U.K. ‘Golden Visa’ Firm Files for Insolvency Following FCA Ban

(Bloomberg) -- A London-based wealth manager which helped its overseas investors with visas has filed for administration after the U.K.'s top market regulator expressed concern about its financial crime controls and its use of a controversial entry permit scheme.

Dolfin Financial (UK) Limited, a financial boutique with almost 1.3 billion pounds ($1.8 billion) in custody assets, applied for special administration at London's High Court on Wednesday. As well as providing financial services, the firm also helped manage investments that allow wealthy clients to gain Tier 1 Investor Visas. Adam Henry Stephens and Kevin Lee of Smith & Williamson LLP have been appointed as joint special administrators.

The Financial Conduct Authority began a review of Dolfin in December 2019 and stopped the firm carrying out regulated activities in March this year, according to a posting on its website.

The costly ‘golden visas,' favored by wealthy investors from outside Europe, allow recipients to stay in the U.K. for three years and four months in exchange for a 2 million-pound investment. A report last year from the U.K. Parliament's Intelligence and Security Committee looking into the influence of Russia in the 2016 Brexit Referendum, recommended that the program should be completely revised because it was widely exploited and applicants weren't adequately vetted.

The U.K. Home Office announced a suspension in late 2018 to implement changes designed to mitigate money laundering and organized crime threats. It later abandoned its plan to suspend the scheme, but did make reforms requiring applicants to provide confirmation that diligence checks were provided and that they could prove they held the necessary funds for more than two years.

The scheme has attracted a growing number of wealthy investors from China and its Special Administrative Regions, such as Hong Kong, in recent years. The number of Tier 1 Investor Visas issued fell last year as the pandemic halted international travel and in the last quarter of 2020 more than 36% of applicants were from China or Hong Kong, according to a report produced by Shard Capital. On its website, Smith & Williamson has included a Mandarin translation of its administrators report on Dolfin.

At one point Dolfin held $4.1 billion in custodial assets and employed more than 125 people based in London, Amsterdam and Malta, according to its website. The firm was founded in 2013 as a wealth management boutique by Roman Joukovski and Chief Executive Officer Denis Nagy, who stood down as a director of the firm last year according to public filings.

“In early June 2021, due to a reassessment of the Company's financial position in the light of progress with its wind down plan, the Dolfin Board concluded that the wind down could not be undertaken outside of a formal insolvency process,” the administrators said in a statement on its website.