For generations, the American passport afforded its holders the privilege of hassle-free travel around much of the world. That has changed with the coronavirus pandemic. While some borders are beginning to reopen to international travel, some countries are staying closed to Americans because of the ongoing coronavirus outbreak stateside.
These travel restrictions are producing an emerging trend among some wealthy Americans: buying a second passport.
"This limitation of mobility has made more people aware of ... the benefits of having more than one passport," said Armand Arton, the president of financial firm Arton Capital, which specializes in citizenship through investment.
The firm defines citizenship by investment as "the process of obtaining a second citizenship and passport by investing in the economy of the host country." These investments can come in the form of real estate, bonds or various new business ventures.
Arton says his firm has seen a 30% to 40% increase, year to date, in demand for services that help clients obtain citizenship in a sovereign state through financial means. The price tag for these services varies, ranging from $100,000 for some Caribbean options to more than $2 million for European ones.
FOR TAX PURPOSES
Before the coronavirus, the plan mainly appealed to Americans for tax purposes, Arton says. But midpandemic, motivations have shifted. Some of Arton Capital's American clients are in mixed-nationality relationships where couples have been separated because of pandemic travel bans. Others are worried about the impact of U.S. politics on their passport's global standing.
"We've had Americans contacting us and saying, 'Listen, I cannot believe that my American super passport cannot get me into as many countries as it used to before. What can I do?' " Arton says. "That was never the case for us before."
Now the U.S. passport that once felt like a gift for travelers may feel like a burden. Arton's new clients fear that if the pandemic carries on for another year or two, they will be trapped by their U.S. passports, so they're seeking out second passports from countries with investment migration programs.
The concept is about 35 years old, Arton says. Today there are approximately 25 countries, including Portugal, Dominica and the United Kingdom, that offer forms of residency or citizenship-by-investment programs as a revenue source.
INTEREST HAS DECREASED
The United States was an early adopter of the program. In 1990, the government created the EB-5 Immigrant Investor Visa Program, which has received nearly 80,000 applicants since. However, Arton says interest in the investment migration program has decreased drastically because of a recent cost increase, the program's long approval process and the U.S. government's fluctuating immigration legislation.
According to Paddy Blewer, public relations director of Henley & Partners, a firm that works with countries and individuals on citizenship-by-investment programs, investment migration "is a way for sovereign states to raise debt-free capital and also to drive further foreign direct investment -- and combine these programs with other policy areas -- to really enhance investment in certain industries."
Blewer says that while Henley & Partners has seen interest in investment migration increase steadily for more than 15 years, the pandemic has brought a significant increase in genuine engagement. Compared with the same period in 2019, January to April 2020 led to a 49% increase for the firm in general interest in citizenship by investment, and a 22% increase in interest in proceeding with the application process.
The application takes months, if not years, to process, and it includes a thorough investigation into a person's private and financial life.
"The one thing that we do have to explain to clients is this will take longer than you think," Blewer says. "This is hardcore investigation into a human being."
Henley & Partners runs public and private background checks on applicants, looking for red flags. Depending on what they find, advisers will decide whether to work with the client.
On occasion, they may find incriminating information during an investigation, and advisers will contact a client to say, "'Never, ever walk through our doors again. We're burning all these files.' Not everyone does that, which is, for me, an issue with the industry," Blewer says. "We do that because we care about our reputation. We do that because we want to be around for the next 20 years."
Reputation management is top of mind for the host country, too. Nestor Alfred, the chief executive of the St. Lucia Citizenship by Investment Unit, says that part of the reason for the St. Lucia program's intense vetting is to uphold the value of the country's passport. It's in St. Lucia's best interest to stay in good standing with the 146 countries that allow St. Lucian passport holders visa-free travel.
Thus, there is lag time between applying for and receiving a second passport -- which is why the approach will not solve any immediate travel problems for those in the United States.
"It doesn't matter if you become a St. Lucian citizen or a Maltese citizen; they're not going to let you in because you've been in Florida for the last six months," Blewer says.
"When it comes to this weird short-term period that we are in, your citizenship and your passport doesn't matter as much as where have you been for the last few months."