Why are 'golden visa' schemes being scrapped?

Golden visas and golden passports have attracted attention in recent years, as some countries attempt to encourage wealthy foreigners to park their money in return for residency or citizenship.

The tiny Caribbean island of Dominica, for example, receives more money from the sale of citizenship at $100,000 (€91,650) a pop than it does from taxes, Bloomberg News reported this month.

The island attracts many wealthy Chinese, Russian and Iranian nationals, among others, who often face difficulties when crossing borders. They now benefit from the perks of being a Dominica passport holder, including 90-day, visa-free travel to the European Union.

No surprise! — VIP visas attract corruption

More than 60 countries operate golden visa or golden passport schemes, including several EU nations. But concern is growing that the programs are being abused by organized crime syndicates and corrupt officials, which prompted the European Commission, the bloc's executive arm, last year to call on member states to stop selling them.

Ireland, Cyprus and the Netherlands have already axed their VIP visa schemes, while Portugal reformed its program in October. All EU states tightened their visa rules for Russian and Belarusian nationals in the wake of Russia's invasion of Ukraine.

On the other side of the world, Australia this week pulled the plug on its program, the significant investor visas (SIV). Launched in 2012, applicants had to invest at least A$5 million ($3.3 million, €4.58 million) in the country to gain residency. According to the federal government, at least 85% of successful applications were from Chinese nationals, saying that the scheme had not had the desired economic effect. Instead, it had attracted many corrupt officials.

"[These] programs inherently appeal to corrupt officials and criminals. An additional passport or residence permit can come in handy if you’re on the run from authorities," Eka Rostomashvili, Campaigns Lead at the anti-corruption group Transparency International, told DW.

Rostomashvili said that rather than putting in place strict due diligence measures, many countries have been "too tolerant" and have "recklessly welcomed dubious characters and their tainted money."

More visas offered by Global South nations

While many headlines on the issue have focused on EU states, the biggest golden visa and passport schemes are in the Global South — countries like Malaysia, Panama, Thailand and the United Arab Emirates, said Kristin Surak, professor of political sociology at the London School of Economics and Political Science (LSE).

"The UAE accepts 50,000 people per year on its golden visa program — it's massive," Surak, who is the author of the book "The Golden Passport: Global Mobility for Millionaires," told DW. That compares to 30,000 people approved over a decade for residency in Portugal, the most popular scheme within the EU.

Transparency International has repeatedly complained about how secretive many governments remain about their VIP visa schemes. Some don't expect applicants to spend any time in the country. Sometimes the application criteria will include a property purchase or a donation to the state, rather than investments that could bolster the economy.

Cyprus gave citizenship to a known Malaysian fraudster

Rostomashvili gave the example of Malaysian businessman Jho Low, who was able to buy a golden passport for Cyprus, despite the negative publicity surrounding his involvement in the 1MDB corruption, bribery and money laundering affair. The scandal, which first came to light in 2015, impacted Malaysia's sovereign wealth fund, 1Malaysia Development Berhad (1MDB). It is often cumbersome for countries to revoke visas and passports when wrongdoing is uncovered, she added.

"It took Cyprus more than three years to strip Low of his citizenship because he reportedly fought back through his lawyers."

Instances of nefarious actors, who take advantage of VIP schemes and shortcuts to citizenship, are often played up by the media, which likes to contrast them with regular immigrants, who often face long waits and arduous application processes to gain residency. But in most cases, those applying for golden visas are not involved in crime. They're just trying to give themselves an exit option from their home country.

How Chinese, Russians — even Americans — are hedging their bets

"In the vast majority of cases, people are trying to hedge their bets against an authoritarian regime or an uncertain future," Surak said, citing the Hong Kong pro-democracy protests and the 2016 failed coup against Turkish President Recep Tayyip Erdogan.

The LSE professor cited the huge increase in US citizens looking for exit options, partly due to the divisive politics of the Trump-Biden era. Americans currently make up the largest number of applications for Portugal's golden visa program.

"If you're going to carry out some sort of criminal activity or money laundering, there are other, cheaper ways than through golden visas," Surak added, noting that Poland is currently investigating how 250,000 regular work visas were issued in Africa and Asia over the past three years in exchange for cash.

Malta and Hungary are currently standing firm against EU pressure to ax their golden visa schemes. Brussels has launched legal action against Malta for offering citizenship for around €1 million. Hungary had rolled back its program but will restart it later this year. Applicants will be required to purchase property, buy shares in local property funds, or make a charitable donation of at least €1 million into a public trust that supports local universities.

Rostomashvili from Transparency International said countries need to be asking "'Are these programs bringing positive socioeconomic impacts to our society?' Usually, the opposite is the case."