News 25th Feb 2016

Plummet in number of golden visas granted after ‘blind faith’ period ends

Steve Goodrich

Head of Research and Investigations

Steve is Transparency International UK’s Head of Research and Investigations. He is responsible for managing TI-UK’s research unit and is our specialist on lobbying accountability, party funding and open governance. Before joining TI-UK in May 2015, Steve worked as a Senior Policy Adviser at the Electoral Commission. He has over five years’ experience working on political finance regulation, legislation and data.

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Today, the Home Office published its immigration figures for the last quarter of 2015 and they make for interesting reading. If you look at the number of applications granted for Tier 1 (Investor) visas – the cash-for-residency programme that’s been running since 2008 – you’ll notice they’ve fallen off a cliff. In 2014, the UK Government admitted 1,172 people through the scheme; in 2015, it only admitted 192. That’s quite a drop.

As we highlighted in our Gold Rush report, these ‘Golden Visas’ represented an easy way for the corrupt to enter the UK under a veil of secrecy. Until 2015, there were very little checks to ensure applicants hadn’t obtained their money from corrupt sources, leaving an open door to those with dubious pasts wishing to start a new life in the UK.

In some ways today’s stats are good news – the UK has finally started to close the door on the corrupt. However, it also raises some serious questions about what the government is going to do about all the people it gave visas to and probably shouldn’t have, some of which may now have permanent residency.

Hong Kong Visa

Why have the numbers dropped so much?

There are three possible reasons. The first is that some investors may have been put off by the government raising the minimum investment amount from £1million to £2million in November 2014. However, for the global super-rich this increase wouldn’t be a problem.

The second is that high net worth individuals no longer want to live in the UK. This seems unlikely considering the capital is still seen as an attractive and stable environment for the super-rich.

The third is that new controls and checks on applicants, introduced in early 2015, have either deterred people from applying or turned them away at the door. From April 2015, the Home Office requires applicants to have a UK bank account before applying for a visa, which means they have to go through anti-money laundering due diligence checks first. If they haven’t held the money for over three months, they’re also required to provide details about its source. Under the old system, it’s highly likely that applicants were often given visas by the Home Office without any checks being done on where the investor’s money came from.

Although we can’t say for certain because of the opacity around the scheme, it seems like these new rules have caused the significant decrease in visas being awarded.

What does the drop in numbers mean?

It confirms what we said in our Gold Rush report: before the checks were introduced in 2015 the Tier 1 (Investor) visa scheme was an open door to the corrupt wanting to enter the UK. Between 2008 and the start of 2015, thousands of high net worth individuals entered the country under this scheme without the source of their funds being verified and with their identities remaining a secret. This has been dubbed the ‘blind faith period’ – we do not know who has been granted a visa, how much they invested into the UK economy or what they invested in.

What’s more, during the ‘blind faith’ period, the scheme was used overwhelmingly by investors from countries with high corruption risks. From the available data, we know that between Q1 2008 and Q1 2015 i.e. before the tighter rules were introduced, there were 1,115 (37 per cent) golden visas awarded to Chinese (including Hong Kong) nationals and 695 (23 per cent) to investors from Russia.

Both of these places have big problems with corruption and admit to large amounts of illicit wealth leaving their countries.

What needs to be done?

We now know it’s highly likely that the Tier 1 (Investor) scheme has been used by the corrupt to buy residency in the UK, with at least £2.95bn and almost 3,000 individuals entering the UK in the blind faith period. Introducing tighter rules on applicants has helped stem this flow; however, this is akin to shutting the door after the horse has bolted – the UK may still be harbouring corrupt Tier 1 investors.

As a start, the government needs to go back, figure out who it has let into the UK and take action if it turns out their money has been corruptly obtained. To help strengthen the new system, it should also require applicants – or at least those who are a higher corruption risk – to proactively and publicly state their income, assets and source of wealth. At present, the Home Office relies on the financial sector to detect suspicious funds but as our recent research has shown, the current anti-money laundering system is insufficient to prevent corrupt money entering the UK.

The UK has offered safe haven to corrupt individuals through this system and action needs to be taken to rectify this. With the UK hosting a global anti-corruption summit in London this year, the government needs to get its own house in order if it is to be taken seriously on the international stage. It’s time they unmasked the corrupt and returned their stolen assets to where they belong.