A panel of European MPs called for these schemes - used by HNW individuals around the world - to be wound up because they allegedly facilitate flows of dirty money.

The industry group acting for advisors helping high net worth individuals obtain so-called “golden visas” has locked horns again with European legislators, who have called for these schemes to be phased out because they allegedly enable money laundering from different parts of the world.

The issue remains toxic because Europe has been hit by money laundering scandals in nations such as Estonia, Denmark and Malta, among others.

Citizenship/residency-by-investment programmes have become a €20 billion ($22.7 billion) industry “responsible for significant investment, job creation and societal development”, the Investment Migration Council said late last week. It responded to calls by the European Parliament to close down those schemes operated in member states. Members of the European Parliament from the European People’s Party group have demanded that the golden visa regime be wound down. The Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance, aka TAX3, recommended measures to tackle financial crime.

Jurisdictions such as Malta, Portugal, Spain and the UK operate such programmes and they have become controversial for allegedly allowing holders of funds to stash them abroad and circumvent laws against money laundering. The IMC has already hit back at such claims. 

European MPs are schedule to vote on the TAX3 Committee report at the end of March.

“We call on all MEPs to recognise that phasing out Investment Migration programmes will be detrimental for many EU Member State economies and public finances. Instead, we call on MEPs to support better regulation, higher industry standards and educational programmes for industry professionals to address the concerns that these programmes currently pose,” the IMC said. It has replied to calls by policymakers for schemes to be wound up before.

“The IMC shares many of the Parliament’s concerns as regards Investment Migration on key issues such as transparency, due diligence, and the potential for nefarious or in some cases illegal activities that can occur when Investment Migration is abused. We are committed to mitigating these risks through higher global standards, and as an industry look forward to collaborating with the European institutions to address these concerns while maintaining the significant societal and economic benefits of investment migration,” the IMC said.

Chinese, Russian and Middle Eastern HNW individuals have been prominent buyers of these “golden visas”. Critics say these programmes are indefensible for the money laundering risks and because of how they give privileged migration access in return for cash rather than based on supposedly more objective criteria. Ironically, these programmes have mushroomed around the world at the same time that migration by poor people to more developed nations has become a hot political issue. The UK has suspended its Tier 1 Investor Visa. Canada mothballed its programme about five years ago after it drew domestic political fire.

Members of the European Parliament from the European People’s Party group have demanded that the golden visa regime be wound down. The Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance, aka TAX3, recommended measures to tackle financial crime.

MEPs from the EPP said that Golden visa schemes pose a security threat to the EU.

Ludek Niedermayer from the Group of the European People’s Party and a Parliament’s Co-Rapporteur of the Report, reportedly dubbed such programmes as devaluing EU citizenship. 

“The Golden Visa and special tax schemes to attract foreign investors pose a security threat to the EU while delivering only marginal or zero economic benefits and devaluating European citizenship,” he said. 

Revenue driver
The IMC said these golden visas can account for up to 40 per cent of total tax revenues in some smaller European states. It cited the European Parliament Research Service’s 2018 report “Citizenship by Investment (CBI) and Residency by Investment (RBI)” which found that investment migration contributes several percentage points of GDP to small economies on the European periphery. 

“Phasing out the industry would effectively cut off a large source of investment for these countries, creating very substantial financial difficulties in less economically privileged places, where investment and natural resources are scarce. We ask the European Parliament not to support a call to phase out the industry but instead to support the implementation of better standards and oversight,” it said.