There has never been a time in history when all of the nations in the world were safe and free from political, personal, financial, commercial or other risks. Today is no different. One can argue—and this writer does—that we are living in a time of great prosperity and consequently greater uncertainty than ever before. In such times, those with the means to take steps to hedge against such risks are doing so.
After all, what use is wealth if it is subject to usurious tax regimes, if one’s business is at the mercy of unpredictable and corrupt governments, if one’s health is threatened by pollution and effects of climate change, and one’s children must travel to school in an armored car?
It is estimated that by 2022, there will be more than 500,000 individuals with a net worth of more than $50 million—these are the high-net-worth individuals (HNWIs) we reference. Thousands of these people are demi-billionaires, with a net worth of more than $500 million, and billionaires. While a significant number of them will be concentrated in high-risk countries like Asia, the Middle East, Latin America, Africa and Russia/CIS, where the risks seems to be clear, those in more developed countries like the United States, United Kingdom (Brexit, anyone?) and EU are not without risks; while perhaps less obvious they are nonetheless very frightening and real.
What do the wealthy do when facing these risks? They can build walls, drive in bullet-proof cars and have security. That is protection, not risk management. To manage risk, they establish residence or citizenship in a country where there is much less risk. To meet the demand of these families, an ever-lengthening list of capital-friendly countries have been offering opportunities to gain residence or citizenship through investment and are now part of a $20 billion global industry.
It is estimated that there are over 100 countries that allow the wealthy refuge through carefully crafted programs. The trend to offer citizenship began with St. Kitts & Nevis in 1984 and has gone on to include several other Caribbean nations, a few European countries and some in Asia. Add to this residence programs like the U.S.’ EB-5 (1990), U.K.'s Tier 1 Investor Visa (2008) and various European "Golden Visas," the list goes on and on.
Cynics, and specifically the European Commission and OECD, routinely sound the alarm—without any evidence—that tax dodgers and criminals are acquiring second residence or citizenship. Why else would a law-abiding and patriotic person do such a thing? While I do not dispute that bad actors can abuse any system, my personal experience of representing many of the world’s wealthiest families and entrepreneurs navigating these issues tells me that this is not the rule, and may not even be the exception. Let me share the example of a few real clients.
In his 40s, Abdullah is a citizen of Saudi Arabia and one of the wealthiest businessmen in the Middle East. He has no criminal record and sits on the boards of companies, charities and universities. Alarmed by the arbitrary detention and extortion of business leaders and friends in his country, he was afraid to go home. Abdullah’s passport was about to expire, which made it impossible for him to travel. Going back to renew the passport was not something he wanted to do. The ability to secure a second passport—in his case St. Kitts—by investing in a hotel development was a life raft for Abdullah as it provided him and his family a safe haven and the ability to travel.
Sarah is a Nigerian billionaire who made her wealth through investments in oil and gas and real estate. She has children in boarding schools and university in the U.K. and U.S. Despite her significant wealth, Sarah’s Nigerian passport offered limited freedom of travel and no right to work in Europe or the U.S. For her, acquiring a European passport by purchasing a substantial property in Cyprus made sense, as did getting a Tier-1 visa in the U.K. for her son and an EB-5 green card in the U.S. for her daughter. All of this gave Sarah and her family the freedom to travel, live and work almost anywhere in the world. It also gave Sarah peace of mind.