Without control the Cash for Citizenship and Passport Scheme can be abused by tax evaders, money launderers, and organised crime figures who can cross borders at short notice especially because the passport and citizenship provide visa free access to many countries
The only significant revenue raising measure of the 2018/19 budget is a “Cash for Citizenship and Passport Scheme” (CCPS) to be run by the Economic Development Board (EDB) with a view to grant Mauritian citizenship and passports to foreign high net worth individuals (HNWI) through a special purpose vehicle known as the Sovereign Fund. The net revenue arising from the sale of citizenship will be managed by a National Investment Authority to repay public debts and to finance capital projects of Government1.
The scheme which closely resembles the Maltese Individual Investor Programme (MIIP) epitomises the desperate need of this Government to find quick fixes to our economic woes while at the same time trying to play Father Christmas.
How does the scheme work?
The CCPS did not fall from the sky. It has been prepared by experts in this multibillion dollar industry with their operatives enticing weak and short-sighted politicians into believing that they can attract FDI in their economies through the scheme. The trick is to identify cash-strapped countries like Greece and small island states with no natural resources, like the Caribbean islands, St Kitts & Nevis, Grenada, St Lucia, Malta and now Mauritius to conduct their project and spin off huge amounts of money by commodifying citizenships and passports, just like selling a pair of jeans.
First they show how they have done it elsewhere, then they get appointed as benevolent advisors. After that they design the system. They prepare the tender documents and finally get themselves awarded the contract as sole “concessionaire” to market and implement the scheme for a fee ranging between 4%- 8% of the FDI so raised on a case by case basis. They also carry out the due diligence and vetting of applicants who most of the time come from their existing portfolio of clients. Applicants are made to pay them for due diligence fees also. They ensure that the contract allows them to appoint subcontractors of their choice like law firms and tax consultants to carry out due diligence and other advisory services. They also operate their own real estate companies and offer trusteeship services in the targeted country to make more money for themselves. They are compensated for all their marketing and ancillary expenses.
They usually insist on obtaining an exclusive contract for ten years renewable. In case of breach of contract the contracting state is still liable to pay the 4%-8% commission on the forecasted FDI contribution over the contract period. It is worth noting that the time frame for finalising a passport sale ranges between 12-24 months. In the process the passport kings get access to key public policy makers and get the necessary amendments brought to the laws and Constitutions of the targeted country to enable their business to flourish. It is alleged that this is the type of scheme that foment conflict of interest, collusion, bribery, corruption, and the importation of organised crimes and money laundering and in some cases even murder.
Market makers & destinations
The main players in the market are firms like Henley & partners, Apex Partners, CS Global and Arton Capital. Not all countries however sell citizenship. Belgium, Canada, Hong Kong, Singapore, Portugal, UK, USA and Switzerland offer residence permits to investors. Cyprus, St Lucia, Grenada, Antigua & Barbuda, St Kitts and Nevis and Malta are countries that sell their citizenship
Citizenship is not a commodity to be sold
The CCPS has sparked controversy and criticism ever since it was announced without notice and without public consultation. The electorate has not mandated this Government to commodify our citizenship and passports for the benefit of the global rich whether they are from Russia, China, Iran, or Switzerland. According to reports one such passport king, who holds more than six different passports under different names and even a Swiss diplomatic passport, has been in touch with key policy makers over the last two years with the objective of convincing our government to adopt this program and to appoint his company as the sole concessionaire of the EDB. Perhaps Mr Cartier of the EDB can enlighten us further. The name of Dominic Volek should be familiar to some.
Attracting fdi by selling Mauritian citizenship/passport?
Government avers that FDI collected from CCPS will be used for capital projects and repayment of national debts. Economic theory states that we can reduce national debts by reducing expenses, increasing revenues, rescheduling debts or simply defaulting on repayments. I never heard any respectable government selling citizenship to repay debts. FDI on the other hand is required to increase the productive capacity of a country and not capital expenditure of Government. In the 1980s our investment promotion mission targeted investment in textile factories and tourism which brought growth, full employment and economic diversification. We have always been granting work permits, residence permits, and occupational permits to foreign workers and investors.
