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The international regulatory body, Financial Action Task Force (FATF), reported that Citizenship by Investment (CBI), known as the “golden visa,” allows criminals to hide their laundered money and protect them from civil penalties and prosecutions.
According to FATF investigation findings, citizenship and residency programs enhance the risks of financial crimes, such as money laundering, terrorist financing, and tax evasion. The probe found a lack of transparency in how the golden visa scheme works and a deficiency in collaboration with the member states. The FATF had urged members to comply with the AML regulations during the “golden passports” and “golden visa” programs. In addition, they claimed the citizenship program, including the residency scheme, is a “multi-dollar business” and assists launderers to evade corruption charges or access third countries. Admitting these programs involve money laundering and other organised crimes, FATF president T. Raja Kumar stated, “they can and are being exploited by criminals and the corrupt, who want to launder their money, hide their identity and assets, or carry out further crimes. This report calls on governments operating these programs to implement a variety of safeguards to ensure these programs are administered in a risk-sensitive way.”
The FATF also stressed that these permits make it easy for criminals to move from one country to another whilst hiding their identities by using shell companies in different nations. They emphasised the deficiencies in these programs, such as insufficient risk assessment process, involvement of government bodies, and misuse of attorneys to help get citizenship. There are significant countries which offer citizenship programs by the government. The first allowed business owners to invest a certain amount in a country to obtain a residency permit, and the second allowed them to get citizenship.
The amount depends on the countries and investment program the business owner applied for. Although these programs positively impact the country’s economy, these programs are also involved in money laundering, tax evasion, corruption, and other financial crimes. The Secretary General of the Organisation for Economic Co-operation and Development (OECD), Mathias Cormann, stated, “our joint FATF-OECD work identifies the risks and vulnerabilities around golden visa schemes and offers a series of mitigation measures to help policymakers and program operators including appropriate due diligence, transparency, and integrity mechanisms.”
According to the FATF research, although an adequate compliance process of the Citizenship by Investment (CBI) or Residency by Investment (RBI) initiatives benefits host nations and their citizens, there is a real risk of criminal activity when using them. Golden visa providers can utilize robust technology to verify the customer’s identity and compliance with the latest anti-money laundering obligations. It assists them in mitigating the risk of terrorism financing and other financial activities.