‘Golden visa’ to UK suspended amid money laundering fears

LONDON, Dec 7, 2018, Times of India. The “golden visa” route to enter the UK that wealthy Indians have used to get the right to live and work in Britain has been suspended amid money-laundering fears, reported the Times Of India.

The UK tier 1 investor visa, established in 2008, was the most favoured route that high net worth individuals from India, China and Russia used to get permanent residency in the UK. The British government suspended it from midnight on Thursday to prevent abuse of the scheme, thought to include money laundering and crime.

There have been fears among some quarters that the scheme was open to misuse. It is widely believed that the poisoning of a former Russian agent and his daughter in Salisbury in March triggered the suspension.

One source told TOI: “I think diplomatic pressure has come to bear on the UK from a number of countries, including India, to prevent fugitives coming to England, and the Skripal scandal has created a national security issue. After Brexit, Britain will need all the assets it can get so I suspect they will devise a new scheme.”

An October 2018 report by Global Witness and Transparency International UK claims that the scheme, which brings £498 million (about Rs 4,510 crore) into the UK annually, had a loophole until recently, — namely that minimal checks were undertaken on an applicant’s wealth until April 2015. This loophole was closed. “During this ‘blind faith period’ over 3,000 high-net-worth individuals entered the UK, bringing with them at least £3.15 billion (about Rs 28,516 crore) of questionable legitimacy,” it states.

“The sale of EU citizenship poses corruption risks that threaten the integrity of the EU,” the report, titled “European Getaway: Inside the Murky World of Golden Visas”, says. “These schemes pose inherent risks for corruption, as people who steal money from their home countries need other jurisdictions to escape to when the going gets tough. There are numerous examples of high-risk business people and oligarchs enjoying all the benefits that golden visas have to offer.”

To enter the UK via this route, applicants simply had to be from outside the EU and prepared to invest £2 million (Rs 18 crore) in UK treasury stock or trading entities. In return they were allowed to work, study or set up a business in the UK, though they did not have to. The £2 million had to remain invested for five years before the individual became eligible for permanent residency.

There was also a fast-track route for the superrich who could get permanent residency after two years if they invested £10 million (Rs 90 crore), or three years if they invested £5 million (Rs 45 crore).

It is not believed that Nirav Modi entered the UK this way as it is thought he may have Belgian citizenship. Vijay Mallya has had permanent residency in the UK since 1992.

Luke Hexter, director, Knightsbridge Capital, London, which sells citizenship and residence-by-investment schemes, said the visa had been suspended only “whilst the government implements more stringent auditing processes”.

“This is to ensure only legitimate and genuine investors are accepted, as there have been some cases where the source of funds has come into question,” he said. “The high-net-worth Indian clients we have spoken to are now exploring other suitable citizenship options, such as Cyprus. We believe the Cyprus programme will be the immediate beneficiary of these measures. In our opinion, the political tensions between the UK and Russia have exacerbated this situation as a large number of applicants have been of Russian origin.”

Tracy Evlogidis, head of the UK immigration team at Withers, said: “Indian nationals, and other nationals, are now unable to file tier 1 investor applications and it is thought that this will continue until January 2019. The UK has experienced a spike in non-EU nationals seeking to move to the UK, and the government appears to want to be seen to be managing this ‘controlled category’ of immigration, as compared to EU nationals.”

Henley & Partners, a big player in the industry, said, “Money laundering is a global challenge, facilitated by the capital market mechanisms that permit it to exist. While we welcome any enhancements to the UK tier 1 investor visa that will create more safety for the UK economy, we believe that the primary safeguards should be within the regulated international financial institutions that transfer capital across borders.”

At least €25 billion in foreign direct investment has flown into the EU through golden visa schemes over the past decade. Investors who have already entered the UK under the scheme are unaffected.

Some Caribbean and other EU countries offer golden visas. Antigua, for example, where Mehul Choksi fled, offers a much cheaper route than the UK and only requires $200,000 (Rs 1.4 crore.)

Seven thousand Indian millionaires obtained permanent residency in another country in 2017, according to the Global Wealth Migration Review.

India currently has the third-highest number of billionaires in the world — 119 — after the US and China. There are 20,700 multi-millionaires and 330,000 millionaires living in India making India the sixth-wealthiest country in the world by total wealth, according to the India 2018 Wealth Report.