theworldismine13
God Emperor of SOHH
Passport King Helps Poor Nations Turn Citizenship Into Resource
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In 2006, the tiny Caribbean state of St. Kitts and Nevis was in deep trouble. Its sugar plantations had closed a year earlier, gang violence had given it the dubious distinction of having one of the world’s highest murder rates, and only two governments on Earth were more indebted. A three-hour flight south of Miami, the country of 48,000 people was more or less unknown. Certainly, the two specks of volcanic rock in the middle of the West Indies weren’t of much interest to the world’s rich. St. Kitts and Nevis had run a citizenship-by-investment program—had sold passports—since 1984, but it didn’t get much attention and was never a moneymaker.
Then a Swiss lawyer named Christian Kalin showed up.
João Canziani/Bloomberg Markets
Christian Kalin in St. Kitts, where he developed the citizenship program that inspired an industry
Thanks to Kalin, St. Kitts has become the world’s most popular place to buy a passport, offering citizenship for $250,000 with no requirement that applicants ever set foot on the island’s sun-kissed shores. Buyers get visa-free travel to 132 countries, limited disclosure of financial information, and no taxes on income or capital gains. The program became so successful that St. Kitts emerged from the global financial crisis far ahead of its neighbors in the Caribbean. “It’s been a complete transformation,” says Judith Gold, head of an International Monetary Fund mission to the country.
Just as Kalin put St. Kitts on the map, Bloomberg Markets will report in its April 2015 issue, the reverse is also true. It made his reputation. Before St. Kitts, Kalin’s firm, Henley & Partners, was an obscure wealth management and immigration consultancy, and Kalin was working out of a small branch office in Zurich. Tall, with a runner’s build, Kalin was known as a researcher, he says, not the hard-nosed dealmaker he’s become. His claim to fame was having edited a 766-page guide to doing business in Switzerland, a tome found in every one of the country’s embassies.
Soon, prime ministers from around the world were seeking Kalin’s advice, in the hope he could reproduce the magic of St. Kitts, where he effectively created a resource out of thin air for a nation that had few. Many countries allow wealthy foreigners to buy residency cards through what are called immigrant investor programs, but before the financial crisis, St. Kitts and another Caribbean island called Dominica were the only ones selling citizenship outright. Since then, another five countries have gotten into the game. More are coming.
Kalin advised the governments of Cyprus and Grenada, which established citizenship-by-investment plans in 2011 and 2013, respectively. Also in 2013, he designed a program very much like St. Kitts’s for Antigua and Barbuda. In 2014, Kalin crafted a plan for Malta, the smallest member of the European Union. “Pretty much every government that has even contemplated this has talked to us,” he says. In St. Lucia, a task force is considering proposals from Henley and other firms. Albania, Croatia, Jamaica, Montenegro, and Slovenia are looking at programs, too.
“The bottom line”—it’s a phrase Kalin uses often—“is that more states are open to making citizenship rights available through investment,” he says. “And it makes a lot of sense. Why not give citizenship to people who contribute a lot to the country?”
Since revamping the St. Kitts program in November 2006, Kalin has built Henley into the biggest firm in an industry turning citizenship into a commodity. Investors spent an estimated $2 billion buying new passports last year alone, and Kalin predicts demand will grow along with the ranks of the wealthy in emerging countries. “It’s a question of mobility and also security,” he says. “If you’re from a country that’s politically unstable, where you’re not sure what the future holds, you want to have an alternative.”
Adam Voorhes/Bloomberg Markets
Henley is privately held and Kalin won’t discuss its revenue, but he says by the end of 2014, the firm had helped dozens of governments raise $4 billion in direct investment through citizenship or residency programs. It has also advised thousands of multimillionaires on where and how to buy a passport of convenience, collecting fees and commissions from all sides. Last year, at 42, Kalin became Henley’s chairman.
The business Kalin pioneered has its share of critics, who say it gives the wealthy more room to avoid taxes and provides safe harbor to people who made their money illegally. “We’ve created over the past 50 years an entire shadow financial system that helps people hide money,” says Raymond Baker, president of the Washington-based advocacy group Global Financial Integrity. “This is a new wrinkle in that.”
In June, Bloomberg News reported that Paul Bilzerian, a former Wall Street raider who served two prison terms for fraud, was claiming to be licensed to process citizenship applications for St. Kitts, where he now lives. Bilzerian helped an entrepreneur named Roger Ver—a provocateur widely known as Bitcoin Jesus—to purchase citizenship on the island. The two men then launched a website called Passports for Bitcoin to help people in places such as China use virtual currency to skirt local laws limiting money transfers. Learning of this, the St. Kitts citizenship unit made a hasty announcement that it wouldn’t be accepting bitcoins as payment. Bilzerian declined to comment for this story.
“Like everywhere, in any industry, you have a spectrum of highly professional people all the way down to crooks and idiots,” Kalin says.
Still, the passport business isn’t quite like any other. It presses moral buttons that most industries don’t. Is it right to turn citizenship into something that can be bought and sold? That’s still an open question for most people, and Kalin admits as much. “It’s sensitive,” he says.
Beyond those sensitivities, there’s also concern that criminals, or even terrorists, are buying second passports. The U.S. Treasury Department issued a warning in May 2014 that St. Kitts had granted passports to Iranian nationals seeking to avoid trade sanctions on the country for its nuclear program. In November, Canada announced it would no longer allow St. Kitts citizens to enter without a visa, due to concerns about “identity management practices within its Citizenship by Investment program.”
St. Kitts responded the next month with a passport recall. Those issued from January 2012 to July 2014 would have to be returned and replaced with ones indicating the holder’s place of birth and any other names by which he or she had been known—information that wasn’t on the originals. Montreal-based Arton Capital, Henley’s biggest competitor, estimates as many as 16,000 passports may be returned.
Nicholas Shaxson, author of Treasure Islands, a 2010 book about tax havens, says the industry feeds into a culture of corruption in poor countries that make a business of ignoring their own laws. “These smaller jurisdictions haven’t got anything to sell besides ‘we’ll let you do anything you want,’” he says.
Developed countries run into trouble, too. Miguel Macedo, Portugal’s interior minister, stepped down in November, and the head of the country’s immigration services was arrested amid an investigation into influence peddling and embezzlement in its new residency-by- investment program. Macedo has denied any wrongdoing.
“All of the programs have a certain tendency for corruption, unfortunately,” Kalin says. “But you have to understand that we, and I, have not paid a single cent to any government official, ever.”
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Gaston Browne, the prime minister of Antigua and Barbuda, starts his sales pitch with a geography lesson for all would-be citizens who might have trouble finding the country on a map. (It’s about 60 miles [100 kilometers] east of St. Kitts.) Then, bending over the podium, he reads out a list of the country’s selling points, including its “365 beaches, its pristine waters, beautiful climate.” The prime minister sounds less like a statesman than a tour guide, or perhaps the property developer he once was.
He’s selling Antiguan citizenship, which can be had for a $200,000 donation or a $400,000 investment in real estate, plus about $60,000 in fees, a deal similar to the one St. Kitts offers. In the weeks before, Browne had delivered the same pitch at roadshows in Toronto and London. This time, in late October, he’s in Singapore at the five-star Fullerton Hotel, where Henley & Partners is hosting its eighth annual Global Residence and Citizenship Conference.