European passports and Schengen visas are the most desired traveling documents in the world. Not only do they grant the most traveling freedom, they give access to a safe and stable living environment, with free speech, in a market that can fulfill all your needs.
Many EU countries have taken advantage of this by offering entry in exchange for investment. This kind of activity is commonly referred to as a Golden Visa Program. For the subject countries, they are indeed golden, because they have the potential to bring in billions of capital into the country. Latvia, for example, used the program to stabilize its economy after the financial crisis.
According Transparency International, such programs have been in existence since the 1980s, and currently at least 12 EU Member States are offering them. Usually the reward is a residence permit, however Cyprus and Malta offer a fast track to citizenship should the customer invest enough money, and Portugal offers the citizenship option after a six year waiting period.
While the controls in most European countries should prevent individuals who are sanctioned by the EU from obtaining citizenship, many individuals took advantage of Golden Visa programs prior to implementation of the current international sanctions. It is a complicated matter for a nation to try to implement sanctions on its own citizens and capital that is invested within the country.
Most of these programs are legitimate, but the way they are set up invites abuse. Real estate is one of the easiest ways to launder dirty money, and these programs are taken advantage of all over the place.
Some of the Golden Visa and Golden Passport programs are complex and might involve long red tapes and waiting periods. Of course, sometimes a suitable facilitation payment can fix that…
Latvia Golden Visa Program
The Latvian Golden Visa Scheme was heavily criticized. From 2010 to 2014, Latvia offered it at a discount price of EUR 71,150 if invested in countryside real-estate. The price for living in Riga was doubled to a value of EUR 142,300. As you can see, this could very easily be taken advantage of by someone looking to spend dirty money.
The number of people who took up this offer increased substantially in 2014, the same year that Russia annexed Crimea. Almost 90% of the visa applicants came from Russia and countries that were formerly in the Soviet Union. Thus, a program that had originally been intended for economic development and brought wealth to Latvia in the previous years had become embroiled in political significance.
Picture 1: Latvian Golden Visas per year (Source)
The negative effects of the program eventually convinced the Latvian Administration to dismantle the discount in 2014. The greatest risk of these visa programs was spying, according to the deputy head of the Latvian Security Police in a 2017 parliamentary committee hearing. Then, of course, there was the risk to the economy, since many applicants were unable to prove the legality of their money. Although the program has since been dismantled, the effects of it and risks introduced by it will be felt for years to come.
Hungarian Golden Visa Program
Another interesting notorious golden visa program was the one in Hungary.
The Hungarian Golden Visa program was slightly different than in Latvia. Instead of it being based on investment in real estate, applicants had to buy a state bond from one of eight companies that had solitary rights to sell them on the behalf of the government. These bonds, which totaled up to EUR 300 000, were not inexpensive.
The results of this program were remarkable. The eight companies were able to earn about USD 600 million – and that’s a conservative estimate – over the course of the years that this program was running from 2013 to 2017. (OCCRP May 16, 2018)
The program ended in 2017 after criticism concerning the integrity of the eight bondseller companies. They were pretty mysterious – most were registered in offshore tax havens and it wasn’t completely clear who exactly profited from the sales.
An investigation conducted by g7.hu and Transparency International Hungary uncovered the way these companies worked. Basically, companies would be assigned to territories around the world and allowed monopolies to sell the bonds under the program. But the way these companies were assigned required inside knowledge and connections – it wasn’t like it was a public tender. They had to have known about it separately since it was never advertised. Per the law, all the applicants were meant to be listed on the Hungarian Economic Committee’s agenda, but this was not always the case.
Although the Golden Visa program in Hungary has since been shut down, there are some rumors that a new ‘golden’ immigration program may be coming. Direkt36 reported that this new program was advertised by a Hong Kong based company on the Chinese platform WeChat. This new program now more closely resembles Latvia’s program, where applicants are required to invest a value of EUR 78 000 into Hungarian real estate.
Case Study: Who buys the visas?
Picture 2: Screenshot of Mr. Bogolyubov from The Times
Mr. Gennadiy Bogolyubov, the Cypriot, the Israeli, the Brit, the Ukrainian
Main Source: EveningStandard 11 Sep 2018
Mr. Gennadiy Bogolyubov is a popular face in the oligarch edition of the Bold and the Beautiful. He and his business partner, Mr. Igor Kolomoisky, are some of the best customers for UK lawyers – the costs alone for the litigation with their rival Mr. Viktor Pinchuk was estimated to be over GBP 50 million. The allegations and adverse reputation of the duo include alleged murders, violent takeovers and other accusations of mafia-style activities.
The two partners were very successful in post-Soviet era privatizations. Allegedly, the hasty privatization of a national bank in Ukraine to PrivatBank enabled the duo and their associates to empty out the bank’s capitalization with a decade long fraudulent loan scam.
To protect taxpayers’ interest and due to demands from Ukraine government’s external financiers (i.e. USA) PrivatBank was re-nationalized in 2016. “When Ukraine’s finance minister went to oversee the nationalization of the country’s biggest bank in December 2016, he took with him a team of bankers—and a security detail of special-forces operatives” (Wsj.com April 6, 2018).
Amongst Mr. Bogolyubov’s hobbies are philanthropy, which he practices through Bogolyubov Foundation.
||United Kingdom Tier 1 Investor Visa (2009)
Cyprus Golden Citizenship (2016)
||Ukraine, Cyprus, Israel, United Kingdom
||Unknown, was Ukraine’s #3 richest in 2010 (Kievpost)
||At least USD 2.6 Billion, shared with Mr. Igor Kolomoisky
|Costs to Ukrainian Taxpayers
||USD 6 Billion to recapitalize Privatbank
|Close Business Partner
||Mr. Igor Kolomoisky, who, according to a quote from the British Court, has taken over companies “at gunpoint” in Ukraine. Mr. Kolomoisky is a former governor and listed as an inactive PEP (Politically Exposed Person) per Dow Jones
||Mr. Alexander Zhukov, father of Roman Abramovich’s girlfriend
||Mr. Viktor Pinchuk
|London Real Estate
||GBP 62.5 Million home
GBP 20 Million house
Eaton Place Mansion
GBP 173 Million office block
Table 1. Mr. Gennadiy Bogolyubov’s Connections
This article was co-written by Oskar Savolainen and Kristina Weber of Centry Ltd. For more content like this, be sure to subscribe to Centry Blog for articles related to the security and risk industries.