The Passport Trap: When a Golden Ticket Becomes a Liability
Citizenship-by-investment programs promise global mobility. They often deliver something closer to house arrest.
Picture the scene: a businessman in a tailored suit opens an Italian leather briefcase and withdraws a passport from a small Pacific island nation – a document that cost him several hundred thousand dollars. It was supposed to be his key to borderless travel, his entrée into international finance, his symbol of global citizenship. Instead, it triggers alarms in banking systems and raises eyebrows at border-control stations. This isn’t the plot of a le Carré novel. It’s the daily reality for thousands of holders of economic citizenship, including those who’ve purchased passports from Vanuatu’s Citizenship by Investment program.
Citizenship-by-investment schemes – colloquially known as “golden passports” – have boomed over the past decade, offering wealthy investors a fast track to second citizenship. Vanuatu, a picturesque island nation in the South Pacific, has become one of the market’s most recognizable players, offering a relatively quick path to citizenship for investments starting at a hundred thousand dollars. What the glossy brochures present as an exclusive premium product, however, often turns out to be a source of serious complications for citizens of European Union countries who decide to go this route.
The Letter of the Law vs. The Spirit of Implementation
Before cataloguing the troubles, it’s worth clarifying a fundamental point. The Republic of Vanuatu is a sovereign state fully recognized by the international community – a member of the United Nations since nineteen-eighty-one, part of the Commonwealth of Nations, and a participant in numerous other international organizations. Vanuatu maintains diplomatic relations with most of the world’s countries, and its citizenship is formally equivalent to that of any other sovereign state. No provisions of international or European law question the validity of identity documents issued by Vanuatu, and the country’s legal status is beyond dispute.
The problems that form the heart of this analysis don’t stem from any lack of international recognition or doubts about Vanuatu’s sovereignty. Rather, they arise from risk assessments related to the specific citizenship-granting programs run by Vanuatu’s government, and from the practices adopted by financial institutions and administrative bodies in various countries as part of anti-money-laundering procedures. This distinction is crucial: formally speaking, there are no direct legal restrictions on opening bank accounts or purchasing real estate for holders of Vanuatu passports. The passport is a recognized and valid document, and its bearer formally retains all rights that come with citizenship.
The critical difference, however, is that in practice financial institutions, administrative bodies, and entities involved in real-estate transactions classify people holding Vanuatu citizenship – particularly those who obtained it through the Citizenship by Investment program – as high-risk clients. This classification translates into a series of practical difficulties and additional burdens that can transform a coveted second passport into a source of legal and financial frustration.
Travel: The Illusion of Global Mobility
One of the main selling points of economic-citizenship programs is the promise of enhanced international mobility. For anyone combining Polish and Vanuatu citizenship, this promise proves entirely illusory – and, in some respects, actively counterproductive.
For a Polish citizen, the question of travel within the European Union requires a careful distinction between formal legal status and practical consequences. Vanuatu citizenship alone doesn’t restrict the ability to travel throughout the European Union when it’s a second citizenship. A Polish citizen who also holds a Vanuatu passport retains full rights to move freely throughout the territory of the European Union, the European Economic Area, and Switzerland, based on Polish citizenship. E.U. treaties guarantee citizens of member states the right to free movement of persons, and this remains intact regardless of any additional citizenships. From the perspective of E.U. law, a Polish citizen traveling with a Polish passport enjoys the full rights that come with European Union citizenship.
Significant limitations and risks emerge, however, in two areas. First, according to Polish law and the practices of Poland’s Border Guard, Polish citizens are required to leave and enter Polish territory exclusively using Polish identity documents. Poland applies the principle of exclusivity and primacy of Polish citizenship on its own territory, meaning that second citizenship isn’t recognized in dealings with Polish state organs at border crossings. Attempting to leave Poland using a Vanuatu passport can result in refusal of exit and administrative complications. In practice, this means a Polish citizen cannot use a Vanuatu passport for trips that begin or end in Poland, even if they could theoretically use it during travels outside Polish borders.
Second, there’s the dramatic deterioration of the Vanuatu passport’s international standing in recent years. The European Union permanently revoked Vanuatu’s visa-free travel rights to the Schengen Area in December, 2024, ending a suspension that had been in place since March, 2022. This decision affects all Vanuatu citizens, regardless of how they obtained citizenship, and means that anyone travelling solely on a Vanuatu passport must now apply for a Schengen visa before entering E.U. countries. The official justification from E.U. institutions explicitly cites concerns about “risks arising from Vanuatu’s investor citizenship schemes” – a clear statement of the international assessment of these programs as threats to security and border-control integrity.
Similarly, the United Kingdom imposed visa requirements for Vanuatu citizens effective July 19, 2023, with a brief transition period until August 16th of that year. The decision was made owing to concerns about the integrity of the C.B.I. program and associated security risks. The United States has never included Vanuatu in the Visa Waiver Program, meaning that Vanuatu citizens must apply for B-1/B-2 tourist and business visas at American consulates, going through standard procedures that include mandatory interviews.
