Dubai: Despite strong warnings about citizenship-by-investment programmes, a growing number of expatriates in the UAE are buying second passports, spurred by mounting concerns over geopolitical instability in the region.
According to Savory & Partners, a Dubai-based firm that offers citizenship-by-investment services, the top nationalities seeking a second passport in the UAE are Pakistanis, Syrians, Indians, Lebanese and Egyptians.
This comes even as the European Commission prepares to toughen its stance against European governments that offer citizenship through an investment scheme. A Financial Times report in mid-August cited the European Union’s Commissioner for Justice, Vera Jourova, who said that such programmes will come under tougher scrutiny as part of a wider drive against money laundering and corruption.
And it’s not just the EU.
Citizenship-by-investment programmes have long raised eyebrows among politicians, lawyers and other experts, with the International Monetary Fund (IMF) classifying some countries that offer these programmes as offshore financial centres.
But in the UAE, demand for it is surging.
In 2017 alone, Savory & Partners saw a 219 per cent jump in the number of Syrians looking to invest in a second passport. Meanwhile, the number of Iraqis increased by 113 per cent year-on-year, with 73 per cent more interest for second passports overall in 2017 over 2016.
“The Arab Spring kicked things off, but in the last two years, events unfolding in Qatar, Saudi, the war in Yemen, the lack of a prime minister for a couple of years in Lebanon — each of those events had a trigger effect,” said Jeremy Savory, CEO and founder of Savory & Partners.
“Syria was already a big market, but I think what’s happened is as [Syrian President Bashar Al] Assad has been strengthening his position, a lot of Syrians have given up hope that there is an end in sight.”
Savory told Gulf News that the top countries where UAE-based expatriates are applying for a second passport are Dominica, and Saint Kitts and Nevis.
Dominica offers passports for individuals an investment of $100,000 (Dh367,000), which goes to the government income, while Saint Kitts and Nevis offers passports for $195,000 for a family.
In European countries, Savory’s clients in the UAE are mostly investing in Cyprus.
Savory said that he expected to see an increase of 40 per cent year-on-year by the end of 2018 compared to 2017.
‘Trophy for the wealthy’
This surge in demand isn’t specific to the UAE.
A Bloomberg News report dubbed second passports the latest “trophy for the ultra-wealthy.” Christian Kalin, chairman of Henley & Partners, told Bloomberg that wealthy buyers are looking for security and peace of mind in case of any instability in their home countries.
“It’s the latest status symbol. We’ve had clients who simply like to collect a few,” Kalin told Bloomberg.
For Savory, the company’s founder said that his UAE-based clients have an average net worth between $5 million and $10 million, but most likely even higher.
“If you’re doing a donation of $100,000 without getting a return, that’s not going to be your life savings or your kids’ education savings, so you’re probably worth at least $1 million to $2 million, because something like a second nationality, you’d probably allocate 8-10 per cent maximum of your net worth,” he said.
So what exactly do critics have against these programmes?
A UAE-based tax lawyer that Gulf News spoke to said that many are concerned that such programmes may attract the wrong people, specifically sanctioned individuals.
“There are genuine cases where [these programmes] serve good purposes, but they may be abused, too. Firms that provide these services have strict due diligence to make sure applicants are legit. But incentive schemes are also used by people who’d like to have another passport for tax purposes,” said the lawyer who asked to remain anonymous.
European politicians have also said that citizenship in Europe should not be up for sale, and that citizenship-by-investment schemes could provide a backdoor for individuals from Russia looking to avoid sanctions in their home country.
Asked about that, advocates of the citizenship programmes say their clients are usually looking for security for their families. Henley & Partners’ Kalin told Bloomberg that stability — not tax avoidance — is what motivates most buyers, while Savory said that many are looking to take hold of their identity.