Why do economic citizenship programs end at some point? National Governments can close the programs for various reasons. They may have concerns about their national security, or they may find that the procedures of granting citizenship to foreigners are not transparent enough, or they may fear that criminals from other countries can use their citizenship-by-investment program for money laundering purposes. In addition to that, they may experience pressure from the international community that is very much concerned about the ‘golden passport’ programs being used for illegal purposes. Let us discuss in more detail why citizenship-by-investment programs may be terminated. This will give us a better understanding of the reasons why a certain national program can be closed soon.
Economic citizenship programs attract wealthy individuals from different countries of the world, again, for various reasons. Some of them want to start a business company in a stable foreign jurisdiction, others want to gain access to the visa-free travel opportunities that the foreign passport can bring, and still others are interested in making use of the educational or medical opportunities that are available in the foreign country whose citizenship they are acquiring. Access to some new tax planning instruments and banking opportunities can also be one of the reasons why an individual may become interested in applying for a second passport.
International Wealth experts will be happy to help you compare the citizenship-by-investment programs that are still functional. We can assist you in choosing the program that meets your requirements and matches your financial possibilities. When you have chosen the citizenship-by-investment program that appeals to you most of all, we will gladly assist you in applying for a second passport. With our expertise in the area, you will not have to overpay and the confidentiality of your second citizenship will be well protected. Please request a professional consultation on applying for foreign citizenship. The consultation is free of charge.
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National states issuing ‘golden passports’ to foreigners do not do it for free, however. They grant citizenship to foreign applicants in exchange for investments or donations to their state funds. The money that citizenship-by-investment programs generate is used for solving various social issues, improving the transportation/ banking/ tourism sectors, etc. Even though citizenship-by-investment programs bring additional funds to the state budgets, they can be terminated at some point in time anyway. Some such programs have been available for quite a few years already while others have ceased to exist.
Moldova, Cyprus, Bulgaria, Montenegro, and the Comoros have closed their economic citizenship programs due to various reasons. In some cases, international pressure has been the main reason why national citizenship-by-investment programs have been closed.
Fears can sometimes be unwarranted
The European Commission has expressed concerns about the citizenship-by-investment programs available on the continent more than once. The officials claim that such programs cause potential threat to European security. They maintain that non-Europeans applying for European passports by investment can change their identities when acquiring a new document. They also fear that a criminal from another part of the world can gain visa-free access to the Schengen zone countries with a second passport.
More often than not, these fears are unfounded. All the countries that issue passports to foreign investors conduct strict due diligence checks before granting their citizenship to foreigners. The applicants have to conclusively show that their capitals have been accumulated in legal ways exclusively. This goes not only for the amount of capital that the foreigner is investing into the second passport but also for his/ her entire wealth. All candidates for second citizenship have to supply clean police records.
Moreover, there are articles in the national legislations governing the process of citizenship acquisition that explicitly state that citizenship will be annulled if the new citizen is found guilty of fraud, information concealment, or other misdoings capable of harming the reputation of the host country.
Cyprus has annulled several passports. Antigua has done the same. Bulgaria is currently investigating several cases and these can result in second citizenship cancellation for some people. (In particular, several foreigners who have obtained Bulgarian citizenship by investment in real property are suspected of selling their property back before the due date. The Bulgarian legislation is perfectly clear about this: if the foreign investor fails to keep the property in their possession for a fixed period, they will lose citizenship of the country.)
Main reasons why national citizenship-by-investment programs can be closed
Economic citizenship programs bring profits to national budgets of the host countries but they are terminated sometimes anyway. Below we list the main factors that have contributed to the closure of several citizenship-by-investment programs.
- Inefficient due diligence checks. Weak due diligence procedures is the № 1 reason why a citizenship-by-investment program can be closed. If a criminal is hiding from the police in their home country, they will naturally want to use any opportunity to change their identity and legalize themselves in a different country. Obtaining a second passport is certainly one of such opportunities. If a criminal is able to bribe a government official in the host country, they may achieve the goal. When the truth comes out, however, the reputation of the host country suffers badly. This is exactly what happened to Cyprus.
