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Fears Chinese investors targeted to `game` visa scheme

Source: AFR – Financial Review, 06/08/2020

The Western Australian government’s Small Business Development Corporation (SBDC) said it had “identified and reported a number of integrity risks” associated with the suite of visas available to potential migrants under the Australian government’s business innovation and investment program.
Acting Immigration Minister Alan Tudge is reviewing the significant investor visa program in the context of the upcoming federal budget. Alex Ellinghausen
The federal government program, launched in 2012, allows investors to get visas to live and work in Australia if they spend $1.5 million for four years into compliant schemes, while applicants to the Significant Investor Visa category are required to spend $5 million for four years to receive citizenship.
The scheme has brought in about $11.6 billion since inception but has been sharply criticised by the Productivity Commission and is currently under a second review after the government tweaked the policy in 2015 to shift investment away from real estate and into venture capital.
Immigrants from China account for almost 90 per cent of those granted visas under the program and the current Home Affairs review of the scheme, launched by Immigration Minister David Coleman in August last year, is confidential.
In a secret submission made to the Department of Home Affairs review of the program, obtained by The Australian Financial Review under FOI, the WA government agency warned of the risks tied to the subclass 132 visa, designed for entrepreneurs with at least $1 million in venture capital funding. Only 32 visas have been granted for the venture capital stream since 2015.
“Nominating jurisdictions have also expressed integrity concerns at the tactics of some venture capital funds and migration agents in generating non-genuine applicants for this visa,” the SBDC said.
The agency said “flaws or weakness” in the overall scheme were “at risk of being exploited by agents and applicants” and urged Home Affairs to overhaul the program to ensure Australia attracted the “right type of applicants”.
A Productivity Commission report in 2016 said the program should be scrapped amid concerns of money laundering and rorting, noting that “intermediaries have a history of helping their clients to push the boundaries of the visa conditions”, that the visas may be a “pathway for investing ‘dirty money’ in Australia” and that the said economic benefits “are negligible, and any benefits accrue mainly to those visa holders and to fund managers”.
The Home Affairs review comes at a time of significant strain in relations between Australia and China, and amid the collapse of property group iProsperity, owned by Michael Gu, which had sourced much of its money from wealthy Chinese investors participating in the visa scheme.
A spokesman for Home Affairs said the government was considering the migration program in the context of the upcoming federal budget.
“Registered migration agents found to be engaged in fraudulent activities which seek to abuse any process in connection with Australian migration law face disciplinary action by the OMARA including cancellation of their registration,” Home Affairs said.
The Australian Investment Council, which registers venture capital funds for the scheme, have “stringent mechanisms to review, revise and revoke their memberships” where required, Home Affairs said.
Along with a number of state government agencies, several fund managers and migration agents made submissions to the review, including the Financial Services Council, which represents big money managers. There is no suggestion that those who made submissions are tied to the concerns of the SBDC.
FSC chief Sally Loane said the group supports the visa program “subject to applicants meeting stringent government security and health checks” and has argued the cost of the scheme should be increased to help speed up visa processing and support assessments of potential migrants.
Teresa Liu, managing partner of Fragomen Australia said applicants to the visa program were a `particularly vulnerable group of consumers`.
`There does appear to be some proliferation in markets such as China for instance in business advisors and agents, as well as SIV product based complying fund firms, who are specifically product driven in the SIV programs and who have referral and commercial arrangements between each other and other mobility and settlement services,` she said.
`We would strongly recommend measures to increase consumer awareness, increase transparency and disclosure of professional fees, referral fees and other benefits, and other measures to improve the integrity of the program and ensure that the best interests of the consumer are served,` Ms Liu said.
Ivan Chait, director of IMC Migration Australia, said only agents registered with the government regulator OMARA should be able to submit applications for the scheme and that the government should consider creating a panel of fund managers with a “proven track record” to manage Significant Investor Visa portfolios.
“Australia should be doing whatever possible at this time to attract high net worth individuals, many of them being very successful entrepreneurs who can establish new businesses which in turn will create employment during these difficult times,” Mr Chait told the Financial Review.
Jannie Kotze, of Perth-based Kotze Law, has written to Home Affairs minister Peter Dutton and acting Immigration Minister Alan Tudge complaining of long processing times for the scheme and of the $70 million in investment he has waiting for approval, mainly from South African migrants.
AUSA Migration, which has submitted numerous business innovation and investment program visas since 2012 and asked Home Affairs to focus on”high value” migration, said the treatment of some investors by fund managers was “a matter of concern”.
“Unless they are assisted by a trusted local friend, family member or migration agent they may be vulnerable to exploitation by unscrupulous fund managers,” AUSA Migration said. “They need greater consumer protection than is currently afforded to them.”
The Australia China Business Council has been lobbying the government to retain the visa program in the face of rising criticism.
The program allows investors to gain citizenship even if they only spend 40 days a year in Australia, and about 2500 significant investor visas have been granted since the program was introduced in 2012 by Labor.
Other groups that made submissions to the consultation include Morgan Stanley Wealth Management, Adelaide-based venture capital fund managers Southmore, and one of Australia`s biggest significant investor visa fund managers Atlas Advisers.

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