Washington must resist Europe’s pressure over Visa Waiver Program

In December, Congress passed the Visa Waiver Program Improvement and Terrorist Travel Prevention Act. The legislation created exceptions to the Visa Waiver Program (VWP), including for dual citizens of Iran and of VWP countries, and met stiff resistance from Europe and Iran. As a result, the Obama administration is trying to reverse these measures through presidential waivers. But instead of trying to placate its critics, the administration should double down. Washington should threaten further penalties, especially against those Visa Waiver countries offering citizenship-by-investment programs (CIPs), whose fast-track to citizenship undermines VWP security standards.

There are compelling reasons for this approach. Since 2006, as sanctions made it harder for Iranian procurement agents to operate, Iranian middlemen have sought to acquire genuine foreign passports for sanctions evasion. CIPs became an Iranian backdoor to circumvent export controls and conduct illicit procurement abroad, including in the U.S.

For years, Iran's preferred route to procurement in the United States was Canada's federal permanent residency program. But in May 2012, Canadian authorities charged Ziad El-Shurafa, a partner at an immigration consultancy named Canada 2000 Immigration Services Inc., and two business associates with defrauding immigration authorities. They were found to have helped residency applicants deceive authorities by pretending to already be in country while never having actually moved to Canada.

Such abuse led Ottawa to shut down the program in 2014. Once that door was shut, Iranian agents found another easy venue to acquire a second nationality. Five Caribbean countries have established CIPs, and their passports can be obtained speedily — usually with no residency requirements or even presence in the country — and with minimal due diligence.

Iranian nationals have sought to exploit these programs to facilitate sanctions-evasion schemes for years. In 2014, the U.S. Treasury's Financial Crimes Enforcement Network issued an advisory to alert financial institutions about the exploitation of St. Kitts and Nevis's CIP by foreign nationals involved in illicit financial activity. The advisory made explicit reference to Iranian nationals who use secondary citizenship to evade sanctions.

The Treasury has since sanctioned four Iranian dual nationals of Caribbean nations. These include Houshang Farsoudeh, Houshang Hosseinpour and Pourya Nayebi — three businessmen who facilitated fraudulent transactions on behalf of sanctioned Iranian entities through a financial institution they controlled in the Republic of Georgia. All three were delisted in January as part of last summer's nuclear deal and are already reconstituting their business network.

After the passage of major U.N. Security Council sanctions in 2010, operations such as those of Farsoudeh, Hosseinpour and Nayebi became extremely difficult. Still, the three individuals moved easily across borders thanks to their St. Kitts passports (and, in Hosseinpour's case, permanent Canadian residency).

Most Visa Waiver countries continue to have stringent requirements of residency and financial commitment for foreign nationals seeking permanent residency and citizenship. Still, in recent years, many of those governments have substantially lowered the bar, with some EU countries now establishing their own citizenship- or residency-by-investment programs.

Citizenship applications for Malta, for example, may be filed within a year of establishing residency. Cyprus — an EU country aspiring to join the VWP — also offers citizenship by investment and currently offers among the fastest tracks to second citizenship, requiring as little as three months to apply. Portugal, Hungary and Bulgaria all offer fast tracks to permanent residency and, eventually, citizenship (Portuguese and Hungarian citizens currently participate in the Visa Waiver program, and Bulgaria may become eligible in the future).

Iranians are applying to these programs in significant numbers and, with the lifting of sanctions, immigration services companies are planning to open (or reopen) offices in Tehran to facilitate such transactions. That's why the Obama administration must resist any pressure from Europe and instead make it clear to all Visa Waiver countries offering (or considering) citizenship or permanent residency for investment that lax rules for doing so will affect their VWP status.

These countries' CIPs should not become a shortcut to entering the United States for nationals of countries excluded from the Visa Waiver Program. At a minimum, Congress should reassess their Visa Waiver status based on countries' particular due diligence and residency requirements, and the speed by which their citizenship may be obtained.

The United States should require that Visa Waiver countries offering CIPs agree to more data sharing. Washington should also request access to applications, both approved and rejected, of Iranian nationals to such programs. Refusal to cooperate could be grounds for restricting those countries' Visa Waiver status.

Reviews of applications should not be limited to the origin of funds for investment, but rather the applicant's entire financial portfolio. Nor should such reviews be limited to background checks with Interpol. Instead, they should require a full accounting of all of the applicant's business activities and assets prior to applying for the program.

Finally, the United States should improve due-diligence standards at visa-processing centers for Iranian dual nationals' applications. Such practices could rely on the aforementioned data sharing, but also on increased cooperation between federal agencies involved in tracking potential sanctions evaders.

The proliferation of easy-to-obtain citizenship options, including among Visa Waiver countries, justifies the concerns of Congress over abuse by Iranian dual nationals. Washington must not cave in to European pressure over the Visa Waiver Program — it should double down.

Ottolenghi is a senior fellow at the Foundation for Defense of Democracies and its Center on Sanctions and Illicit Finance. Follow him on Twitter @eottolenghi