Gaming the passport lottery
Pretty much everyone in Brussels has had it in for Malta’s “Citizenship by Investment programme ever since it launched a decade ago, but it took the European Court of Justice to finally kill it, on the basis that it’s illegal to make acquisition of a passport a “mere commercial transaction”. “Such ‘commercialisation’ of citizenship is incompatible with the basic concept of Union citizenship,” the court declared.
On one level, I am fully onboard with the widespread rejoicing that has followed the decision, and anything that annoys ex-Maltese prime minister Joseph Muscat is clearly an unalloyed good. I’m also not persuaded by the argument from passport vendors Henley & Partners (who helped design the programme) that this decision was an infringement of national sovereignty. A Maltese passport gives its holder rights to live, work, and travel anywhere in the European Union, so European authorities should have a say, not least considering some of the questionable people who’ve obtained, or rather bought, citizenship in the past.
However, at the risk of being one of those people, I want to point out that this is not the knockout victory that it looks like.
It’s a basic principle of the offshore world that I called “Moneyland” in a previous book that if rich people perceive something as onerous – taxes, transparency, democratic oversight, legal accountability, alimony — they’ll find a way to get out of it. I have little to no sympathy for any of this, with the one partial exception of citizenship.
It is undeniably unfair that someone like me – born in Britain, with one Canadian parent – has access to two super useful passports, whereas someone born in, say, Palestine, Nigeria or Bangladesh is stuck queuing for visas from countries that charge a fortune for the application, and may not provide them anyway.
The golden passport schemes of countries like St Kitts and Nevis, Turkey and, er, Nauru all sprang up in response to demand from people rich enough to travel the world but inconvenienced by borders (or by law enforcement), and that demand isn’t going away just because formal schemes like that in Malta are abolished. Instead, it will become informal.
So, I would like European authorities to now pay attention to places like Italy, Romania and Poland, which award citizenship to people with an ancestral link to the country, or to people from places that were once within the borders of the country. In Romania’s case, that includes parts of modern-day Bulgaria, Moldova, Hungary and Ukraine. How scrupulous are they being about the authenticity of the documents being provided? How sure can we be that cash isn’t changing hands? I hear an awful lot of rumours.
Malta’s problem may have been that it made the commercial aspect too obvious, and the lessons its politicians will learn is that they should just put the word out that proving Maltese descent will be easy if you pay enough money to the right people. Also, Vienna still sells passports to people who make exceptional contributions to Austria, why isn’t the European Commission going after them?
A FREE PASS FOR THE PIG BUTCHERS?
The latest iteration of anti-corruption measures in the United States seems to go like this: Prolonged discussion in Washington, with extensive stakeholder consideration; an injunction from a judge in Texas at the request of some random business which doesn’t like having to do paperwork; the federal government deciding to give up on regulation.
We saw this earlier this year with a judge blocking the implementation of the Corporate Transparency Act, and may be seeing it again with attempts to regulate all-cash property purchases being stymied. We now await word from the administration to see if they’ll give up on this too.
In some ways, this is good. Anti-money-laundering regulations can be extremely intrusive and often lack democratic oversight, so a bit more discussion can help legitimacy. But in other ways this is bad, not least in how it plays into a growing perception that the United States is retreating from any efforts to enforce rules around financial crime. It’s even been told off by the U.K. about violating a global anti-bribery treaty, which must have raised some eyebrows.
I hope though that the U.S. authorities will stay the course with their designation of Cambodia’s Huione Group as being of “primary money laundering concern”. As successive studies by Elliptic have shown, Huione is the largest illicit marketplace of all time, and central to much of the cyber-enabled wave of fraud given the nasty name of “pig butchering”. According to Elliptic, Huione group companies have taken in at least $98 billion in crypto assets to date, and anything that prevents them from operating freely is good.
HITTING RUSSIA WHERE IT HURTS
When Donald Trump did not include Russia in his big chart of which countries would face tariffs, it looked pretty odd, particularly given the fury with which he went after penguins and seals. However, the economic turmoil unleashed by “liberation day” does appear to be hitting Russia hard nonetheless, since lower oil prices threaten to undermine its state budget.
It’s a good time therefore to read this excellent article by Tom Keatinge about Western sanctions on Russia’s oil industry, how Moscow has responded to them, and what should now be done. With its shadow fleet of aged tankers insured – if at all – by under-capitalised companies, Russia has found new customers, above all in India and China, and managed to keep earning the petrodollars it needs to keep its war going. Now, it not only continues to pose a strategic threat to the West, but also a very significant environmental threat as well.
“Yet despite these risks and Russia’s disregard for conventions and norms related to safety on the high seas, the West’s unwillingness to act decisively in the face of the Kremlin’s flouting of international maritime conventions means that Russia is able to operate with impunity,” Keatinge writes. His injunction is to “Remember the Original Mission”, and that applies to all sanctions.
Western countries imposed restrictions on hundreds of individuals and companies in the months after Russia’s full-scale invasion of Ukraine with the aim of crippling the Kremlin’s war effort. This clearly hasn’t worked. I would like to see a discussion – with the same urgency as the initial sanctions were discussed – about what to do next. Ukrainians are dying every day, and the mission is to save their lives. We need to remember it.
A version of this story was published in this week’s Oligarchy newsletter. Sign up here.