“Granting citizenship and residency to wealthy investors through 'golden' passport and visa programmes can potentially lead to economic growth. But they can and are being exploited by criminals and the corrupt, who want to launder their money hide their identity and assets, or carry out further crimes.”(Financial Action Task Force – FATF) President T. Raja Kumar.
The recent European Court of Justice decision that Malta had to end its golden passport programme effectively closes this option for the whole of the European Union. The United Kingdom, Ireland and Australia have also ended their CBI (Citizenship by Investment) or RBI (Residency by Investment) programmes. Those seeking access to residency or citizenship in other countries will be shopping around for other options.
This offers both potential and risk for New Zealand, where the government has just amended the Active Investor Programme put in place by the previous Government, reducing some entry criteria. This is not a new initiative - successive governments have run residency for investment programmes since the 1970s.
In attracting overseas investors, New Zealand needs sufficient checks and balances to avoid corrupt use of this visa category. While we benefit from people using migrant investor schemes for their intended purpose and benefit, we don’t want New Zealand to be the bolthole of oligarchs and miscreants, those trying to avoid tax or those who are facing charges or sanctions in other jurisdictions.
It is vitally important to maintain the high reputation and integrity of the New Zealand immigration system and the value of our passport, which is regarded as one of the most powerful passports in the world facilitating visa-free or visa-on-arrival access to over 190 countries.
Did the Government and its advisors consider corruption risk?
The heavily redacted Cabinet papers supporting broadening the revised Active Investor Programme do not offer confidence that the government considered corruption risk. There is no minuted discussion by Cabinet or information from the Ministry of Business, Innovation and Employment (MBIE) of previous misuse of our ‘golden visa’ schemes or of the internationally recognised risks, or the withdrawal from this sort of programme by several peer countries.
It is unclear whether consultation occurred with relevant regulatory agencies (e.g. Financial Intelligence Unit, Serious Fraud Office, the Security and Intelligence Service, financial market regulators and the Office of the Auditor-General) about the type of due diligence needed to mitigate corruption risks. Stakeholder consultation external to the government is stated as immigration advisers and business associations.
Have character requirements been lowered?
A general character requirement is outlined in a Cabinet Paper but not yet visible on the Immigration New Zealand website or the prospectus. There may be more stringent expectations which are not visible. The stated general character requirements for this category of visa application are:
– the applicant has to be a ‘fit and proper person’. This is described as:
- all businesses the investor has influence over must have complied with all immigration, employment, and taxation laws.
- The investor must have never been investigated by the Serious Fraud Office or the New Zealand police for any offence resulting from business dealings; have no convictions for an offence involving dishonesty; have never been involved in business fraud or financial impropriety.
- the person has ‘earned or acquired investment funds lawfully (and can prove that).
Other categories of New Zealand business migrant visa applications appear to be more stringent, involving specific police checks and a broader range of exclusionary convictions than the just financial.
Whilst New Zealand investigations are included in that ‘fit and proper’ description, it does not seem to include any overseas jurisdictions. If a person is currently being investigated in an overseas jurisdiction, are they still welcome here?
It is also not clear what integrity and accountability mechanisms will be built into the assessment process.
FATF/OECD Report
In November 2023 the Financial Action Task Force (FATF) and the Organisation for Economic Co-operation and Development (OECD) published a joint report “Misuse of Citizenship and Residency by Investment Programmes”
The report summarized: “Properly managed, CBI or RBI programmes can, theoretically, benefit both host countries and individuals. However, in practice, such programmes bring significant risks of money laundering, fraud, and other forms of misuse, and should be designed and administered in a risk-sensitive way, including by implementing safeguards such as those set out in this paper.”
The report is comprehensive and thorough, offering many risk mitigation actions which we frame below as questions for New Zealand decisionmakers. It is likely that some of these risk mitigations are incorporated into the programme, but we just don’t see that in publicly accessible guidelines or policy.
- Pre-application due diligence. Does this occur, and if it does, is it separate to an immigration advisory firm supporting an application, so as to avoid conflict of interest?
- Clarity of roles. There should be clarity and role distinction between the public and private actors. Relevant questions:
- What processes are in place to guard against political interference in the application and approval process?
- Are there limits and monitoring of interactions between Agency case officers and Agents to ensure transparency and limit conflict of interest or regulatory capture?
- Is there a multi-tier vetting process to conduct Customer Due Diligence (CDD) by a licensed Agent, the Agency and any third-party recipient of associated funds (i.e., financial institution, property developer etc) independently of each other?
- Transparency:
- What is the accountability around funds from CBI inflows?
- Are numbers of applications publicly reported on at regular intervals?
- Is there transparency about how the RBI funds are being used over time (eg types of investments)? This can help alleviate financial crime risks.
- Due diligence cross checks:
- Will thorough identity, background and cross checks occur against applicable law enforcement, intelligence, media from the source country, and immigration systems for adverse information?
- Will there be any additional CDD for high-risk jurisdictions? Identifying indications of potential criminal activity from media is helpful when an individual may have cover from prosecution or where the necessary information from law enforcement cannot be obtained?
- Will interviewing for immigration and financial crime detection purposes by trained personnel occur?
- Will the applicant be required to disclose any additional active citizenship holdings and any current and previous identities and nationalities?
- Will background legal checks include civil recovery and asset freezing procedures related to corruption/unexplained wealth or regulatory censor actions (such as being struck off as a director or banned from providing financial services due to malpractice? Is there checking whether the applicant or their business have raised Suspicious Transaction reports?
- It is important that ‘Politically Exposed Person’ applicants are identified, and the exposure fully understood, and where necessary risk mitigated. A PEP is an individual who is or has been entrusted with a prominent public function, including heads of government, senior politicians, and public officials.
- Will NZ/UN sanctions screening be part of the due diligence process?
The UK stopped its Tier 1 Investor visa in 2022 due to apprehensions about the influx of illicit funds, particularly from Russia. Ireland stopped its residency for investment programme in 2023 due to mounting concerns about potential misuse, including money laundering and tax evasion. In early 2024 Australia ended its programme after the government found it was "delivering poor economic outcomes". It was attracting large numbers of migrants with less business acumen than would have otherwise arrived, including some who exploited the system.
It is the government’s responsibility to ensure that the risk of misuse of this programme is managed appropriately. Investors are attracted to New Zealand because of the ease of doing business and because we are a relatively safe country with a relatively low level of corruption.. That is a reputation that has to be constantly earned. We cannot de-prioritise due diligence and risk mitigation in the chase for the overseas dollar or yuan.
