating measures.

What has the Commission proposed as next steps regarding investor citizenship schemes?

The Commission will set up a group of experts from Member States that will work to address the specific risks posed by investor citizenship schemes.  It will also address the transparency of investor citizenship schemes and of discretionary naturalisation procedures, which permit acquisition of citizenship based on investment.  The group of experts shall put in place procedures for the exchange of information and statistics on such schemes, including the exchange of information concerning applicants whose applications for citizenship have been turned down in one Member State on grounds of posing a security risk.  Finally, the group should develop by the end of 2019 a common set of security checks for investor citizenship schemes, including risk management processes that take into account security, money laundering, tax evasion and corruption.

Is there a link between investor citizenship and residence schemes?

In some cases, investor residence schemes may facilitate the acquisition of citizenship.  In particular, a residence permit acquired by investment can be used under some Member States’ ordinary naturalisation procedures to provide fast-track access to permanent residence and then citizenship. In countries which have both citizenship and residence investor schemes, the investment required for the residence scheme may be taken into consideration to qualify for the investor citizenship scheme.

In addition, both schemes pose similar risks in terms of security, money laundering and tax evasion.

2. Investor residence (“golden visa”) schemes

What are investor residence schemes?

Investor residence schemes – often referred to as “golden visas” – grant a right of residence on a Member States’ territory to third country nationals on the basis of investment in the country.  They are issued at national level, and therefore do not entitle the permit holder to reside outside the issuing Member State. They do entitle the holder, however, to travel freely within the Schengen zone for a maximum of 90 days in any 180-day period. Currently, 20 Member States run such schemes: Bulgaria, Croatia, Cyprus, Czechia, Estonia, France, Greece, Ireland, Italy, Latvia, Malta, the Netherlands, Poland, Portugal, Slovakia, Spain and the United Kingdom.

What is the EU’s competence as regards investor residence schemes?

Residence permits for foreign investors are not regulated at EU level and remain governed by national law. EU law regulates the entry conditions for specific categories of non-EU nationals (for example students and researchers, seasonal workers and intra-corporate transferees).

What type of investments are required under these schemes? 

Residence investor schemes have very different features, particularly as regards the nature and amount of investment. Investment amounts can range from EUR 13,500 to over EUR 5 million in the form of capital investment, investment in immovable property, investment in government bonds, or donations to an activity contributing to the public good charity or one-time contributions to the national budget. These options are not mutually exclusive, and some Member States allow for different types of investment and their combination.

What are the main risks of investor residence schemes identified by the Commission?

  •     Security risks: In a Schengen area without internal border controls, it is particularly important to ensure that the commonly agreed security checks are fully implemented, for example through centralised information systems such as: the Schengen Information System (SIS); the Visa Information System (VIS); EURODAC and the newly established Entry/Exist system (EES); and the Electronic Travel Information and Authorisation System (ETIAS). Member States must ensure that investor schemes do not undermine and jeopardise these security efforts by allowing them to circumvent these security checks. The Commission’s report has identified both a lack of available information and an important level of discretion in the way Member States approach security checks. For these reasons, the Commission will closely monitor compliance of existing investor residence schemes with EU law to ensure that all obligatory existing border and security checks are systematically and effectively carried out by Member States.
  •     Money laundering: Member States should ensure that funds paid by investor citizenship applicants are assessed according to the EU anti-money laundering rules. This includes enhanced customer due diligence checks on non EU-nationals who apply for residence rights and, as with other higher risk financial transactions or activities, full transparency around the residence schemes to ensure the integrity of funds entering the Union financial system. Member States should also ensure that authorities running investor residence schemes have an obligation to check the origin of funds in investors’ schemes.
  •     Impact on EU law on legal migration: Residence permits obtained by investment but with limited or no required physical presence of the  investor in the Member State in question could have an impact on the application of and rights associated with the EU Long-Term Residence Status. In the absence of an effective monitoring of continuity of residence, investors considered to be residing in a Member State on the basis of a national permit for five years could acquire EU Long Term Resident status and subsequent rights, in particular mobility rights, without fulfilling the actual condition of continuity of residence for five years. This would not be compliant with the Long-Term Residence Directive.
  •     Fast-track to citizenship: Sometimes, a residence permit obtained by investment and without requiring any physical presence may provide fast-track access or a link to permanent residence and then citizenship. In Member States that have both investor citizenship and residence schemes, the investment required for the residence scheme may be taken into consideration to qualify for the investor citizenship scheme.
  •     Tax evasion: There is a risk that the use of investor residence schemes may facilitate abuse as the documentation issued under some of these schemes can make it difficult for financial institutions to correctly identify the legitimate place of tax residence. This is whyMember States should make use of the available tools in the EU framework for administrative cooperation in the context of tax avoidance, in particular for exchange of information.

What has the Commission proposed as next steps regarding investor residence schemes?

The Commission will monitor compliance by Member States with EU law, in particular, with existing EU legal migration and family reunification rules, as well as existing rules regarding the use and implementation of the EU’s migration, border and security information systems.

