NIRAV Modi, the accused in the multi-million-dollar bank fraud is in the news again. Following the furor over his departure from India, the government of India cancelled his passport. In the initial days, television channels speculated his presence in New York, Hong Kong, and London. Various cases were registered in India including under PMLA but he could not be exactly located till such time that a journalist with a UK daily easily tracked him down to a posh housing area in London wearing a horrendously ugly and expensive ostrich leather suit.

Traditionally, London has been a favourite refuge for those wanted by Law in India. Vijay Mallya, another financial fraudster from India used to openly roam around in the UK till such time as the government slapped a money-laundering case against him and asked for his extradition. We may recall that in his case, the main issue was diversion of loan funds from Banks in India In the extradition proceedings, the Magistrate found that there was clear evidence of dispersal and misapplication of the loan funds and that there was a prima facie case of fraud and a conspiracy to launder money. Although his appeal process is still on, only days back, a British Court has upheld the extradition move.

In the Mallya case, from news reports, it is however not clear whether he has a dual citizenship or is an Indian citizen having a valid passport. He was also an MP from the Rajya Sabha and was issued a diplomatic passport that has since been cancelled. India does not allow dual citizenship. So, it is curious that he would be able to move around freely.

In an earlier case, another high profile financial fraudster Lalit Modi of the IPL fame and against whom there are also charges of misappropriation of funds and money laundering is reported to have purchased a mansion in London as his current abode. Although his passport was also cancelled by the government in 2011, apparently he obtained ‘leave to remain' in the UK and is reported to be in the process of acquiring a British citizenship.

In the context of financial frauds, Tax Justice Network (TJN) has been consistently pointing out that the City of London as the global hotspot involving a lot of financial engineering, money laundering and a safe haven for the corrupt. According to the TJN, the UK financial services industry centered on London, is on some measures the world's largest financial Centre that is predicated on lax financial regulations. In other words, in these types of cases where serious money is involved, the British government is not very serious about the source of the money. TJN also points out the intimate connection between the British government to the tax haven networks of the three Crown Dependencies (Jersey, Guernsey and the Isle of Man) and the 14 Overseas Territories, which include such offshore giants as Cayman, the British Virgin Islands and Bermuda, also facilitates the fraudsters.

Another high profile fraudster from India, diamantaire Mehul Choksi, the uncle of Nirav Modi, is also reportedly sighted in London. He is reported to have acquired the citizenship of Antigua and Barbuda in the West Indies. Although Antigua is formally independent, but it retains a Constitutional Monarchy and the British Queen is the head of the government there. In his case, it has been reported that he has even given up his Indian Passport for fear of extradition to India even though India and Barbuda does not have a formal extradition treaty.

When the common people from India, intend to go abroad on a valid Indian passport, the visa process itself is tedious where one has to answer all kinds of silly questions, submit finger prints and even after having a valid visa, the process of transiting through the immigration counters in various cities in the western world is not always very smooth. How then it is possible for these worthies to sail through such checks and balances with so much ease? It is in that context, that we need to look at some special regimes that are operated in many developed countries that essentially end up helping capital flight from around the world including in particular from the poorer countries.

A Golden Visa is a visa programme that is being adopted by many countries to attract foreign capital in their countries. The first one to introduce such a programme where stay or citizenship could be acquired either through straight donation to the government or through some investments was by Saint Kitts and Nevis in 1984. Essentially this involved selling citizenship/residence for money. Strangely, rich developed countries; even Canada and the United States also adopted similar programmes, although their programmes may not be as blatant. But, there is indeed a certain amount of hypocrisy involved in being partial when it comes to serious money.

Different jurisdictions offer different facilities. Essentially, there are two types of such programmes- Citizenship by investment (named as CBI) and Residency by investment (RBI). Since many of the high profile fugitives from India are in the UK or in the English speaking jurisdictions in its orbit, let us first see what the UK Golden Visa programme has to offer.