Since 2003 we are also giving permanent resident visas as incentives to foreigners who invest in luxury villas but who do not necessarily contribute to any useful economic activity. Even then only 2,500 units have been sold to date. What will therefore be the incentive for foreign investors to buy the smart villas now that they can buy passports and citizenship directly?
Government is ill-inspired to pursue this short-sighted shenanigan which can only harm our democracy and sovereignty by creating a dependency for passport and citizenship sale.
The main players in the industry are Henley & partners, Apex Partners, CS Global, Arton Capital and Deloitte. While much is not known about the other companies Henley & Partners2 (H&P) led by a Swiss born lawyer Dr Christian H Kalin has been in the public limelight in the Grenada Islands, in St Kitts & Nevis and Malta especially. He is reputed to show governments in poor and cash-strapped countries that they have at least one resource to sell i.e. passports3.
The company has been linked to several high profile cases in recent years. It is under scrutiny by the European Parliament, the British Parliament, the FBI, Europol and even the US state department4. Its particular way of doing business has drawn severe criticisms from the media and H&P has responded by threatening the press with crippling legal actions5. According to the UK political paper “Spectator” H&P (kalin) and CA (Alexander Nix) have also been accused by a source from SCL – to have allegedly coordinated funding and electoral works for politicians in the Caribbean who would then engage H&P to run their passport selling schemes. This is particularly the case in Malta where the actual Prime Minister awarded the CIP project without public consultation to H&P immediately after coming to power in 2013. H&P and Mr Kalin are also reported to have obtained four St Kitts and Nevis passports for an Iranian businessman Ali Sadr Hasheminejad (Ali Sadr), and facilitated the obtaining by Ali Sadr of a Maltese banking licence for Pilatus Bank. Ali Sadr is now arrested in the US on a charge of laundering of US$ 115m Venezuelan money in the US and is facing up to 125 years jail sentence. Pilatus bank is the same bank where ministers of Malta are allegedly to have received kickbacks from H&P passport sales6.
Murder of Daphne Carauana Galizia- Maltese Journalist
In October 2017 Daphne Caruana Gazilia, a Maltese blogger and investigative journalist, was murdered in a car bomb (triggered by burner phone) close to her house after denunciating corruption at the highest political level in her country. She exposed the Malta Golden passport schemes and the sale of passports to barely screened foreign nationals and corrupt businessmen. She denounced H&P and Kalin on the MIIP and Ali Sadr and Pilatus Bank. H&P allegedly threatened to ruin her financially for her articles and blogs against the incumbent government of Malta. Daphne even wrote to the Maltese Prime minister on the matter before her assassination. H&P and Christian Kalin, have been named by Caruana Galizia’s children as being allegedly part of a “gang of crooks” who sought to “financially cripple” their mother. “There was a gang of crooks, including Christian Kalin of Henley and Partners, and lawyers at Mischon de Reya in London, who conspired with politicians in Malta to financially cripple my mother with one vexatious lawsuit after another,” Matthew Caruana Galizia posted on Facebook.
Andrew Caruana Galizia the other son of Daphne adds: “Malta’s a small country. So if you capture a major political party which is going to be elected to government, very easily all of a sudden you control all the levers of a European Union member state. Malta’s EU membership, instead of serving as protection, made us a more attractive prize for these people. Malta has enormous power for its size, within the European Council, within the European Parliament, and also influence over the European Commission: that’s incredibly dangerous.”
To conclude, the CPPS is the only revenue raising measure in this budget and should be fiercely resisted by everybody. It is wrong and retrograde, nefarious and it is not sustainable in the long term. Government has not been mandated by the population for such a scheme although they may have the numbers in Parliament. Without control this scheme can be abused by tax evaders, money launderers, and organised crime figures who can cross borders at short notice especially because the passport and citizenship provide visa free access to many countries including the EU and its institutions – banks, courts and financial centres.