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Thu 20 Jun 2019 08:13 AM

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Why controversy swirls over citizenship by investment programmes

A recent announcement that investors in a Dubai development will qualify for Moldovan passports has renewed debate over citizenship by investment programme

Why controversy swirls over citizenship by investment programmes
Kleindienst says demand has been strong due to the Heart of Europe’s unique nature

Around the world – particularly in many parts of the Middle East – people are increasingly looking towards second citizenship to protect their assets and ensure a prosperous future for themselves and their families. To obtain that opportunity, many have turned to citizenship and residency by investment programmes.

In a number of countries ranging from Caribbean islands such as St. Kitts and Dominica, to European Union countries such as Cyprus and Malta, it is legal to obtain citizenship provided that one obtain certain criteria, which may include financial contributions through real estate or a one-time investment. Other factors include stringent background checks.

“It is a win-win situation for both parties. The Caribbean countries, especially, have ended up benefitting from these schemes. The economy of St. Kitts, for example, has really benefited because of citizenship-by-ownership and visa-free access,” explains Vrinda Grupta, the managing partner of Vazir Group.

Vrinda Grupta, managing partner of Vazir Group

“It ends up attracting funds and helping the economy of the countries, and the people get citizenship, travel liberties, security, etc.”

Moldova enters the fray

While these citizenship-by-investment programmes are nothing new, they have recently been thrust into the headlines again by UAE-based developer Kleindienst Group, which in late May announced that investors who buy property worth more than AED5m ($1.36m) in its Heart of Europe project will automatically qualify for Moldovan citizenship.

A passport from Moldova – which launched its citizenship-by-investment programme in 2018 – allows for visa-free travel in the Schengen zone and 121 countries around the world, provided that one pass a multi-stage due-diligence procedure and meet the criteria set by the Moldovan government.

“As facilitators, we are working very closely with the accredited agent approved by the Moldovan government on the ground here in the UAE to ensure the full measures and application processes are followed,” group founder and chairman Josef Kleindienst says.

Visas and naturalisation in Europe should depend on integration and residence, not on one’s wallet

“We strongly believe that an opportunity of the sort stands to benefit both the country of Moldova  by adding some of the elite members of this region to their national portfolio, as well as our investors, who not only gain global access, but also a secure investment opportunity that comes with 100 percent returns.”

Backlash begins

Programmes such as the one announced by Kleindienst, however, have been met with significant opposition from those who see them as “backdoor access” into Europe.

Germany’s Sven Giegold, a member of the European Parliament’s special committee on financial crimes, was quoted in the Daily Mail last week as saying that the sale of passports represents an “unacceptable security risk” to Europe.

“We need to endorse EU-wide minimum standards and ensure that all member states comply with them,” he said. “Visas and naturalisation in Europe should depend on integration and residence, not on one’s wallet.”

Additionally, Noami Hirst, a senior researcher at anti-corruption group Global Witness, says that Kleindienst’s programme “poses a serious security risk to both Moldova and the entire Schengen area to which it has visa-free access… we look forward to the end of the super-rich buying citizenship and access to Europe.”

At a minimum, such programmes seem to be getting the attention of the European Commission, which stated that it is “closely monitoring the impact of the scheme launched in November [in Moldova] as it could pose migratory and security risks.”

The wrong incentive?

Other criticisms have come from those within the industry, who question whether a scheme such as Kleindienst’s circumvent the process – despite the company’s assurance that it is doing its due diligence.

Josef Kleindienst, chairman of Kleindienst Group

“You could do something and [get] an iPhone, or maybe a car, but citizenship? It shouldn’t be exchanged as a price,” argues Sam Bayat, the owner of Bayat Legal Services, which helps applicants apply for citizenship and residency by investment programmes, including Moldova’s. “But this company has a right to do it.”

One of Bayat’s main criticisms of the programme, he adds, is primarily due to the fact that Kleindienst advertised the programme as “automatically” qualifying one for the citizenship.

“It’s not up to them to say who qualifies. It’s up to the government,” he explained. “They could have said they’d pay the [fees]… they should have mentioned the government of Moldova has the final say.”

Bayat adds that such programmes and “these sort of advertisements and messages bring unnecessary attention” at a time when there are “strong voices” in the European Parliament against citizenship-by-investment programmes.”

Despite the controversy, a number of countries – such as Montenegro – are implementing similar programmes soon, with another two or three programmes in the works, according to Bayat.

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