As a result of these restrictions, the value of the Vanuatu passport in global-mobility rankings has dropped sharply. It now sits at roughly fifty-fifth to sixtieth place, with visa-free or visa-on-arrival access to only about ninety-six to a hundred and thirty countries, depending on the data source. By comparison, the Polish passport consistently ranks in the top ten most powerful passports in the world, offering visa-free access to around a hundred and eighty-four countries. The math is brutal: instead of gaining additional travel options, a Polish citizen with a Vanuatu passport simply possesses a second, significantly inferior document that can’t be effectively used.
An additional risk involves potential administrative complications arising from the mere fact of holding second citizenship in dealings with border and consular authorities. Although holding second citizenship is legal in Poland and requires no notification or approval from any authorities, in practice revealing possession of Vanuatu citizenship can lead to additional questions from border or consular officers, especially given growing international attention to Citizenship by Investment programs. In some situations, this can lead to extended border checks or additional verification procedures, though formally it doesn’t constitute grounds for denying entry to a European Union citizen travelling with an E.U. document.
Banking: A Red Flag in the Compliance System
It’s in relations with the financial sector, however, that holders of economic citizenship encounter the most acute problems. The scenario is repetitive and frustrating: a wealthy individual, often someone who’s run a legitimate business for decades, tries to open a bank account at a reputable European financial institution. While filling out standard forms, they disclose possession of Vanuatu citizenship. At that moment, a process that would take a few days for an average customer transforms into a months-long bureaucratic odyssey that, in many cases, ends with a terse refusal lacking detailed explanation.
European and American banks apply procedures known as Enhanced Due Diligence to holders of Vanuatu passports – heightened scrutiny in their know-your-customer protocols. As part of these tightened procedures, financial institutions require detailed verification of the source of funds, which in practice means providing extensive documentation confirming the legitimacy of business activities, transaction histories, tax returns from multiple years, registration documents for all related entities, and other financial documents that far exceed the standard requirements for average customers. The process of reviewing account-opening applications becomes significantly prolonged, often lasting several months instead of the standard few days or weeks.
The source of these difficulties lies in international concerns about Citizenship by Investment programs as potential tools for money laundering and terrorist financing. Financial institutions, operating under increasingly restrictive anti-money-laundering and counter-terrorist-financing regulations, classify C.B.I. programs as high-risk areas. The European Union’s Fifth and Sixth Anti-Money Laundering Directives explicitly classify entities offering C.B.I. intermediary services as obligated entities subject to enhanced scrutiny, which automatically translates into financial institutions treating their clients as high-risk subjects.
The logic of this classification goes as follows: if someone was willing to pay a substantial sum for rapid citizenship in a small island nation, questions arise about their motives. Was it for legitimate tax optimization and succession planning, or perhaps to hide true identity and the origin of capital? For a bank that bears regulatory and reputational responsibility for its clients, the safer solution is simply to refuse services rather than take the risk of potential involvement in money-laundering structures.
An additional burden for Polish citizens who also hold Vanuatu citizenship comes from requirements under international tax-information-exchange standards. According to the provisions of FATCA and the Common Reporting Standard, which Poland has joined, people opening bank accounts are obligated to disclose all citizenships they hold and provide information about their tax-residency status. Poland participates in automatic tax-information exchange with more than fifty countries, meaning that information about bank accounts is transmitted between jurisdictions. In the case of people holding citizenship obtained through investment programs, banks often require additional confirmation of tax residency outside Vanuatu, which can pose a significant difficulty, especially if the person doesn’t actually live or conduct business in any country other than Poland.
In practice, this means that a Polish citizen with additional Vanuatu citizenship may encounter refusal to open an account at certain prestigious financial institutions that have decided not to serve C.B.I.-program clients at all, owing to high compliance costs. The list of such institutions is systematically growing, encompassing not only traditional private banks but also ordinary retail banks that have determined that serving such clients isn’t economically justified given the costs associated with Enhanced Due Diligence procedures.
Even if a bank agrees to open an account, it may impose a series of additional conditions and restrictions. Higher account-maintenance fees, requirements to maintain significantly higher minimum balances, limitations on access to certain banking products such as private banking, advanced investment products or loans, and mandatory regular documentation reviews are just some of the possible consequences. Annual or even more frequent documentation reviews require the client to provide current certificates, tax returns, explanations regarding sources of income and directions of expenditure, which generates additional costs not only for the bank but also for the client, who must engage lawyers and tax advisors to prepare the required documentation.
