The most powerful passports money can buy
For the uber-rich, the second passport has become the must-have accessory offering both clout and convenience. From the Caribbean to Europe and even as far as the South Pacific, 13 countries around the world now offer fast-track citizenship for thousands or even millions of euros. Dual nationality means flexibility with visa-free travel or access to tax havens.
Residence by investment is a more widely available alternative. Over the past few years, Europe’s famed golden visa and passport schemes have grown in popularity with 20 countries offering residency and three countries offering fast-track citizenship. Typically, in exchange for property investment or government bonds, the likes of Russian oligarchs and Chinese billionaires can obtain residency or citizenship.
According to the 2018 report “European Getaway — Inside the Murky World of Golden Visas,” published by Transparency International and Global Witness, at least 6,000 passports and almost 100,000 residence permits have been granted in the past decade under Europe’s golden visa programs. This is now the sought-after asset among the global elite.
Which nations offer the most powerful passports for sale? Every year, a ranking is published showing the strongest passports ranked by how many countries citizens can travel to without a visa. The chart below compares countries that offer citizenship by investment based on figures from the Passport Index 2018. Assuming a passport equates to the number of visa-free travel destinations, Malta is the best nationality to have with access to 122 visa-free countries. Cyprus is a close second at 120 followed by Bulgaria at 114. Meanwhile, the Caribbean island nations offer 94–100 visa-free travel destinations, depending on the country. The three least powerful passports are Montenegro (76), Moldova (75), and Turkey (71).
From Europe to the Caribbean to such far-flung destinations as Vanuatu, by investing anywhere from €87,000 to €2 million, the wealthy can obtain a second passport. While Malta (122), Cyprus (120), and Bulgaria (114) may be the most prized passports for the number of visa-free travel destinations, these citizenships are also the most expensive. Investors will need to put down a minimum of €2 million for Cyprus, €1 million for Bulgaria, and €800,000 for Malta.
Malta and Cyprus offer an almost immediate fast-track citizenship plan with few requirements for residency. If money is tight, the Caribbean may be a better option. St. Lucia and Dominica offer the best price for a minimum of €87,802. The price halved when the governments needed to raise some quick capital to pay for the damages after the 2017 hurricanes. With the exception of Antigua and Barbuda, Caribbean countries don’t require an applicant to step foot in the country to gain citizenship.
Why the Rich Collect Passports
While the residency requirements, investment fees, and formalities vary by country, many high net-worth individuals are enticed by the low taxes and visa-free travel offered by such citizenship schemes. There’s also the status-signaling, along with the fact some citizenships can be passed down to family members, or that they can bring spouses for a smaller fee. For some, depending on their country of origin, dual citizenship can even serve as a good Plan B to safeguard from political uncertainty back home.
But not all those who seek a second passport come from wealthy backgrounds in emerging economies. With Brexit on the horizon, Britons living in Europe and Europeans living in the United Kingdom are seeking ways to obtain second passports or residency. In recent years, more Americans have renounced their U.S. citizenship due to complicated global tax laws, seeking the economic freedom that comes with obtaining a different passport — even if it offers less visa-free travel options and power.
Selling Citizenship to Pay Off Public Debt
What motivates countries to sell citizenship? Very often it’s public debt.
While few countries report data on their foreign direct investment through citizenship schemes, St Kitts and Nevis in 2013 attributed 25 percent of the country’s gross domestic product (GDP) to offering economic citizenship. Their success story isn’t just about raising funds. How a country manages those funds is also key. For instance, St Kitts and Nevis recorded a government debt equivalent to 89 percent of the country’s GDP in 2008, a figure that dropped to 34 percent by 2016, according to the IMF. Antigua and Barbuda has also profited through this scheme. The Antigua Observer reported the country’s prime minister attributed 20 percent of the country’s 2017 GDP to offering economic citizenship.
Malta, which charges the most for citizenship worldwide (€2 million), has managed to cut its public debt dramatically. In 2009, Malta’s debt was 63.3 percent of its GDP, according to data from the IMF. By 2016 that figure dropped to 54 percent.
If only other states had been as prudent. Though Cyprus began selling citizenships in 2011, a debt-free existence is a far-off dream. In 2016, its debt was 149 percent of GDP, up from 89 percent in 2008. The European Parliament’s October 2018 study explores these long-term economic risks for member states engaging in economic citizenship.
According to a 2015 IMF working paper, such unpredictable windfalls of cash make it difficult for governments to manage public funds for the future. This is attributed to currency fluctuations or drops in applications and approvals. The IMF argues that if countries create “macroeconomic programs designed to take care of the long-term financial health and reputation of accepting funds for citizenship,” then a positive case for such schemes could be made. But until governments can learn to manage the financial risks, the business of states selling citizenship remains tenuous.
The History of Citizenship for Sale
Where and how did economic citizenship begin? In 1984, the two island nation of St Kitts and Nevis became the first country ever to allow citizenship to foreigners in exchange for large financial sums. While the notion of selling passports didn’t catch on immediately, some wealthy countries like the United States, Canada, and the United Kingdom began offering residency for fees of $500,000 and up in the late 1980s and early 1990s.
It wasn’t until 1993 when Dominica became the second country to offer citizenship by investment. While some neighboring islands in the Caribbean followed, certain countries discontinued the schemes over security concerns after the September 11 attacks in 2001.
Like the Caribbean islands, some European governments saw foreign direct investment through residency as their solution to the Eurozone crisis and the 2008 global financial crisis. Bulgaria (2009), Cyprus (2011), and eventually Malta (2014) took it a step further by formally offering citizenship in exchange for investment in government bonds or real estate. The prices were higher than in Portugal, Spain, Italy, and other European countries only offering residency through their golden visa programmes. Fast-track citizenship schemes began to attract wealthy investors from emerging economies like Russia, China, and India seeking a mix of quick economic citizenship, security, and freedom to travel in the European Union.
Risky Business at What Cost?
Though successful citizenship by investment applicants account for just 1,000 new EU citizens each year, countries have raked in over €25 billion over the past decade. In January 2019, the European Commission (EC) released a report warning of the risks posed by turning EU passports into a commodity. If monitoring and security checks weren’t implemented consistently across all 28 European states going forward, the EC cautioned, certain states may lose their travel privileges.
The warning came on the heels of two major European money-laundering scandals involving billions of tainted euros linked to Denmark’s Danske Bank A/S and The Netherlands’ ING Groep NV. Over the years, a number of golden visa corruption cases have been reported in Hungary, Portugal, and Malta. The United Kingdom almost threatened to put its Tier 1 investor scheme on hold over alleged links to money-laundering.
What’s most concerning is that the latest EC report was meant to come down on member states with a heavy hand. Instead, the report called for vague guidelines on security checks. Anti-corruption campaigners were disappointed with the report and have argued for tougher scrutiny on countries engaging in the sale of citizenship and visas. Some MEPs even called for the schemes to be banned altogether in a bid to keep organized crime and corruption coming in from outside of Europe.
But with the huge sums of cash lining government coffers, it’s unlikely such schemes will end any time soon. For now, it looks like Europe will remain the playground of the ultra-wealthy.