Football, free ports, and “golden visas” are among the seven new supranational risk areas for money-laundering and financial terrorism, according to the European Commission in its latest series of reports on Europe’s anti-money laundering capabilities published Wednesday. According to Maya Perry (Football, Golden Visas Among “New” Money Laundering Risk Areas—published by Transparency International on July 25, 2019)this is the first time the football industry has been explicitly identified as a risk area. The new risk areas, which join a previously-identified 40, have been added because of money-laundering incidents that have been reported to or investigated by law enforcement authorities in the EU over the past two years.
Though this is the first time football has been included in this assessment, the EU and the Financial Action Task Force, an inter-governmental anti-money laundering agency, have both long identified the lucrative industry as a vehicle for money laundering and other criminal activities—such as trafficking, corruption, and tax evasion. Ongoing investigations related to the 2015 Football Leaks scandal have, in the last few years, pulled back the curtain on the dirty underbelly of the business side of European football in particular, which as a net industry is worth an estimated US$28 billion—more than the United States’ National Football League, National Hockey League, and Major League Baseball combined, according to the New Yorker.
“Professional football’s complex organisation and lack of transparency have created fertile ground for the use of illegal resources,” the report notes, “Questionable sums of money with no apparent or explicable financial return or gain are being invested in the sport.” The report also focuses on risks associated with “free ports,” also known as free economic zones, of which the EU and its dependencies have 80, according to the Guardian. Though the sites are legal, the report highlights mechanisms by which criminals could utilize the more lax customs regulations in these ports of entry to tamper with goods and associated paperwork and re-export products in such a way that their true nature and origin are obscured from customs agents.
A third new concept highlighted in the report are investor citizenship and resident schemes, where the global 1% can easily obtain visas or passports for European countries in exchange for substantial sums of money. In Greece and Latvia, a residency visa can cost €250,000, while a Cypriot passport can be worth up to €2 million, according to Transparency International. The organisation also notes that since 2008, the EU has welcomed over 6,000 new citizens and over 100,000 new residents through these schemes.
In this report, the European Commission adds that it has recently established a group of experts from member states to identify risks associated with golden passport and visa schemes, and that the 5th Anti-Money Laundering Directive, which will come into effect in 2020, will require enhanced customer due diligence for those hoping to buy access to the continent in this way. Meanwhile, David Dawkins in his piece (How The World’s Wealthiest Obtain ‘Golden Passports’ To The U.K. And EU) says controversial “Golden Passport” (or visa) schemes are back under the spotlight as one leading London firm opens up on the “huge increase” in demand for its services.
Luke Hexter, managing director of Knightsbridge Capital Partners, told Forbes that their European Passport program was driving 70% year-on-year growth at the firm. This comes after Knightsbridge was embroiled in a Sunday Times and Channel Four investigation that found firms brokering U.K. investment visas and European passports for foreign billionaires and millionaires had boasted of being able to sidestep government checks and safeguards for their clients. Knightsbridge currently sells passports from Cyprus, which would give foreign investors and their families the right to travel visa-free to 163 countries, in return for a $2.2 million (€2 million) investment into local property or funds. The island has raked in $7.4 billion (€6.6 billion) from selling passports, but the scheme has also attracted the ire of the European Commision and OECD.
Economic growth and political instability in emerging markets created the demand for so-called Golden Passport investment programs, according to Hexter. “If you got a few billion–a lot of these clients will have citizenship in one country, passports in another and residency somewhere else as a way to mitigate risk,” says Hexter “Nigeria is a prime example of a country where a lot of people are becoming very wealthy quite quickly. But with the political instability, they still love their country … they just still need to have a contingency plan in place,” he added. Nigeria is currently ranked by campaign group Transparency International as one of the world’s most corrupt countries with tens of billions from its oil fields looted by its political and military elite.
Hexter struck a defensive tone on whether the Golden Passport industry and his firm helped criminals to flee justice and hide their ill-gotten gains. The industry can “get a little bit of flak for pandering to certain unscrupulous high-net-worth individuals,” the accusation is, “as far away from the truth as can be possible.” Knightsbridge Capital, he says, “wouldn’t touch” what he describes as, “a politically exposed person or someone where there’s even a question that their wealth could have been obtained illegally.” He adds his firm’s client checks (KYC) are “stringent” and the EU’s due diligence are “very very strict.” However, for those fighting global corruption, these citizens by investment schemes are not as benign as the London firms involved would have you believe.
Ben Cowdock, senior research officer at Transparency International, challenges whether British and European money laundering and background checks are effective in identifying corrupt business leaders and politicians. The Sunday Times and Channel four undercover investigations revealed how London’s private client professionals had talked of securing a so-called “golden visa” for a member of the former Libyan dictator Colonel Gaddafi’s family, alongside questionable applicants from Thailand, Egypt and Angola. One immigration specialist is filmed dismissing Home Office anti-corruption checks as “easy-peasy,” claiming that the officials responsible relied solely on Googling names. Cowdock tells Forbes, “Our research has found all too often firms and professionals unwittingly or knowingly offering services to high-risk individuals, enabling them to launder both their money and reputations.”
More often than not, he adds, citizenship is being sought because those who benefit from political connections in unstable countries often need “to escape and enjoy the proceeds of their corruption should they find themselves out of favor.”
He adds that a British passport is still seen as a public “hallmark of credibility,” warning that the poor quality of checks carried out on those using these schemes allows them to invest funds from questionable origins in addition to “laundering their reputations”—making them appear more respectable and legitimate than they are in reality. Late last week one of the Golden Passport sector’s biggest firms, Henley & Partners, saw one of their schemes, which gave investors visa-free access to across Europe’s Schengen Zone, suspended by the Moldovan government.
Moldova is one of the poorest countries in Europe and is locked outside the European Union, but its citizens have the right to visa-free travel across the trading bloc and beyond. The former Communist state was offering citizenship and a passport for just $112,000 (€100,000) to investors, but its recently elected government decided to review the program. Dr. Juerg Steffen, CEO of Henley & Partners, released a statement arguing that they had “invested significant time and capital in Moldova” and still “believe that this investment will generate hundreds of millions of capital over time for the Moldovan economy that will enhance the lives of the Moldovan population.”
The shabbiness of the passport-for-cash business was showcased by a Dubai luxury property developer who in June was offering to bundle a Moldovan passportwith every purchase of a luxury Europe-shaped artificial island.
— The writer is veteran journalist and a former editor based in Islamabad.