It’s also worth noting that some European banks have launched campaigns in recent years to close accounts of expatriates and people with dual citizenship from countries considered high-risk. This happens owing to rising compliance costs associated with A.M.L. regulations, which make servicing such accounts unprofitable from the institution’s perspective. This means that even holders of existing accounts who reveal possession of Vanuatu citizenship – for example, during routine customer-data updates – may face demands to close the account or convert it to significantly less favorable terms, with transaction limitations and higher fees.
This problem extends beyond traditional banking. Fintech platforms, payment processors, and even some cryptocurrency exchanges have begun applying similar verification procedures to holders of economic citizenship. Although sources note that Binance still accepts Vanuatu passports for verification, even in this case additional scrutiny may be applied, and the situation could change at any time in response to evolving regulatory requirements.
Real Estate: Nuances and Hidden Traps
In the case of real-estate transactions, the situation is more nuanced than with banking services or travel. Formally speaking, a Polish citizen who also holds Vanuatu citizenship retains full rights to purchase real estate in Poland and other European Union and European Economic Area countries, without any restrictions arising from regulations concerning foreigners. E.U. treaties guarantee freedom of capital movement, meaning that citizens of member states can freely purchase real estate in other member states. Polish-citizenship status remains dominant in this regard, and it’s Polish citizenship that determines rights and obligations in relations with E.U. member-state administrative bodies.
Practical complications arise, however, at the transaction-execution stage, especially when transactions are financed by mortgages or involve high-value properties. As with banking services, notaries, lawyers, and real-estate agents also operate under the E.U.’s Fifth Anti-Money Laundering Directive, which imposes on them an obligation of enhanced scrutiny of clients connected with Citizenship by Investment programs. These regulations leave these professionals no choice – they’re legally obligated to conduct Enhanced Due Diligence on clients who acquired citizenship through investment programs, regardless of whether there are any specific suspicions of irregularities.
In practice, this means that in real-estate transactions a person holding Vanuatu citizenship may be asked to present detailed documentation regarding the origin of funds intended for purchase. This isn’t the standard confirmation of financial capacity required of every buyer, but rather significantly more detailed documentation encompassing entire financial history. A notary or lawyer conducting the transaction may demand presentation of tax returns going back several years, documentation of income sources, explanation of every larger transaction in bank accounts, documents confirming the legality of business operations, and, in the case of funds from the sale of other assets, full documentation of those earlier transactions. This process can be not only time-consuming but also invasive and frustrating for someone who conducts fully legitimate business and has never had problems with the law.
The greatest difficulties may arise when attempting to obtain mortgage financing. Banks extending such loans apply their own credit-risk-assessment procedures, under which citizenship from countries considered high-risk can result in more restrictive lending conditions. A bank may require a higher down payment – say, fifty per cent of the property’s value instead of the standard twenty per cent – which significantly increases the capital requirement. Loan interest rates may be higher owing to risk classification, which over decades of repayment can mean tens of thousands of additional euros in costs. The loan-approval process may also be significantly prolonged owing to the need to conduct additional due-diligence procedures by the bank’s compliance departments. In extreme cases, a bank may refuse financing altogether, forcing the buyer to seek alternative capital sources or abandon the transaction.
It’s also worth noting that some European countries have introduced additional restrictions on foreigners purchasing real estate, especially in attractive tourist locations. Although these restrictions formally don’t apply to E.U. citizens, administrative bodies may show particular interest in transactions conducted by people who also hold citizenship from C.B.I. programs, especially if these transactions involve large values or may have implications for the local real-estate market.
Outside the European Union, the situation is generally more favorable, though not without caveats. In most third countries, holding Vanuatu citizenship as a second citizenship doesn’t introduce additional barriers to purchasing real estate compared to the situation if the person held only Polish citizenship. Moreover, Vanuatu, as a member of the Commonwealth of Nations, may in some Commonwealth countries provide preferential treatment when purchasing real estate, especially in Caribbean and Pacific countries where Commonwealth membership still has practical significance. In some jurisdictions, dual citizenship may also offer more favorable tax treatment in real-estate transactions – for example, lower property-transfer-tax rates or exemptions from certain notary fees – though this requires detailed analysis of the specific country’s regulations and potential tax consequences in Poland as the country of tax residence.
It should be remembered, however, that outside the European Union as well – especially in countries with developed anti-money-laundering systems, such as the United States, Canada, Australia, or the United Kingdom – real-estate transactions conducted by holders of citizenships obtained through C.B.I. programs may be subject to increased scrutiny. In the United States, where the real-estate sector has been identified as particularly vulnerable to money laundering, transactions above certain value thresholds are subject to mandatory reporting to the Financial Crimes Enforcement Network, and transactions conducted by people with C.B.I. citizenships may trigger additional verification procedures from real-estate agents, lawyers, and title-insurance companies.