- Negative public reaction. Most citizenship-by-investment programs have very lax requirements to foreign nationals as far as the integration with the local societies is concerned. Foreigners ‘buying’ second passports do not have to learn the national language, they do have to know anything about the history and the culture of the home country, and they don’t have to have the ‘center of their personal interests’ in this country. All they have to do is make a donation or buy a piece of property there. This sometimes can make the local public react negatively to the national citizenship-by-investment program. Locals can pressure the Government to terminate the program due to these ‘bad feelings’. This cannot probably be the main factor leading to the program termination but it can be a contributing factor anyway.
- Sovereignty concerns. If a national citizenship-by-investment program becomes too popular and attracts too many foreigners, some threats to the sovereignty of the country may potentially arise. The Government may want to close the program or limit the number of applications in order to preserve the national identity and exercise better control over the immigration processes.
- Risks related to money laundering and corruption. Economic citizenship schemes are closely monitored by the international regulatory authorities for their potential ability to be used for money laundering, tax evasion, and other fraudulent activities. If the due diligence checks that a particular country conducts when granting citizenship to foreigners seem weak or inefficient to the regulators, they may become alerted. Consequently, the host country may face reputational problems. All countries ‘selling’ their passports to foreign investors are toughening their due diligence procedures but if their efforts are unsuccessful, their citizenship-by-investment programs may have to be closed. The same holds for banks: they have to know their foreign clients very well in order to avoid fines and other sanctions. No bank wants to lose its correspondent banks in other countries let alone losing the banking license.
- Change of political climate. The political climate can change in any country. If a certain national Government launches a citizenship-by-investment program, its successors may turn out unhappy with the way it functions. Thus, if a change of Government occurs, the national citizenship-by-investment program can be put on hold or simply terminated.
- External pressure from international organizations. All countries granting citizenship to foreign investors have to face international pressure of a certain level of intensity. Global regulators push the national Governments to conform to the international standards as far as citizenship acquisition is concerned. The European Commission, the OECD, and other transnational bodies have repeatedly expressed serious concerns about citizenship-by-investment programs. The EU Council has called upon the member states to cancel all their citizenship-by-investment programs by 2025. International organizations have powerful instruments of applying pressure. They can make any national state ‘toe the line’. Malta, for instance, still issues ‘golden passports’ but obtaining one has become a rather difficult task lately.
- Possible tax evasion. Some countries granting citizenship to foreign investors are referred to as ‘offshore jurisdictions’. Now, some offshore jurisdictions are known for the low-tax opportunities that they provide. Consequently, the OECD, among other global regulators, is worried that a second passport can allow its holder to conceal their assets and evade taxes. If a country doesn’t follow the CRS rules and simultaneously ‘sells’ its passports to foreigners, it is going to find itself on various black lists without any doubt.
- Housing crises. If a national state grants citizenship or permanent residence to those foreigners who buy real estate on its territory, the prices for residential accommodations in the country may rise. Local people naturally feel unhappy when residential property becomes less affordable to them. This is exactly what has happened in Portugal, for example. The country is closing its ‘golden visa’ (residence-by-investment) program due to the dramatic rise in property prices.
- Xenophobia. Unfortunately, distrust towards foreigners is characteristic of many nationalities. This distrust can spread onto foreign investors too and nationalistically minded residents of a certain country may insist that the local citizenship-by-investment program be closed to keep foreigners away, including foreign investors. This attitude is unreasonable but one must admit that human behavior is not always reasonable.
- Denunciation of visa-free travel agreements. Canada and the EU have denounced their visa-free travel agreements with some countries ‘selling’ their citizenship to foreigners. In particular, citizens of two such countries in the Caribbean (Antigua and St Kitts) have lost visa-free access to Canada while citizens of Vanuatu in the South Pacific now have to apply for visas to enter the Schengen zone, which they did not have to do before. These facts have made the corresponding citizenship-by-investment programs less attractive.
- Lack of transparency. Some critics of citizenship-by-investment programs believe that a lot of money spent on foreign passports remains unaccounted for. They claim that corrupt politicians and government officials in the host countries regularly receive bribes and help untrustworthy foreigners obtain second passports. The critics’ main point is that corrupt politicians benefit from the citizenship-by-investment programs rather than the common people living in the countries. Lack of transparency and inefficient regulation of the money flows involved in citizenship-by-investment programs cause an extremely negative reaction on the part of the international community.
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