Pakistanis pose high risk to global financial system: IMC
KARACHI: A global investment migration association on Wednesday termed Pakistanis among high-risk nationalities who could exploit loopholes in the OECD’s common reporting standard (CRS) developed to curb offshore tax evasion and avoidance.
“Of those nearly one million citizenships granted by the EU each year that are not related to CBI (citizenship-by-investment) programs, there are many high-risk nationalities, including Pakistan, Ukraine, Algeria, Russia, Nigeria, and Somalia, that pose a much more real danger to the international community in terms of criminal activity in the financial system,” the Geneva-based Investment Migration Council (IMC) said in a statement.
The IMC sets the standards on a global level and interacts with other professional associations, governments and international organisations in relation to investment migration.
The IMC urged the Organisation for Economic Cooperation and Development (OECD) to review and strengthen the CRS due diligence requirements, “but not with a sole focus on RBI/CBI (citizenship-by-investment) programs”.
On September 14, 2016, Pakistan became the 104th economy to sign OECD’s CRS convention – the most powerful multilateral instrument against offshore tax evasion and avoidance. The CRS is an information standard for the automatic exchange of information regarding bank accounts on a global level, between tax authorities, which the OECD developed in 2014.
The IMC said it understands the motivation behind the OECD’s recent analysis and guidance regarding the purported circumvention of the CRS in both RBI and CBI programs.
“We entirely agree that individuals should be stopped from using such programs to avoid accurate CRS reporting or, even worse, to engage in financial crimes, including money laundering and terrorist financing,” it said.
IMC, however, said only a very small percentage of residence or citizenship statuses legitimately obtained through RBI or CBI programs are at issue.
“For the vast majority of applicants, tax is a non-issue, since they either move completely to their new place of residence and become tax residents there or do not change their tax residence at all.”
Within the EU, the European Economic Area and Switzerland, the freedom of establishment means that any citizen of these countries can freely move to any other one of these countries and does not have to use an RBI or CBI program to establish their tax residence there.
RBI/CBI programs are only a fraction of the immigration options available to individuals. Most residence permits and citizenships are in fact obtained under other options, which can be equally used or abused for circumventing CRS, while citizenships obtained through EU CBI programs account for less than 0.1 percent of all the citizenships granted in the EU.
“The abuse of CRS is contrary to the strategic rationale for and specific design of investment migration programs, which is to facilitate – following a detailed and intensive due diligence process – the legitimate movement of capital and people, which is essential to the contemporary global economic model,” Bruno L’ecuyer, chief executive of the IMC said in the statement.