In the UK, it used to be actually called an Entrepreneur Visa (Tier 1). This particular programme has been now suspended because of public pressure from civil society organizations. One could apply for stay and work in the UK. The scheme had a free run for almost 10 years, having been introduced in the year 2008. According to reports, the programme was particularly popular amongst the Russian oligarchs, and also amongst the Chinese, Pakistanis and people from the UAE. To qualify for this visa one had to invest a minimum of 2 million pounds in the UK either in the form of bonds, or share capital in a company. The investor could then apply for permanent residency in the UK after five years. If one invested 5 million pounds then the permanent residency could be applied for after three years and if one was willing to dish out 10 million pounds then the door to permanent residency could open after just two years.

This particular VISA programme apparently fetched the UK government six billion pounds over the years. However, civil society organizations like the TJN pointed out that the much of the funds coming in represented dirty money and that the UK was facilitating the laundering of such proceeds of crime. As a result of such persistent outcry this particular programme now stands suspended.

As stated earlier, citizenship for money was started by St Kitts and Nevis in 1984. It became popular because of a number of reasons. First is the cost. As per latest information, it costs just $158000 for a single investor and for a family of four the same comes to $212000. This is of course, in the form of a donation to the government. But, one can also invest in real estate an amount of $400000 (divided in two principal investors) and thereby acquire the citizenship. Here, one has to hold the property for seven years and thereafter it can even be sold thereby ensuring the return of money to investors. If one searches for St Kitts and golden visa, many websites appear vying for your attention. One of them has calculated the return form such real estate at around 4.5-5% p.a. The jurisdiction offers second citizenship meaning that one can continue to hold the citizenship of another country while at the same time holding this citizenship. It is also not necessary that one has to spend a certain number of days here. There are other advantages too. Holding such a passport opens up visa free travel to 140 countries around the world including the Schengen areas. Apparently, there is an arrangement with the government of India too with this jurisdiction for visa free travel. Besides, there are tax benefits too for the investors. There is no wealth tax, no dividend tax, and no estate tax. There is no general Income tax and there is no world-wide taxation of its residents. Thus the foreign income of the investors that become its residents are not subject to any taxation here.

However, the most attractive part of the jurisdiction seems to be confidentiality. According to one website: "The information about your dealings with St. Kitts and Nevis is not transferred to the country of your first citizenship, nor is it disclosed to third parties". No wonder then, between 2005 and 2015, over 11000 passports were issued to foreign citizens from 127 countries around the world. Most prominent fraudster from India using this jurisdiction is Jatin Mehta of Winsome Diamonds.

There are cheaper options too. The cheapest one is supposed to be offered by St. Lucia and Dominica where a single applicant can acquire a passport for about $110,000, while the cheapest option for applicants with families (the investor, the spouse, and two children, is the one offered by Antigua and Barbuda (about $146,000). Grenada has also a similar programme that allows visa free travel to China as well. According to news reports, in so far as Antigua & Barbuda is concerned, 28 Indians had applied for its citizenship since 2014.

One can perhaps understand the compulsion of such tiny islands without any alternative resources to take resort to such kind of programmes to boost their finances. But the fact is that many rich countries have also introduced similar programmes, may not be as lax but attractive nevertheless for those with ill-gotten wealth trying to leave the country where they earned the income/wealth. According to Transparency International, the golden visa programme started in the EU region following the financial crisis of 2007-08. Residency and even citizenship is for sale in four EU countries. Some offer both. These are Bulgaria, Cyprus and Malta. Hungary also used to offer citizenship through investment between 2013 and 2018 and has stopped the programme following serious allegations and the charge that it actually cost the government more than the benefit it ensured.

As per the Transparency International and Organized Crime and Corruption Reporting Project (OCCRP report)- European Gateways-Inside the murky world of Golden Visas", since the start of their respective programmes, the following countries have granted the highest number of golden visas to investors and their families: Spain (roughly 24,800), Hungary (19,800), Latvia (17,300), Portugal (17,500) and the UK (10,400), followed by Greece (7,500), Cyprus (3,300) and Malta (2,400). Monetarily some of the programmes could be termed successful but since in many places the investments are in real estate, property prices are going through the roof and such properties are becoming out of reach for the common people resulting in some push back.

In so far as the provenance of the investors for this Golden Visa is concerned, it seems that residents of different countries have different preferences. Overall though the maximum number of applicants who were granted passports or visa were from China, and Russia. India also accounts for a sizeable number for the UK and Spain. According to the report, "- in so far as the UK is concerned, there were 82 awardees from India between 2008 and March 2018 while for Spain, the awardees from India were 3,233 between 2013 and April 2018.

