Global Financial Integrity


Citizenship by Investment

Many people derive non-monetary value from passports. It’s hard to put a price tag on, say, enmeshing oneself in a new culture, visiting a friend abroad, or standing atop Kilimanjaro. A passport is a papery key that grants its owner access to the world’s capacious landscapes and sprawling metropolises, and its cost—$165, if you’re an adult U.S. citizen—seems modest relative to the rich experiences it fetches. It is unsurprising, then, that the latest census data indicate that nearly half of Americans are passport-wielders.

Not all passports are created equally, however. Over the past four decades, the world’s ultra-wealthy have been flocking to buy a different kind of passport; one whose sticker price is often denominated in millions, not hundreds or thousands. Formally known as citizenship by investment (CBI) or residency by investment (RBI) programs, these “golden passports” aren’t acquired like average passports. When a non-resident purchases a golden passport, they are granted citizenship or residency rights–along with all rights and privileges associated with such–in the issuing jurisdiction. Put simply, high net-worth individuals can purchase fast-track citizenship in select countries.

CBI/RBI programs were born in the West Indies in 1984, when Saint Kitts and Nevis, the smallest sovereign state in the Western Hemisphere, placed golden passports on the auction block for the first time. To acquire one, a monied client must invest–in ways stipulated by the issuing government agency–in weighty, passive assets that benefit the issuing country’s strategic interests. In addition to real estate, investment vehicles with clear connections to national interests include things like bonds, national development funds, and debt servicing (while less obvious investment vehicles include luxury real estate and corporate equity).

Indeed, many golden passport programs emerged in the wake of debt crises. Beset with the economic devastation of increasingly catastrophic natural disasters, Caribbean nations have turned to CBI schemes to service ballooning debts. These debts cannot be understated: in 2017, Dominica, a prolific issuer of golden passports, was so thoroughly ravaged by Hurricane Maria that it incurred costs tantamount to 224 percent of its GDP. If the U.S. were to experience a commensurate disaster, it would cost the country US$44 trillion. Dominica’s massive losses were somewhat cushioned by golden passport revenue. Meanwhile, further east, European nations turned to CBI schemes to offset the socioeconomic wreckage of the 2008 global financial crisis.

While golden passport programs can help countries attract much-needed foreign direct investment (FDI), framing them as a simple, unproblematic panacea of growth is naïve.

For all their upsides, these programs enable spectacular amounts of corruption on both the client/individual level and the issuer/government level. On the client/individual level, CBI/RBI programs provide kleptocrats, terrorists, and other criminals with means to avoid extradition, evade sanctions, launder illicit proceeds, and dodge taxation. When corrupt actors get to hand-pick the set of criminal and tax laws they’d like to abide by, they expand their berths of impunity. Moreover, dual citizenship enables criminals and criminal networks to seamlessly coordinate transnational operations.

On the issuer/government level, golden passport programs encourage rent-seeking and bribery. Without high levels of transparency–and golden passport programs are notoriously opaque–CBI/RBI revenues are siphoned away by corrupt actors. Additionally, officials can game golden passport programs by choosing to pool revenues in investment vehicles that benefit them personally but have little relevance to national interest, such as companies they hold equity in or real estate they’re looking to sell.

A number of high-profile corruption scandals involving golden passport schemes have been captured in international headlines in recent years. Most prominent among them, perhaps, is the story of Mehul Choski, a wealthy diamond merchant from India who used a CBI scheme to purchase Antinguan citizenship. He had no criminal record when he purchased his golden passport in November 2017, but months after the transaction Indian authorities revealed that Choski was the mastermind behind India’s “largest-ever bank fraud” scandal. Prosecutors allege Choski and his nephew stole US$1.8 billion from the Punjab National Bank, and he is currently wanted by the Indian government for, among other things, criminal conspiracy and money laundering. Choski’s dual-citizenship status has enabled him to evade extradition orders and resist adjudication.

Many golden passport-issuing countries are small, littoral, and low-income. The Cayman Islands sell golden passports for US$2.4 million each, and other small Caribbean nations, such as Curaçao, Dominica, Grenada, St. Lucia, Antigua and Barbuda, St. Kitts and Nevis, and Aguilla, offer cheaper, but still hefty, rates. As mentioned above, the commercialization of citizenship and residency has become a vital source of national income for this group. Revenue from CBI transfers made up 30 percent of Dominica’s GDP in 2020, for example, and in a 2019 report the IMF found that CBI programs have bolstered development in the Caribbean by “[increasing] public revenues, improv[ing] fiscal growth, and facilitat[ing] debt repayments.”

Small EU countries such as Malta, Bulgaria, Cyprus, and Luxembourg are also cashing in, offering clients a portal to the entire European Union. But golden passport schemes aren’t exclusive to smaller countries: a handful of OECD behemoths have implemented CBI/RBI programs to attract foreign direct investment. Spain, the UK, Italy, Portugal, Greece, Germany, Turkey, Ireland, Belgium, Austria, and even the U.S. have placed citizenship on the market. Golden visa schemes of EU states have raked in €25 billion in FDI over the past decade, with Cyprus and Spain being the top two beneficiaries by a large margin.