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Increasing Action on Citizenship by Investment Programs

Most US financial advisors have done their best to placate their nervous ultra-high-net-worth (UHNW) investor clients over US and foreign stock market performance since the Russian invasion of Ukraine.

What many of these financial advisors may not realize is that we are beginning to see a crack in the universal acceptance of residency by the United States, the European Union, and the United Kingdom, so-called citizenship or investment programs. Here are three recent developments.

travel ban act for smugglers

In the United States, three US Congressmen introduced bipartisan legislation in early March 2022, called the “Travel Ban for Traffickers Act” (the Traffickers Act), which would revoke a country’s right to remain on the US visa waiver program. If they sponsor a citizenship. An investment program in which passports are sold in exchange for economic investment in the country.

Sometimes referred to as the “Golden Passport”, these programs reportedly lack transparency. Although no proof is given by critics, the assumption is that these citizenships through investment programs enable wealthy foreign nationals of dubious character to obtain citizenship in a particular country and enjoy all its privileges. Representative Burgess Owens (UT-R), one of the House sponsors, noted that the Russians are among the most common beneficiaries of these alleged plans.

The Smuggling Act would include banning passport-selling countries from participating in the US Visa Waiver Program. In addition, it will ask the executive branch to try to persuade the United Kingdom and EU countries to end visa-free travel to countries that sell passports. The advantage of the EU passport is that it entitles its holder to reside in any of the 27 EU countries. Currently, Bulgaria and Malta are the only EU member states that operate passports by investment programmes. However, the Trafficking Act will not differentiate between Maltese citizens on the basis of birth or investment, and all of them must apply for a visa before entering the United States.

In April 2021, the BBC and The Guardian reported that some non-EU citizens received Maltese citizenship after spending only a few days there. According to the BBC report, some investors allegedly met the 1-year residency requirement in Malta by renting out vacant flats or accommodation. A BBC investigative team found that wealthy individuals who obtained Maltese passports by investment would spend an average of 16 days in Malta during their 1-year residency period before obtaining citizenship. Some investors were able to rent a yacht or donate it to charity to prove their “real link” to Malta.

None of this sits well with other EU member states. In 2020, the European Commission initiated proceedings against Malta and Cyprus over their citizenship infringement by investment programmes. Their objection is that applicants have benefited from EU citizenship, and have the right to reside in any of its 27 member states, without establishing actual links to the country. The European Union has previously called on Malta and other countries to end these programs, noting that investor citizenship schemes reportedly involve “inherent” security issues as well as risks of money laundering, tax evasion and corruption. Were. Cyprus suspended its citizenship by investment program on November 1, 2020

UK cancels Tier 1 investor program

In a separate but related development, and amid the current dominance of Russian oligarchs and their easy access to permanent residency in the United Kingdom, in February 2022 the British Home Secretary abruptly canceled his Tier 1 residency by the investment programme. Launched in 2008, the program has enabled wealthy foreign nationals and their families to settle in the United Kingdom in exchange for bringing some of their wealth with them. According to the BBC, the Home Office had issued 2,581 investor visas to Russian citizens.

The British Home Secretary announced that she is ending the Tier 1 investor visa program after pressure on the UK government over the illegal finances of corrupt Russian oligarchs. according to this politicianThis UK “Golden Visa” residency program reportedly allowed investors and business people from overseas, including countries often politically at odds with the United Kingdom, such as Russia and China, to fast into the United Kingdom in turn. -Track is bringing UK as little as 2 million to achieve residency status.

Under the now-suspended programme, a UK 2 million investment allowed an applicant to become a UK resident in a minimum of five years, for up to three years with a UK 5 million investment or two years with a UK 10 million investment. shortened to a year. Tier 1 (investor) visa holders will become eligible to apply for British citizenship after meeting language and other requirements, having lived in the United Kingdom for at least five years and permanent residency for at least one year .

The Home Secretary was under pressure to threaten Britain’s national security and infiltrate the country with his dirty money to prevent the perception of corrupt elites and international crosses. Going forward, the Home Office stated that settling in the United Kingdom would require an investment strategy that reflects real job creation in the United Kingdom, active management of UK business and other tangible economic benefits. In short, passively holding UK investment assets will no longer be sufficient to obtain settlement in the United Kingdom.

Revised US EB-5 Program

In March 2022, US Congressional leaders reached an agreement to reauthorize an investor program that allowed foreign investors to apply for a green card after investing in US real estate or other projects. However, the program was ended in 2021 on the wishes of some people in Congress. Criteria strict.

according to wall street journalThe EB-5 visa program, which has raised more than $40 billion for US real estate and other enterprises, and partially funded major developments such as Hudson Yards in New York City, was suspended in July 2021 when Congressional authorization expired. happened. The deal to renew the program was included in the mandatory annual omnibus spending law that President Biden has now signed. The revised EB-5 deal represents an agreement between legislators in rural states who advocate for stricter rules to prevent fraud and steering funding in rural areas, and real estate lobbyists and urban lawmakers from states like New York who advocate for property rights. Wanted to make it easier for developers. Big cities will raise EB-5 money.

Under the terms of the revised EB-5 program, foreign investors would need to invest at least $1.05 million in an investment program to qualify for a green card or $800,000 in an area with high unemployment. The EB-5 program emerged as a popular source of cheap funding for real estate developers after the 2008 financial meltdown. In exchange for obtaining a green card and a possible route to US citizenship, foreign investors are often willing to accept lower interest rates. While the initial policy objective behind the program was to create jobs in poorer areas, much of the money instead went to fund luxury apartments and high-rise hotels in midtown Manhattan. Projects like the Hudson Yards and Jared Kushner family development of a pair of Jersey City luxury apartment towers qualified for lower minimum investment amounts as states preferred projects to include high unemployment areas in asymmetrical, non-contiguous shape. Is.

The EB-5 reauthorization bill would end this practice and leave it to the federal government to attract eligible unemployment areas. Projects approved for EB-5 funding will need to comply with more vetting and reporting requirements. The bill gives the US Department of Homeland Security more authority to screen the source of funding of foreign investors in the United States to ensure that the money is “ethically sourced”.

backup plan required

What do all these changes in the Western government’s attitude towards citizenship or residency through investment programs reveal? We know that UHNW global families dislike uncertainty and risk.

In a future article in an upcoming edition of trusts and estates, we will share the prism through which we are advising our clients to prepare for and tackle the ever-increasing changes and challenges in our globally connected world. We have studied the history and many wealthy family fortunes destroyed by genocide, World War II and other minor wars, expulsion, seizure and genocide. Once a common failure in wealthy families throughout history There was a lack of plans for the younger generations to protect their fortunes.

Planning for the worst is part of our philosophy of advising our cross-border customers today. In our view, every wealthy family should prepare for the increasing uncertainty and instability in the world by having what is referred to as a backup plan. In our upcoming article we’ll explore some of the details and important considerations in developing a backup plan.

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