The report mentions about lack of sufficient due diligence by the investee countries in granting such visa or citizenship. The report points out in this regard that the success rate of the applications were too high; even in the UK the success rate was apparently around 91.1%.

From the point of view of transparency, such programmes undermines the whole effort of the G20/OECD project in terms of which countries have agreed to put in place a Common Reporting Standard (CRS) for automatic exchange of information whereby tax authorities are exchanging information about the financial affairs of their residents with each other. TJN has again been in the forefront of highlighting the potential abuse of the Golden Visa programme in undermining the CRS put in place, after a lot of effort. As mentioned in their report, the essence of the CRS is the automatic information exchange about the financial affairs of the residents of the countries involved. The information will be captured mostly by the financial intermediaries and then shared with the revenue authorities that then will share the same with other jurisdictions. Now, if a resident of India holding a golden visa of another country enters into any transaction abroad that yields him income in the form of interest etc. that would have been of interest to the India revenue authorities. However, it is likely that such persons will not disclose their actual residency and hence the information will not come to India at all. (See-https://www.taxjustice.net/2018/11/13/passports-and-residency-for-sale-the-oecd-is-sitting-on-its-hands-heres-how-to-fix-the-problem/)

Finally, OECD also initiated some action in this regard. It examined the residence by investment (RBI) and Citizenship by Investment (CBI) schemes of 100 jurisdictions and on 16 October 2018, OECD put out an initial list of 21 jurisdictions that it found as potentially harmful. According to the OECD - "Potentially high-risk CBI/RBI schemes are those that give access to a low personal tax rate on income from foreign financial assets and do not require an individual to spend a significant amount of time in the jurisdiction offering the scheme. Such schemes are currently operated by Antigua and Barbuda, The Bahamas, Bahrain, Barbados, Colombia, Cyprus, Dominica, Grenada, Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, United Arab Emirates and Vanuatu." TJN points out that within days Colombia, Montserrat, Monaco, Mauritius were removed from the list. This is probably because these jurisdictions had agreed in advance to share the information regarding the RBI/CBI scheme voluntarily with other countries of origin. It may be recalled that Mauritius had played this game before in the wake of the threat of being blacklisted by the OECD way back in 1998.

According to the OECD, the following countries and their regimes were potentially harmful:

Antigua and Barbuda - Antigua and Barbuda Citizenship by Investment, Permanent Residence Certificate

Bahamas - Bahamas Economic Permanent Residency

Bahrain - Bahrain Residence by Investment

Barbados - Special Entry and Residence Permit

Cyprus - Citizenship by Investment: Scheme for Naturalisation of Investors in Cyprus by Exception, Residence by Investment

Dominica - Citizenship by Investment

Grenada - Grenada Citizenship by Investment

Malta - Malta Individual Investor Programme

Malta - Malta Residence and Visa Programme

Panama - Friendly Nations Visa, Economic Solvency Visa, Reforestation Investor Visa

Saint Lucia - Citizenship by Investment Saint Lucia

Turks and Caicos Islands - Permanent Residence Certificate via Undertaking and Investment in a Home, Permanent Residence Certificate via Investment in a Designated Public Sector Project, Permanent Residence Certificate via Investment in a Home or Business

Vanuatu - Development Support Programme, Self-Funded Visa, Land-Owner Visa, Investor Visa

In the context of the seriousness and the ability of some of the known secrecy jurisdictions to share information, there is an interesting news item in today's papers. It seems that in the ongoing investigations against Deepak Kochar, the tax department had sought some information from British Virgin Islands, Mauritius and Singapore. BVI had replied that they suffered a natural calamity in which all documents and storage devices have been washed away and accordingly the information sought by the tax department could not be supplied (ET-10/4/2019)

It is true that the number of persons affected will not be too high. But we must also note that these persons fall in the category of the so-called Ultra High Net worth Individuals (UHNWI). According to one report the top 1% of the richest hold half of the world's total wealth. And according to the Global Wealth Report (2018) of Knight Frank 34% of, UNHWIs already hold a second passport and 29% were planning to procure one, while 21% were considering emigrating permanently. Also to note that India has 6740 of such individuals. So, is it time for an exit tax in India?