Golden Visa Business, Alive and Well?
Recent editions from the British Airways “High Life” magazine have included an insert from St Kitts and Nevis that reads initially as an offer of a warm winter break – “The Perfect Winter Destination”. Its proposition for citizenship is dressed up as an ecology play: a contribution to the “Sustainable Growth Fund” is presented as “a faster, less complicated path to receiving citizenship”. It is cheap as well: US$205,500 for a group of four, including a nominal US$11,500 for so-called “Due Diligence”. The benefit is the fact that St Kitts and Nevis levies no personal income tax.
The Paradise Papers and the Panama Papers have focused attention on two other jurisdictions and on the common objective of tax-reduction. They also have revealed how many jurisdictions take part in e-commerce, and how access to their facilities is not restricted to those who have obtained their wealth through overtly legal means and who would like to shield it from taxation.
The revelations have included a smattering of installments of corrupt governmental kleptocrats as well as “businessmen” whose wealth has been derived from criminal, or at best highly suspicious, activities: shared objectives are shielding their wealth from seizure and evading justice in their countries of origin.
Involvement within this business is not limited to countries referred to by bankers as “sunny places with shady people”. Offshore locations do for winter sun, but not throughout the year. For your you have the EU. Numerous EU countries have a Golden Visa scheme, however the same concerns that surfaced around the back of the Panama and Paradise Papers are now casting a shadow over these.
Reuters reported on December 6th that the UK had decided to suspend its Tier 1 Investor visas, included in a crack-down on organised crime and cash laundering.
These visas allow non-European Union residents over three years' entry in return for lb2 million in investment in Uk bonds, share capital or loan capital in UK companies. The visas have brought in billions of pounds of investment, into high-end property, soccer clubs and UK businesses, but the provenance of the individuals – and of their wealth – has been an issue of increasing concern.
EUObserver recently reported on the case of Bulgaria, where naturalisation certificates are available to all-comers. EUObserver quoted a former Director of Citizenship at Bulgaria’s Secretary of state for Justice, who asserted an informal charge of between EUR500 as much as EUR7,000 was being levied, depending on the insightful the person, no matter their claim's legitimacy.
In the face area of those strong headwinds Cyprus, however, continues its operations unabashed. Ever since its accession towards the EU it's had its “Cyprus business model”, whereby “introducers” developed business propositions for customers outside Cyprus, and then established legal entities domiciled in Cyprus and banking facilities with indigenous banks.
Close connections have shown to exist between these introducers – by means of law offices, accountants and company formation agents – and senior politicians and bankers. Indeed, the current president's own law practice is a prominent introducer.
Cyprus has featured in the Panama Papers, the Paradise Papers, the Paul Manafort and Hermitage/Magnitsky affairs , and Liberty Reserve .
Cyprus undertook towards the European authorities and also the IMF to wash up its act, in return for its financial bailout in 2012/13.
However, this promise would be a dead letter: the deposits of Russian persons within the largest Cyprus banks were converted into shares underneath the the bailout. The largest single shareholder in Bank of Cyprus is Viktor Vekselberg, who's subject to formal US sanctions. Hellenic Bank – the other systemically important Cypriot bank – counts amongst its main shareholders Wargaming Group Ltd, a Belarusian-Cypriot gaming company founded in Minsk in 1998.
Cyprus put in place its Golden Visa scheme soon after the bailout, and contains since attracted over 3,000 users, and introduced fees of EUR4.8 billion.
The foreign party must purchase property with a value more than EUR500,000, and invest at least EUR2 million in a national development fund, Cyprus businesses or Cypriot government bonds. This buys a Cypriot passport and unfettered accessibility EU.
The scheme has come under the scrutiny of EU and US regulators because it has emerged that both Cyprus regulators and native banks were turning a blind eye to the bona fides of funds entering the country.
Cyprus' authorities again pledged to enhance their AML/CTF efforts and indeed, in writing, Cyprus has strong legislation. The gravy train keeps rolling, as implementation used remains in the hands of the well-connected “introducer” law, accountancy, and company formation firms.
