21 February 2022

Goodbye and good riddance to golden visas

By Robert Tyler

Of the steps the UK has taken to rebuff the Putin regime, the recent decision to scrap so-called ‘golden passports’ is among the most welcome.

Since 2008, wealthy foreigners have been offered fast-track residency in exchange for investing £2m in the UK – essentially a less expansive version of the heavily criticised cash-for-passports’ schemes offered by Cyprus and Malta.

In Cyprus the ‘golden passport’ began as a way of raising money after the 2008 crash by targeting wealthy Russian, Ukrainian and Chinese investors looking to secure their assets inside the relative security of the European Union. By some estimates, as much as €7bn has been raised from the programme, off the back of nearly 7,000 issued passports – although it’s notable that the Cypriot government has recently announced plans to revoke a number of illegally issued passports

Malta on the other hand has seemingly doubled down on its cash for citizenship offer, first introduced by Joseph Muscat’s Labour government in 2014. Under the Maltese system, passports are granted to anyone who invests over €1m in the country and holds a Maltese bank account. Since the imposition of sanctions following Vladimir Putin’s annexation of Crime, a number of wealthy Russians have sought a safe haven in the island. Indeed, in 2015 some 40% of all new passports issued in Malta were to Russians. Big names in the Russian elite have acquired EU citizenship through this process – including a number of Putin’s closest confidants. 

This access matters for a number of reasons. First of all – it gives kleptocratic oligarchs easy access to the West in order to hide their assets in a more protected financial environment, using financial institutions far more stable than those in their homeland. 

Secondly – the influx of foreign money and buying up of assets poses a major security risk. We have already seen the impact that Chinese investment has had on academic freedom in the UK, and the development of so called ‘dual-use technologies’ – technology designed for one use but easily manipulated for military purposes.  

There is also the risk that the influx of foreign money can influence the political climate. Take the debate this week in the European Parliament on the build-up of Russian troops on the Ukrainian border, Maltese Labour MEP and former Prime Minister Alfred Sant stated that ‘Russia’s legitimate concerns about the security’ of the nation had been ignored by the expansion of NATO into the region. A similar line has been used by Germany’s Social Democrats, whose attitude to Russia has too often strayed into apologism.

Given how much Malta has made off the sale of ‘Golden Passports’ it is not hard to see why the governing party of the island has softened its tone on the issue. It’s a similar story in Greece, where big Chinese investment has swayed the Government’s attitude towards Beijing.

The Home Secretary is therefore quite right to conclude that ‘golden visas’ pose a distinct security threat to the UK. Whilst there are minor economic advantages to offering visas as an incentive to invest, they are outweighed by their potential to facilitate money laundering and corruption. In 2018 both British and German intelligence agencies spoke out against the such fast-track regimes, pointing to the fact that they make it easier for criminals to hide and harder to trace their assets. 

While sending military and medical aid to Ukraine is the most direct way we can help the country defends its hard-won sovereignty, hitting Russia where it hurts is another key part of the Western strategy towards Putin. Along with the package of sanctions being worked up by the UK and others, stopping the Russian elite stashing their cash on our shores is a key part of that effort.

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Robert Tyler is the Senior Policy Advisor at New Direction Foundation for European Reform based in Brussels.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.