Golden visa scrapped: Who should be worried?

Written by Kunal Sawnhey, Kalkine Media

The protracted conflict between Russia and Ukraine is reaching climax, and even though Russia may not have been officially subjected to any sanctions as of now, the repercussions of waging war have slowly started appearing with the UK government scrapping the Tier 1 (Investor) visa scheme, which was reportedly being used by several thousand wealthy Russians.

Though the government’s reason for the closure of the scheme has been that it was the renewed crackdown on fraud and illicit finance. And the official release stated that the scheme failed to deliver for the UK people and was giving opportunities for corrupt elites to enter the UK.

NATO has been threatening Russia with tough sanctions this time; while the UK government has also been talking about harsh economic sanctions against Russia; hence the latest decision cannot be seen in isolation, even if it is not a direct diplomatic reaction.

Golden visa – A popular scheme across the globe

The infamous scheme (Tier 1 investor visas) was first introduced in 2008 with the purpose to persuade rich people beyond the EU to invest in the country. The rules laid down for the Tier 1 investor visa states that a foreign national who spends at least £2million in the UK registered active and trading companies share capital or loan capital can get the golden visa. The visa permission also gave individuals the right to seek permanent residency and subsequent approval to be joined by their family after the completion of five years. The investor visa is initially issued for a maximum of three years and four months, and a further extension for another two years can be availed with the condition that the funds must have invested within three months of getting the visa and continue to remain invested.

The UK is not the only nation that has allowed such kind of golden visa, the scheme is popular in many countries, and almost half of the EU nations host golden visas, allowing individuals to get a residence permit or even citizenship after making large investments or donations. The scheme has helped many countries to meet their economic need with a shot of foreign investment.

Has the golden visa really served the purpose?

Golden visas are primarily aimed at meeting the economic needs of the country and are not merely immigration-related tools. As per the data available, nations like Latvia and Portugal who have seen a good surge in golden visas, had contributions of around 8-10 per cent in their foreign direct investment (FDI) through the scheme. The UK, while being a part of the EU, was said to be accruing around €750 million through the programme every year till 2019.

It is estimated that since its launch in 2008, a majority of golden visa (~60 per cent) has been granted to Chinese and Russian nationals only. The golden visa rules of the UK were modified in 2019, with the inclusion of some tightening measures like the money being paid should be of self, spouse, or civil partner only and the funds should be held in a regulated financial institution, etc. Still, the scheme presents a major money laundering challenge for the money of corruption entering the country.

If we talk about the two countries, Russia and China, the stats say that they have higher than average corruption risks associated with them; hence the proportion of money through the golden visa for Russian and Chinese individuals raises the risk of money linked to crimes of corruption in the country. Also, many call this means of securing funds merely a tool of neoliberalisation that possibly disrupts the domestic real estate markets and can price locals out of the housing.

The scheme in the UK has come under wider criticism for individuals with illegitimate wealth and those associated with wider corruption benefiting and bringing negative macroeconomic consequences. It requires a complete revamp. Due diligence checks along with upfront money laundering checks for the applicants are something that needs to be tightened, while on the domestic front, bribery poses a distinct risk, which should be tackled efficiently as the collusion between visa seekers and those granting it may derail the whole purpose of transparency.

About Lisa Baker, Editor 2419 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.