A recent UK parliamentary report said the country's citizenship/residency-by investment regime must be radically reformed to curb the influence of Russian oligarchs with dubious sources of wealth. The author of this article says such claims are unwarranted.
Unless one has been living on a remote desert island, it has been difficult to avoid reading about how attitudes towards those from the former Soviet Union and from mainland China have changed in recent years. The UK had been seemingly eager to roll out the red investment carpet to high net worth and ultra-HNW individuals. More recently, it appears the mood has cooled. One potential consequence could be a take-up of the UK’s own “golden visa” regime, aka the Tier 1 Investor Visa system.
To discuss these issues is Nicolas Rollason, head of immigration at law firm Kingsley Napley. The editors are pleased to share these views and invite readers to respond. As ever, the usual editorial disclaimers apply. Email email@example.com and firstname.lastname@example.org
The Tier 1 (Investor) visa category celebrated its 25th year anniversary in 2019. It is one of the last survivors of a number of visa categories introduced (or rebranded) in 1994 such as the business person/entrepreneur route, closed off last year, and a number of other later visa categories such as HSMP and Post Study Work which have come and gone.
The UK is not unique in having a residence by investment scheme - most developed countries have similar visas, with variations in investment amounts and types. These should not be confused with the more controversial citizenship by investment schemes, which provide passports with relatively short or in some cases, no periods of residence. This distinction is often forgotten in the media discussions about passports for sale.
Since 2011, the investor route has been overhauled many times, first to attract more investors, then tightened to increase the minimum investment from £1 million to £2 million and more recently adjusted to allow for more due diligence and to restrict investment types. The Home Office has responded to suggestions from the Migration Advisory Committee (MAC) in making these changes, but some of the changes have been driven by concerns in government, the media and parliament about possible abuses of the route by those with questionable pasts and sources of wealth, in some cases with Russian connections.
The route has, however, survived. As the UK starts to move to a new immigration system in 2021, more questions about the investor visa have been raised by this week’s release of the UK Parliament Intelligence and Security Committee’s Russia Report. Under the subtitle Welcoming oligarchs with open arms the report states: “Whilst the Russian elite have developed ties with a number of countries in recent years, it would appear that the UK has been viewed as a particularly favourable destination for Russian oligarchs and their money. It is widely recognised that the key to London’s appeal was the exploitation of the UK’s investor visa scheme, introduced in 1994, followed by the promotion of a light and limited touch to regulation, with London’s strong capital and housing markets offering sound investment opportunities.”
The report goes on to recommend that one way of “shutting the stable door” and “disrupting the threat posed by illicit Russian financial activity” would be “an overhaul of the Tier 1 (investor) visa programme.” There needs to be a more robust approach to the approval process for these visas.
The committee’s call for further overhaul of the investor visa is somewhat disingenuous. The necessary rule changes which make the route more robust are already in place. In fact the route has been reformed and tightened almost to death. The possibility of refusal based on the source of funds and how people extracted their funds from specific countries with capital controls are now much more explicit.
Many investors from higher risk countries such as China and, yes, Russia, are now interviewed. The Home Office has for some time effectively outsourced the source of funds, wealth and AML client due diligence to UK wealth managers - having an investment account opened has been a prerequisite for obtaining the visa since 2014. The argument is that banks are much better placed to run compliance checks and, as regulated entities, they should have a high level of compliance with AML regulations and sophisticated systems for undertaking that due diligence.
Indeed, as banks and wealth managers have reduced their appetite for onboarding clients from high risk countries, so the number of Russian investor applicants has dropped from the peak of 241 applications in 2014 to just 26 in 2019. That reduction in numbers applies to all nationalities and is not only a result of more “filtering” of PEPs by financial institutions but also resistance to committing £2 million, along with other immigration changes which have made it harder for families to acquire permanent residence where one parent travels extensively. In the Russian context, taking up residence elsewhere can sometimes be seen as a sign of disloyalty to the regime.