The Root of the Problem: International Pressure on Golden-Passport Programs
To understand why holders of economic citizenship encounter such significant difficulties, it’s necessary to look at the broader context of international regulatory and political actions targeting golden-passport programs. The Organisation for Economic Co-operation and Development has identified C.B.I. and R.B.I. (Residence by Investment) programs as high-risk areas for the integrity of international tax-transparency standards. In a series of reports and recommendations, the O.E.C.D. has pointed to the potential for using these programs to avoid automatic tax-information exchange by changing formal tax residency without actually changing place of residence or business operations.
The Financial Action Task Force, the international body dealing with anti-money-laundering and counter-terrorist-financing standards, has issued guidelines in recent years recommending that member states apply enhanced scrutiny to people who obtained citizenship or permanent residence through investment programs. The F.A.T.F. draws attention to the risk that these programs may be used by people trying to avoid international sanctions, hide their true identity or the origin of capital, and, in extreme cases, by terrorist organizations to facilitate movement of their members.
The European Union has taken particularly decisive action against economic-citizenship programs, both those run by third countries and – critically – those run by its own member states. The European Commission has repeatedly expressed concerns about threats to the Union’s internal security arising from C.B.I. programs, pointing to risks of organized-crime infiltration, circumvention of international sanctions, and undermining the integrity of the Schengen Area. The permanent revocation of Vanuatu’s visa-free travel rights to the Schengen Area was a direct result of these concerns and sends a clear signal to other countries running similar programs.
Particularly significant is that this pressure applies not only to small island nations but also to European Union members. Malta and Cyprus, which for years ran lucrative citizenship-sales programs, were forced to close or radically reform their programs under pressure from E.U. institutions. Bulgaria ended its investment-residency program after sharp criticism from the European Commission. The Commission even threatened infringement proceedings against member states continuing such programs, arguing that selling national citizenship effectively means selling E.U. citizenship, which undermines fundamental values and the security of the entire Union.
This international consensus on the problematic nature of golden-passport programs translates directly into the practices of financial institutions, notaries, lawyers, and administrative bodies, which comply with international-organization guidelines and increasingly restrictive national and E.U. regulations. For these entities, classifying C.B.I.-citizenship holders as high-risk clients isn’t an arbitrary decision discriminating against a certain group of people but a regulatory requirement arising from legal provisions and supervisory-authority guidelines.
Looking Forward: What’s Next for C.B.I. Programs?
Looking ahead, it’s hard to expect improvement in the situation of economic-citizenship holders. The international trend is unambiguous: growing regulatory pressure, tightening of anti-money-laundering regulations, and increasingly critical public attitudes toward golden-passport programs. Vanuatu is taking some steps aimed at improving its program’s reputation, including increasing Financial Intelligence Unit fees from five thousand to seventy-five hundred dollars per application, introducing mandatory biometric registration, and excluding citizens of certain countries considered high-risk, such as Iran, Iraq, Syria, North Korea, Yemen, Russia, and Belarus. However, these reforms, though positive, are unlikely to reverse the negative perception of the program by international institutions, which consider the very concept of selling citizenship to be fundamentally problematic.
For Polish citizens considering obtaining second citizenship, the conclusions are unambiguous. Vanuatu citizenship offers virtually no benefits in terms of international mobility, since the Polish passport is significantly stronger. It doesn’t facilitate conducting international business; on the contrary, it complicates relations with financial institutions. It offers no tax benefits for Polish tax residents, who are subject to taxation in Poland on their worldwide income anyway. At the same time, it’s associated with a series of practical difficulties, costs, and reputational risks.
The value of the investment in Vanuatu citizenship – which initially amounts to a hundred thousand dollars or more – must be weighed against intangible costs: hours-long conversations with bank officials trying to explain sources of funds, delays in business transactions, additional questions from border-guard officers, the need to engage expensive lawyers and tax advisors to manage the consequences of holding second citizenship. For most Polish citizens, this balance will be decidedly negative.
If the goal is to obtain second citizenship to increase international mobility, a far more sensible option for a Polish citizen would be to consider citizenships of other European Union countries based on actual residence and integration, which don’t carry the stigma of C.B.I. programs. If the goal is tax optimization, there are legal and transparent mechanisms that don’t require changing citizenship and don’t expose one to problems with financial institutions. If the goal is to secure a contingency plan in case of political instability, it’s worth considering residency rather than citizenship programs, which offer real rights to reside in a specific country without the international stigma of golden-passport programs.
The history of economic-citizenship programs shows that what appears to be an attractive premium product in marketing materials may in reality turn out to be a document that closes more doors than it opens. In a world of increasingly integrated information-exchange systems, tightened compliance regulations, and growing international coöperation against financial crime, a golden passport may prove to be a ball and chain rather than a key to global mobility. It’s a lesson that thousands of holders of such documents are learning firsthand, paying not only money for citizenship itself but also time, nerves, and lost trust of financial institutions in the years following this seemingly attractive investment.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