What are the risks of investor citizenship schemes run by third countries that have a visa-free regime with the EU? How can they be mitigated?

Acquiring the citizenship of a third country, which has visa-free access to the EU for short stays, can permit nationals who require a visa to enter the EU to circumvent the regular Schengen visa procedure and the in-depth assessment of individual migratory and security risks it entails.

However, since April 2017 such risks are mitigated as all travellers, including those that do not require an EU visa, are checked at the EU’s external borders as to whether they fulfil the entry conditions, including by carrying out checks in the Schengen Information System and Member States’ national databases. If there are indications that a traveller could pose a risk to internal security or public policy of any of the Member States, entry could be refused. New information systems such as the European Travel Information and Authorisation System (ETIAS), and the Entry/Exit System (EES) will further contribute to enhancing effective checks of non-EU travellers.

In addition, in March 2017, a revised and strengthened visa suspension mechanism entered into force. It provides for new grounds for the temporary suspension of visa liberalisation, including where the third country in question by its actions – or inaction – is endangering the public policy or internal security of the EU Member States. It applies horizontally to all third countries whose citizens enjoy visa-free access to the Union. The Commission will monitor the impact of investor citizenship schemes implemented by visa-free countries as part of this mechanism.

What will the Commission do to mitigate the risks of investor residence and investor citizenship schemes operated by candidate countries and potential candidates?

In view of the risks inherent in investor citizenship schemes, the Commission will monitor citizenship investor schemes as part of the EU accession process. The countries concerned will be expected to have robust monitoring systems in place, including systems to counter possible security risks such as money laundering, terrorist financing, corruption and infiltration of organised crime linked to any such schemes.

What will the Commission do to mitigate the risks of investor residence and investor citizenship schemes?

The Commission will monitor wider issues of compliance with EU law raised by investor citizenship and residence schemes and it will take necessary action as appropriate. For this reason, Member States need to ensure, in particular, that:

  •          All obligatory border and security checks are systematically carried out;
  •          The requirements of the Long-Term Residence Permit Directive and the Family Reunification Directive are properly complied with;
  •          Funds paid by investor citizenship and residence applicants are assessed according to the EU anti-money laundering rules;
  •          In the context of tax avoidance risks, there are tools available in the EU framework for administrative cooperation, in particular for exchange of information.

The Commission will monitor steps taken by Member States to address issues of transparency and governance in managing these schemes. It will establish a group of experts from Member States to improve the transparency, governance and the security of the schemes. That group will be tasked, in particular, with:

  •      Setting up a system of exchange of information and consultation on the numbers of applications received, countries of origin and on the number of citizenships and residence permits granted/rejected by Member States to individuals based on investments;
  •      Developing a common set of security checks for investor citizenship schemes, including specific risk management processes, by the end of 2019.

Finally, concerning third countries setting up similar schemes, which may have security implications for the EU, the Commission will monitor investor citizenship schemes in candidate countries and potential candidates as part of the EU accession process. It will also monitor the impact of such schemes by EU visa-free countries as part of the visa-suspension mechanism.

What are the risks of tax evasion linked to these schemes?

While the underlying study did not look into tax aspects related to investor citizenship and residence schemes, it seems that very few of the schemes include provisions with the explicit purpose of avoiding or evading tax. That said, a risk of potential aggressive tax planning and evasion can be created when individuals partaking in the schemes are abruptly granted new or additional citizenships which may help to obscure the actual tax residence of the individual, leading to the tax rules in their original country to be circumvented. Schemes in countries which do not tax the income, or tax it at a very low rate, carry a greater risk of account holders hiding evidence of the real state of residence and thereby evading tax. In particular, some EU citizens may deliberately evade taxation in their EU State of residence by acquiring citizenship and declaring themselves tax resident in countries where enforcement of certain requirements is less strict than in others. EU financial institutions may  be less familiar with schemes in place outside the EU in order to evaluate their relevance. Documentation issued under some of these schemes may also make it very difficult for financial institutions to identify correctly the legitimate places of tax residence.

What can be done to limit these tax risks?

EU countries that offer investor citizenship and residence schemes are already subject to strict EU transparency rules that came into force in 2014 and which ensure that all Member States exchange information with each other on the financial accounts held by EU citizens from other countries. These transparency rules have in recent years been significantly extended to include a wealth of other information. Most recently, the rules have been supplemented with new reporting provisions for tax intermediaries (factsheet) who offer advice that could lead to tax evasion or fraud. At the same time, EU level networks of fraud investigators have also been strengthened to enable professionals from all Member States to exchange more information and best practices.

However, there are a number of actions could be taken outside of the EU’s tax transparency framework to minimise the risk of tax evasion when it comes to citizen investorship schemes such as considering the issues they raise for tax purposes in the work being carried out by Member States in the Council to reform the Code of Conduct for business taxation and whether the risks posed merit the inclusion of these issues in the criteria on which the EU’s list of non-cooperative tax jurisdictions is based.